Judgment of the General Court (First Chamber) of 6 October 2015

The subject matter of the application

52 The present action is based on Article 263 TFEU and, as is expressly stated in the introduction and in the form of order sought in the application, is strictly for annulment of the contested decision. In support of the action, the applicants put forward essentially three pleas: a ‘plea alleging a manifest error of assessment on the part of the Commission’, a plea relating to the defective statement of the reasons on which the contested decision was based, and a plea alleging infringement of the principle prohibiting unjust enrichment.

53 The express founding of the action on Article 263 TFEU, and the headings of the pleas submitted in support of the action, call for the Court to exercise its powers in respect of reviewing the legality of the contested decision. As regards the nature of that decision, it must be borne in mind that an act, such as the contested decision, whereby the Commission effects an out-of-court set-off between debts and claims arising from different legal relationships with the same person is a challengeable act for the purposes of Article 263 TFEU (see, to that effect, judgments of 10 July 2003 in Commission v CCRE, C‑87/01 P, ECR, EU:C:2003:400 , paragraph 45; 8 October 2008 in Helkon Media v Commission, T‑122/06, EU:T:2008:418 , paragraph 46; and 8 November 2011 in Walton v Commission, T‑37/08, ECR, EU:T:2011:640 , paragraph 25). It is in the context of such an action for annulment that it is for the Court to examine the legality of a decision to off-set in the light of the effects of the failure actually to pay the contested sums to the applicant (see, to that effect, judgments in Helkon Media v Commission, EU:T:2008:418 , paragraph 46, and Walton v Commission, EU:T:2011:640 , paragraph 25).

54 Nonetheless, it should be noted that, in submitting the ‘plea alleging a manifest error of assessment on the part of the Commission’, the applicants must be considered in the present case to be seeking a declaration from the Court, under Article 272 TFEU, that the claim which the Commission alleges to have on Technion under the Mosaica contract and which is the subject matter of the disputed set-off (‘the contractual claim at issue’) is non-existent. The applicants challenge inter alia the finding of the audit report that Mr K’s services may not ‘actually’, for the purposes of Article II.19(1)(a) of General Conditions FP6, have been performed and, in order to corroborate their arguments, they annexed to the application copies of the contracts between Technion and the Commission and, in particular, a copy of the Mosaica contract.

55 The present action, therefore, in reality seeks not only annulment of the contested decision but also a declaration by the Court that the Commission does not hold the contractual claim at issue on Technion.

56 In their answer to a written question from the Court (see paragraph 46 above), the applicants confirmed that understanding of the duality of the action they had brought, namely, that it is an application for annulment of the contested decision and an action for a declaration from the Court that the contractual claim at issue is non-existent.

57 Since, first, in the context of an action for annulment under Article 263 TFEU, the EU judicature does not have jurisdiction to hear an action for a declaratory judgment (see, to that effect, order of 9 December 2003 in Italy v Commission, C‑224/03, EU:C:2003:658 , paragraphs 20 and 21) and, secondly, the Mosaica contract contains, in Article 13, an arbitration clause within the meaning of Article 272 TFEU, giving exclusive jurisdiction to the EU judicature to hear any disputes between the parties as regards the validity, performance or interpretation of that contract, it is necessary to determine whether it is possible in the present case to reclassify the present action in part as an action brought both under Article 263 TFEU, for annulment of the contested decision, and under Article 272 TFEU, for a declaration that the Commission does not hold the contractual claim at issue. Since under Article 272 TFEU the EU Court enjoys full jurisdiction, enabling it, in contrast to a court reviewing the legality of an act under Article 263 TFEU, to hear and determine any type of action under an arbitration clause (see, to that effect, judgment of 26 February 2015 in Planet v Commission, C‑564/13 P, ECR, EU:C:2015:124 , paragraphs 21 to 27, and Opinion of Advocate General Kokott in Planet v Commission, C‑564/13 P, ECR, C:2014:2352, points 19 to 22), Article 272 TFEU constitutes the appropriate legal basis on which to adjudicate on the applicants’ application for a declaration that the contractual claim at issue is non-existent.

