NC v Commission (Grants - OLAF investigation - Finding of irregularities : Judgment) [2017] EUECJ T-151/16 (27 June 2017)

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(Grants - OLAF investigation - Finding of irregularities - Commission decision imposing an administrative penalty - Exclusion from procurement and grant award procedures financed by the general budget of the European Union for a period of 18 months - Registration in the Early Detection and Exclusion System database - Temporal application of various versions of the Financial Regulation - Essential procedural requirements - Retroactive application of the more lenient law)

NC, represented initially by J. Killick, G. Forwood, Barristers, C. Van Haute and A. Bernard, lawyers, and subsequently by J. Killick, G. Forwood, C. Van Haute and J. Jeram, Solicitor,

European Commission, represented initially by F. Dintilhac and M. Clausen, and subsequently by F. Dintilhac and R. Lyal, acting as Agents,

APPLICATION pursuant to Article 263 TFEU seeking annulment of the decision of the Commission of 28 January 2016 imposing the administrative penalty of exclusion of the applicant from procurement and grant award procedures financed from the general budget of the European Union for a period of 18 months and consequently registering it in the Early Detection and Exclusion System database provided for in Article 108(1) of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ 2012 L 298, p. 1),

composed of S. Gervasoni, President, L. Madise (Rapporteur) and K. Kowalik-Bańczyk, Judges,

having regard to the written part of the procedure and further to the hearing on 2 March 2017,

1 Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ 2012 L 298, p. 1, ‘the Financial Regulation’), was amended, inter alia, by Regulation (EU, Euratom) 2015/1929 of the European Parliament and of the Council of 28 October 2015 (OJ 2015 L 286, p. 1), applicable from 1 January 2016. Since the proceedings in the present case involve the question of which version of the Financial Regulation is applicable to the facts of the case, where necessary the version of the Financial Regulation applicable at the time when the facts alleged occurred shall also be indicated, by reference to Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1), in the version applicable in November 2008 and in February 2009. Commission Delegated Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application of Regulation No 966/2012 (OJ 2012 L 362, p. 1) was also amended with effect from 1 January 2016 by Commission Delegated Regulation (EU) 2015/2462 of 30 October 2015 (OJ 2015 L 342, p. 7) whereas, at the time when the facts alleged occurred, Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Regulation No 1605/2002 (OJ 2002 L 357, p. 1) (‘the Implementing Regulation’) applied.

2 The applicant, NC, is a non-profit organisation which undertakes, inter alia, humanitarian and sustainable development projects. In 2007 it received, within the framework of a contract concluded with the Commission of the European Communities in relation to the external actions of the European Community, a grant amounting to several hundred thousand euro for an environmental management project in a third country.

3 In 2012 the Court of Auditors of the European Union carried out checks at the applicant’s headquarters in relation to the performance of the contract referred to in paragraph 2 above. It identified two purchases of equipment, concerning a vehicle and technical equipment, which give rise to doubts as to whether the tender procedures followed for those purchases, in November 2008 and in February 2009 respectively, were genuine. Accordingly, the European Anti-Fraud Office (OLAF) launched an investigation in the course of which it pointed out to the applicant that the latter had been unable to provide the suppliers’ tender documents and that the investigations had revealed that some of the bidders were linked to the single supplier which had been awarded both contracts. According to OLAF, the facts suggested that the applicant itself arranged matters so as to benefit that supplier. The applicant responded to OLAF but nevertheless, in August 2014, the latter stated, on completion of its investigation, that it was going to recommend that the Commission register the applicant in the Early Warning System provided for in Commission Decision 2008/969/EC, Euratom, of 16 December 2008 on the Early Warning System for the use of authorising officers of the Commission and the executive agencies (OJ 2008 L 344, p. 125).