58 As regards the possibility of partial reclassification of the present action as an action brought under Article 272 TFEU, it should be noted that, according to settled case-law, when an action for annulment or an action for damages is brought before the Court when the dispute is, in point of fact, contractual in nature, the Court reclassifies the action, provided that the conditions for such a reclassification are satisfied (judgment of 19 September 2001 in Lecureur v Commission, T‑26/00, ECR, EU:T:2001:222 , paragraph 38; order of 10 May 2004 in Musée Grévin v Commission, T‑314/03 and T‑378/03, ECR, EU:T:2004:139 , paragraph 88; and judgment of 17 June 2010 in CEVA v Commission, T‑428/07 and T‑455/07, ECR, EU:T:2010:240 , paragraph 57).

59 On the other hand, when faced with a dispute which is contractual in nature, the Court considers itself unable to reclassify an action for annulment either where the applicant’s express intention not to base his application on Article 272 TFEU precludes such a reclassification or where the action is not based on any plea alleging infringement of the rules governing the contractual relationship in question, whether they be contractual clauses or provisions of the national law designated in the contract (see judgment in CEVA v Commission, cited in paragraph 58 above, EU:T:2010:240 , paragraph 59 and the case-law cited).

60 It follows that reclassification of the action is possible, without the rights of defence of the defendant institution being affected, where, first, the express intention of the applicant does not preclude it and, secondly, at least one plea alleging infringement of the rules governing the contractual relationship in question is put forward in the application pursuant to the provisions of Article 44(1)(c) of the Rules of Procedure of 2 May 1991. These two criteria are cumulative (see, to that effect, judgment of 24 October 2014 in Technische Universität Dresden v Commission, T‑29/11, ECR, EU:T:2014:912 , paragraph 44).

61 In the present case, first, in their answers to a written question put by the Court (see paragraph 46 above), the applicants agreed to the partial reclassification of the action.

62 Secondly, as stated in paragraph 54 above, the applicants disputed the existence of the contractual claim at issue, making express reference to Article II.19(1) of General Conditions FP6.

63 It should moreover be noted that, in the defence, the Commission gave a detailed presentation of the Mosaica contract, highlighting the clauses that were relevant for the purpose of resolving the dispute. Furthermore, it also put forward the argument that Technion had failed to fulfil its obligations under Article II.19 of General Conditions FP6, which, according to the Commission, limits the EU’s financial contribution to eligible costs, namely costs that are actual and justified. That argument shows that the Commission understood that the applicants disputed, in essence, the existence of the contractual claim at issue and were therefore able properly to defend themselves in the defence. Moreover, at the hearing the Commission stated that, in the event of partial reclassification of the action, its rights of defence would not be affected.

64 On the other hand, at the hearing the Commission expressed disagreement with partial reclassification of the action.

65 In particular, first, the Commission argued that, as is clear from the judgments in Commission v CCRE, cited in paragraph 53 above ( EU:C:2003:400 ), and Helkon Media v Commission, cited in paragraph 53 above ( EU:T:2008:418 ), the validity of a set-off decision can be challenged only in the context of Article 263 TFEU.

66 That argument does not call into question partial reclassification in the present case, since the objective of such reclassification is not to enable the Court to examine the validity of the contested decision. Such examination may be conducted, without reclassification, under Article 263 TFEU, which constitutes the express legal basis for the action brought. However, partial reclassification in the present case is intended to enable the Court to give a ruling on the applicants’ action for a declaration that the contractual claim at issue is non-existent. That possibility of partial reclassification is by no means called in question by the judgments in Commission v CCRE, cited in paragraph 53 above ( EU:C:2003:400 ), and Helkon Media v Commission, cited in paragraph 53 above ( EU:T:2008:418 ), relied on by the Commission.

67 Secondly, the Commission has relied on the circumstance that, in the orders in Technion and Technion Research & Development Foundation v Commission, cited in paragraph 35 above ( EU:T:2012:303 ), and Technion and Technion Research & Development Foundation v Commission, cited in paragraph 38 above ( EU:T:2012:411 ), the Court had decided not to reclassify the respective actions for annulment as actions based on Article 272 TFEU, notwithstanding the fact that the pleas relied upon in support of those actions for annulment were the same as those relied on in the present case.

68 In that regard, it should be noted that no parallel can be drawn between the cases giving rise to the abovementioned orders and the present case. In the abovementioned orders, the Court found that the applicants had not put forward, even summarily, any plea, argument or complaint alleging infringement of the provisions of the contracts at issue or of those of the relevant national law (orders in Technion and Technion Research & Development Foundation v Commission, cited in paragraph 35 above, EU:T:2012:303 , paragraphs 62 to 65, and Technion and Technion Research & Development Foundation v Commission, cited in paragraph 38 above, EU:T:2012:411 , paragraphs 58 to 60). However, in the present case, as stated in paragraphs 54 and 62 above, the applicants have claimed such infringement of contractual provisions. It follows that the legal and factual circumstances which led the Court not to proceed to reclassification of the actions in the cases giving rise to the abovementioned orders are different from the circumstances giving rise to the present case.

69 Thirdly and lastly, the Commission has contended that reclassification in the present case was not necessary since the Court’s review of legality could extend to cover the interpretation and application of the Mosaica contract. To support that contention, first, the Commission drew a parallel between review of the legality of the contested decision and review of the legality of a decision awarding a public contract and held that, since, in the context of the latter review, the court could examine the specification, by analogy, in the context of review of the legality of the contested decision, the court could examine the Mosaica contract. Secondly, the Commission relied on the judgments of 21 September 2011 in Berliner Institut für Vergleichende Sozialforschung v Commission (T‑34/08, EU:T:2011:504 ); of 28 March 2012 in Berliner Institut für Vergleichende Sozialforschung v Commission (T‑296/08, EU:T:2012:162 ), of 13 September 2013 in Berliner Institut für Vergleichende Sozialforschung v Commission (T‑73/08, EU:T:2013:433 ), and of 12 December 2013 in Berliner Institut für Vergleichende Sozialforschung v Commission (T‑171/08, EU:T:2013:639 ), arguing that in those judgments the Court had examined the contracts at issue in the context of a review of the legality of the contested measures.

70 In that regard, first of all, it is necessary to reject the parallel drawn by the Commission between the present case and proceedings relating to public contracts, since the specification does not constitute a contract in the context of a tendering procedure. Secondly, the reference made by the Commission, in general and abstract terms, to the case-law referred to in paragraph 69 above does not show that partial reclassification of the action in the present case is impossible or inopportune, since such reclassification satisfies the cumulative conditions laid down in that regard by the well-established case-law referred to in paragraphs 58 to 60 above.

71 In the light of the above considerations, it is necessary to reclassify the present action in part as an action brought both on the basis of Article 263 TFEU for annulment of the contested decision and on the basis of Article 272 TFEU for a declaration that the Commission does not hold the contractual claim at issue.

72 It is appropriate to examine, first, the part of the action based on Article 272 TFEU.

The application for a declaration that the contractual claim at issue is non-existent

73 As a preliminary point, it should be noted, with regard to the application for a declaration that the contractual claim at issue is non-existent, that the action is admissible only so far as Technion is concerned. As TRDF is not a party to the Mosaica contract containing the arbitration clause, the action, in so far as the abovementioned application is concerned, is not admissible since it was brought by that body (see, to that effect, judgment of 16 December 2010 in Commission v Arci Nuova associazione comitato di Cagliari and Gessa, T‑259/09, EU:T:2010:536 , paragraph 40 and the case-law cited). The applicants moreover accepted, at the hearing, that the part of the action based on Article 272 TFEU was inadmissible so far as TRDF was concerned.