4 By a letter of 31 August 2015, issued on the basis of Article 131(5) of the Financial Regulation, read in conjunction with Article 109(1) of that regulation, as well as Article 145 of the Implementing Regulation, in the version applicable until 31 December 2015, according to which the authorising officer responsible, after having given the persons involved the opportunity to submit their observations, may impose administrative and financial penalties which are effective, proportionate and dissuasive on beneficiaries of grants who, inter alia, have been found to be in serious breach of their obligations, the Commission informed the applicant that it was planning to exclude the applicant from contracts and grants financed by the EU budget for a period of two years. Article 145 of the Implementing Regulation in the version applicable until 31 December 2015 provided, inter alia, that exclusion from contracts and grants financed from the EU budget may last up to 5 years from the date on which the infringement is established, or up to 10 years in the event of a repeated offence. The Commission added that, in the event that that penalty was imposed, the applicant would be registered in the central exclusion database, referred to in Article 108 of the Financial Regulation in the version applicable until 31 December 2015, as well as in the Early Warning System, as provided for in Article 12 of Commission Decision 2014/792/EU of 13 November 2014 on the Early Warning System to be used by authorising officers of the Commission and by the executive agencies (OJ 2014 L 329, p. 68), which replaced the previous decision on the Early Warning System and which was itself replaced by the provisions of Article 105a(1)(a) as well as Article 108(2) to (4) of the Financial Regulation in the version applicable from 1 January 2016, concerning ‘early detection of risks threatening the Union’s financial interests’. It must be noted that, in its letter, the Commission also made reference to the relevant provisions of the Financial Regulation and of its Implementing Regulation applicable at the time the facts alleged occurred. The provisions of the regulations to which the Commission referred in its letter are, in essence, identical to those cited at the beginning of this paragraph.

5 The Commission, in the adversarial procedure provided for in the provisions referred to above, asked the applicant to submit its observations within 30 days of receipt of its letter.

6 In that letter of 31 August 2015, the Commission summarised the facts, set out a certain number of circumstances from which it had inferred that the tenders made for the two purchases at issue were not genuine, noted discrepancies relating to the identity of those bidding to supply the vehicle, between information provided by the applicant in an operational report sent to the head of the EU delegation in the third country to which the project relates and the conclusions of the investigations carried out by OLAF and noted the absence of any mention of the purchase of the technical equipment in any of the reports submitted by the applicant and the latter’s inability to provide the Court of Auditors with a copy of the invitations to submit tenders that should have been sent to the bidders. The Commission concluded from this that the applicant had arranged a fraud consisting in a notional tender procedure for the benefit of the supplier of the two items of equipment at issue. In the legal analysis subsequently set out, the Commission noted as irregularities, in addition to the manipulation of the two tender procedures, the production of reports which did not reflect the factual situation and non-compliance with the purchasing principles and documentation obligations stipulated in the contract. It took the view, in general, that the applicant had not operated the subsidised project with the requisite seriousness, efficiency, transparency and diligence, in accordance with good practice in the sector and in compliance with the contract. As regards the proposed penalty, after noting the general criteria which it had to apply, the Commission took the view that the irregularities identified were very serious and that it was not the first time that the applicant had submitted documents which were falsified or did not reflect the factual situation. In that regard, the Commission referred to several practices which the applicant allegedly used to overstate its true costs in various contracts, including the one at issue in the present case, and which were discovered by OLAF or other services. This led to the applicant being required to reimburse more than EUR 200 000 in grant money which had been unduly paid.

7 By letter of 5 October 2015, within the period stipulated by the Commission, the applicant submitted its observations in reply. In particular, it stated that an exclusion penalty against it would be disproportionate. In that connection, it claimed, in the first place, that the facts did not actually correspond with the serious acts attributed to it. It disputed that the circumstances specified by the Commission could have led to the conclusion that it arranged fictitious tender procedures. It admitted, in essence, insufficient rigour in its checks and in the preparation of its reports, pointing out that the project manager had been dismissed and that its internal procedures had been changed, but it denied intentional fraud on its part, putting forward arguments on the various items of evidence put forward by the Commission. In the second place, it claimed that the facts referred to did not adversely affect the financial interests and image of the European Union. The purchases in question, it claimed, had been paid for at the market price and the corresponding amount had been reimbursed to the Union. In the third place, it argued that account should be taken of the time elapsed, especially given that since the occurrence of the facts alleged, in 2008 and 2009, it had already been heavily penalised for other irregularities. In that regard, in the fourth place, the applicant disputed that the irregularities had been repeated. The other practices referred to by the Commission did not predate those at issue in the present case but occurred at the same time, indicating the same flaw in internal control. In the fifth place, the irregularities committed were not intentional. In the sixth place, identification of the irregularities meant that henceforth robust internal procedures and control mechanisms could be put in place, to ensure compliance with the required principles, while the applicant cooperated fully with the services of the EU institutions during their investigations. In the seventh place, the applicant claimed that the heavy penalty already imposed on it, referred to above, had been a fait accompli on account of the media publicity given to OLAF’s previous investigations relating to it. Therefore, the exclusion of two years envisaged by the Commission, with registration in the central exclusion database, referred to in Article 108 of the Financial Regulation in the version applicable until 31 December 2015, as well as in the Early Warning System, would deal the applicant a devastating blow bearing no relation to the facts referred to.