74 As regards the substance, Technion challenges before the Court the auditor’s finding, approved by the Commission, that the costs claimed from the Commission in connection with Mr K’s services may not ‘actually’, for the purposes of Article II.19(1)(a) of General Conditions FP6, have been incurred. In that regard, Technion maintains that the documents at its disposal, and in particular the first PMR for the Mosaica project, which was sent to it by letter of 4 October 2010, do not show that Mr K. had been working on the Mosaica project for several bodies at one and the same time. In that context, Technion also contends that, during the audit procedure, its rights of defence were infringed, since the Commission denied it access to the documents on which the auditor had, allegedly, based its findings. Technion was therefore unable to put forward its case effectively.

75 The Commission rejects those arguments.

76 It should be noted that the auditor found that all the direct costs claimed from the Commission by Technion in connection with Mr K.’s services were ineligible, on the ground that it was impossible for the auditor to establish that those costs had ‘actually’, for the purposes of Article II.19(1)(a) of General Conditions FP6, been incurred.

77 In the first place, the auditor discovered a number of errors in Mr K.’s timesheets, which cast doubt on the accuracy of their content. Firstly, the timesheets were all signed together, on the same date and in retrospect for the previous year. Secondly, some of the timesheets were not signed by the project manager. Thirdly, the hours worked as recorded by Mr K. appeared to be budgeted hours and not actual hours, since they were the same for every day throughout the period audited.

78 In the second place, on the basis of information supplied by the Commission and on the basis of its audit, the auditor found that Mr K. had worked for other bodies besides Technion at one and the same time. According to the auditor’s finding, the contracts concluded between Mr K. and Technion showed that Mr K. was employed full time by that body. Furthermore, the auditor was informed during the audit that the contracts concluded between Technion and Mr K. did not allow the latter to work for other bodies at the same time without notifying Technion of that fact. According to the information available to the auditor, Mr K. had not notified Technion to that effect.

79 On the basis of that evidence, the auditor expressed doubts as to whether Technion had declared to the Commission the actual times and costs relating to Mr K.’s services and noted that it was unable to establish that they were the actual times and costs. The auditor also noted that neither was Technion in a position to establish that they were the actual times and costs. It therefore proposed that all the direct costs claimed in connection with Mr K.’s work should be excluded.

80 It should be noted that at no point did Technion challenge the auditor’s findings that Mr K.’s timesheets were unreliable or, more generally, the auditor’s inability to establish the extent to which Mr K. had actually performed services in connection with the various projects in which Technion took part and, in particular, in connection with the Mosaica project. Technion merely challenged the finding that Mr K. had worked at the same time for other bodies.

81 In that regard, it should be noted that, as is clear in particular from Article 19(1)(a) and (d), and from Article 20(1) of General Conditions FP6, the methods for recording and certifying working time used by a contractor must enable the Commission to verify that the costs declared represent actual expenses, correspond to economic rationality, are necessary for carrying out the project and can be directly attributed to the project.

82 It is not disputed that the timesheets of the staff employed on a project constitute a means whereby the Commission can carry out the abovementioned checks and must therefore be reliable. It is also clear from case-law that failure to comply with the obligation to submit, at the time of a financial audit, reliable timesheets to justify the personnel costs declared constitutes sufficient grounds for rejecting all those costs (see, to that effect, judgments of 22 May 2007 in Commission v IIC, T‑500/04, ECR, EU:T:2007:146 , paragraphs 114 to 117, and CEVA v Commission, cited in paragraph 58 above, EU:T:2010:240 , paragraph 139 and the case-law cited).

83 In the present case, in the absence of any challenge by Technion in that regard, it is necessary to approve the auditor’s finding that the three factors identified in paragraph 77 above rendered Mr K.’s timesheets unreliable and hence deprived the Commission of a useful tool for checking whether or not the costs declared were eligible.