8 On 28 January 2016, the Commission adopted the contested decision, imposing the administrative penalty of exclusion of the applicant from procedures for the award of public procurement contracts and grants financed from the general budget of the European Union for a period of 18 months and registering it, consequently, in the Early Detection and Exclusion System database provided for in Article 108(1) of the Financial Regulation in the version applicable from 1 January 2016 (‘the contested decision’).

9 The contested decision reproduces the statement of the facts which appeared in the Commission’s letter of 31 August 2015, summarised in paragraph 6 above. It recalls that the adversarial procedure was launched by that letter pursuant to Article 109(1) of the Financial Regulation in the version applicable until 31 December 2015. It specifies the legal basis of the penalty, referring to the provisions of the Financial Regulation and its Implementing Regulation applicable at the time when the alleged facts occurred (see paragraph 4 above). In that regard, in a footnote, the Commission states:

‘In conformity with the principle of succession of legal rules and settled case-law it must be recalled that the applicable procedural laws are the ones in force at the moment of the adoption of a decision, whereas substantive rules are usually interpreted as not applying, in principle, to situations existing before their entry into force … Therefore the substantives rules applicable for this case are the one[s] in force at the time when the alleged facts are committed. The contradictory procedure has been finalising within the remit of the rules applicable until 31 December 2015.’

10 The contested decision then notes two irregularities which were uncovered, namely the manipulation of the two tender procedures and the production of reports which did not reflect the facts. It also recalls the proposed two-year exclusion penalty, taking account in particular of the repeated production of information which did not reflect the factual situation.

11 In the legal analysis contained in the remainder of the contested decision, the Commission classified the two irregularities referred to in the previous paragraph as serious breaches by the applicant of its contractual obligations, for the purposes of the relevant provisions of the Financial Regulation applicable when the facts alleged occurred, in this case Article 96(1)(b) and Article 114(4) of Regulation No 1605/2002, which are identical, respectively, to Article 109(1)(b) and Article 131(5) of the Financial Regulation in the version applicable until 31 December 2015. The Commission disputes the arguments put forward by the applicant to deny that it arranged fictitious tender procedures. The Commission also disputes other arguments made by the applicant with a view to showing that it did not disregard a number of principles stipulated in the contract or aimed at ensuring its proper performance. Furthermore, it states that the applicant does not dispute that there were errors, discrepancies and omissions in the reports which it was required to produce.

12 As regards the penalty, the Commission recalls that, in accordance with the relevant provisions of the Implementing Regulation applicable at the time when the facts alleged occurred, it must, in order to determine the duration of exclusion in compliance with the principle of proportionality, take into account in particular the seriousness of the facts, including their impact on the European Union’s financial interests and image, the time which has elapsed since the facts at issue, the duration and recurrence of the breaches, the intent or degree of negligence of the entity concerned and the measures taken by the entity to remedy the situation. In the present case, after emphasising the seriousness of the facts, the Commission states that the production of documents which did not reflect the factual situation was a recurrent behaviour on the part of the applicant. It refers in that regard to practices, referred to in its letter of 31 August 2015, which the applicant allegedly used to overstate its true costs in various contracts and which were discovered by OLAF or other services. Responding to the various arguments put forward by the applicant to avoid a penalty, the Commission argues, inter alia: (i) that it is incorrect to deny that there was an adverse financial impact for the European Union, since if the tender procedures had been genuine the purchase price could have been lower; (ii) that the European Union’s image is inevitably affected by poor use of grants for cooperation in the development of third countries; (iii) that the time which has elapsed since the facts is a consequence of the fact that they were not discovered until 2012 by the Court of Auditors; (iv) that the concept of recurrence of acts referred to in the relevant provisions of the Implementing Regulation does not presuppose that there was an administrative penalty prior to some of them, nor even that they succeed one another in time, and it covers cases where the facts are not isolated events but fit within a body of similar facts attesting to the seriousness of the situation; (v) that in the present case the applicant had nevertheless already provided false information in the past seeking to overstate its costs; and (vi) that, contrary to the applicant’s claims, the manipulations at issue in the present case were intentional and no control mechanism could have prevented them. Furthermore, the Commission puts forward a firm and detailed rebuttal of the claim that it was the source of the media coverage concerning proceedings against the applicant, as well as the subsequent difficulties which may have affected it. The Commission draws attention to the very preponderant share of public, non-EU, funds in the applicant’s budget and the fact that, in the period from 2008 to 2014, EU grants to it accounted for a much smaller share. The exclusion penalty would not, therefore, according to the Commission, have a devastating impact on the applicant, contrary to the latter’s claim. Taking into account, however, the measures taken by the applicant to improve its internal controls and procedures, as well as the dismissal of the individual in charge of the project at issue, the Commission ultimately reduced the exclusion penalty to 18 months, applicable from the date when the decision imposing the penalty was notified.