84 Furthermore, it should be noted that at no time did Technion provide any evidence showing that Mr K. had actually provided the services or calling into question more generally the auditor’s finding that Technion was not in a position to ensure that the costs declared in connection with Mr K.’s services had actually been incurred. As the EU Court has already pointed out in the context of a case concerning the Sixth Framework Programme, the Commission’s contractors are subject to the obligation that they must be in a position to show that the expenses they declare to be eligible for funding from the EU budget have actually been incurred, and that obligation arises from the need for them to prove that the condition laid down in Article II.19(1) of General Conditions FP6 that expenses must be eligible is fulfilled (judgment of 2 October 2012 in ELE.SI.A v Commission, T‑312/10, EU:T:2012:512 , paragraph 115).

85 Technion has merely argued that the information which had been sent to it, inter alia the audit report and the first PMR for the Mosaica project, did not show that Mr K. worked on that project for several bodies at one and the same time.

86 First of all, that argument does not prove the reliability of Mr K.’s timesheets or, more generally, the existence within Technion of an audit system enabling the Commission to check whether the costs declared complied with the requirements laid down in Article II.19(1)(a) of General Conditions FP6 (see paragraph 84 above). That argument is therefore ineffective.

87 In any event, it should be noted that the PMRs sent to Technion, read in conjunction with the information contained in the final audit report, show that other bodies besides Technion declared hours worked and costs incurred in respect of services provided by Mr K. during periods when he was deemed to have been working full time for Technion (see paragraph 78 above). That circumstance was such as to cast doubt on whether Mr K. actually worked all the hours declared and whether the costs declared were actually incurred, given also the unreliability of the timesheets. Technion’s argument was limited to a set of abstract, arbitrary deductions, and was not corroborated by any evidence to prove that Mr K. actually worked the hours declared.

88 It is also necessary to reject Technion’s argument that it fulfilled the requirements of the Mosaica contract satisfactorily by providing services ‘in the most effective way’. It should be recalled that, according to a fundamental principle of European Union financial aid, the Union can subsidise only expenses which have actually been incurred. It follows from that principle that it is not sufficient for the beneficiary of the aid to show that a project has been carried out for the allocation of a specific subsidy to be justified. The beneficiary of the aid must, in addition, produce evidence that he has incurred the expenses declared in accordance with the conditions laid down for the grant of the aid concerned, with only those expenses which are properly justified being capable of being regarded as eligible. His obligation to satisfy the prescribed financial conditions is even one of his essential commitments and accordingly determines the allocation of European Union financial aid (see judgment in Technische Universität Dresden v Commission, cited in paragraph 60 above, EU:T:2014:912 , paragraph 71 and the case-law cited).

89 Lastly, nor is it possible to accept Technion’s complaint that its rights of defence were infringed, since the information that was available to it was sufficient to warrant the findings of the audit report. In any event, the Court, in its judgment in Technion and Technion Research & Development Foundation v Commission, cited in paragraph 33 above ( EU:T:2015:272 ), upheld the Commission’s decision to deny Technion access to certain documents under Regulation No 1049/2001.

90 In the light of the above considerations, it must be concluded that the Commission was entitled to take the view that all the costs in connection with Mr K.’s services were ineligible and that accordingly it did hold the contractual claim at issue. In consequence, Technion’s application under Article 272 TFEU must be dismissed.

91 It follows also that the head of claim submitted in the reply must also be rejected. In any event, that head of claim is inadmissible under Article 44(1)(c) of the Rules of Procedure of 2 May 1991 since, having been submitted for the first time in the reply, it is out of time (see, to that effect, judgment of 31 January 2001 in Sunrider v OHIM (VITALITE), T‑24/00, ECR, EU:T:2001:34 , paragraph 12).

The application for annulment of the contested decision