13 The Commission adds, in the contested decision, that the applicant’s registration in the Early Detection and Exclusion System database will end on expiry of the penalty period. The registration actually occurred on 30 March 2016.

14 The contested decision was not published. In that regard, the Financial Regulation in the version applicable at the time when the alleged facts occurred made no reference to the possibility of publishing a decision of that kind. However, Article 109(3) of the Financial Regulation in the version applicable until 31 December 2015 provided that such publication was possible after the legal remedies against the decision have been exhausted. Now, in respect of the exclusion penalties adopted in a case such as the present, Article 106(16) and (17) of the Financial Regulation, in the version applicable from 1 January 2016, provides, under certain conditions, that publication of nominative information concerning the exclusion imposed is possible before the legal remedies have been exhausted.

15 On 29 January 2016, when the applicant still had no knowledge of the contested decision, its lawyers wrote to the Commission. In their letter, the use of the word ‘fraud’ in the Commission’s letter of 31 August 2015 was challenged on the ground that it suggested the intentional nature of the conduct in question and because of its very negative meaning. In fact, only alleged serious breaches of the contract were at issue. It was also pointed out that the upper limit of an exclusion penalty in a case such as that in the main proceedings had been reduced from five to three years, as was evident from the provisions of Article 106(14)(c) of the Financial Regulation in the version applicable from 1 January 2016. The proposed penalty of two years is now at the upper end of the scale of possible penalties and ought, at the very least, to be revised downwards. In the main, the applicant claimed that no penalty should be imposed. In addition to the arguments already put forward, it stated that Article 106(7) of the Financial Regulation, in the same version, provided that an operator could not be excluded if it had taken remedial measures demonstrating its reliability. In the present case, not only had the European Union recovered its funds, but the applicant had also carried out a thorough review of its manner of operation. The repetition of the conduct at issue was again contested. Furthermore, it was argued that the applicant had probably already been excluded de facto from EU contracts since mid-2014 and that it reserved the right to verify this. The question was also raised as to how the Commission proposed to involve in the proceedings the panel newly provided for in Article 108 of the Financial Regulation in the version applicable from 1 January 2016 (‘the Article 108 panel’).

16 On 29 February, the applicant wrote to the Commission expressing regret that the letter from its lawyers, summarised in paragraph 15 above, had crossed with the contested decision. It asked that the latter not be published and that it be reconsidered taking into account the arguments put forward by its lawyers. It also asked what the implications would be for existing contracts.

17 On 1 March 2016, the Commission replied to the applicant’s lawyers. It stated that the contested decision was based not on a finding of fraud but on a finding of serious breaches of contractual obligations, that the principle of the application of the new, more lenient, law was complied with in that the duration of the exclusion was reduced from two years to 18 months, taking into account the lowering of the upper limit provided for in respect of that penalty in the version of the Financial Regulation applicable from 1 January 2016, and that the applicant had not been subject to exclusion before the end of the procedure. It added, in essence, that the procedure which led to the contested decision was completed when the adversarial procedure ended, under the rules applicable until 31 December 2015.

19 By a separate document, lodged at the Registry of the General Court pursuant to Articles 151 and 152 of the Rules of Procedure of the General Court, the applicant requested that the procedure be expedited. By decision of 13 May 2016, the Court rejected that request.

20 By a separate document, lodged at the Registry of the General Court pursuant to Article 66 of the Rules of Procedure, the applicant requested anonymity and that certain information not be made public. By decision of 14 June 2016, the Court granted that request on the ground that a refusal of anonymity would result in public disclosure of the applicant’s penalty and thus, de facto, in the additional penalty of publishing the exclusion decision (see paragraph 14 above).

21 In its application, the applicant requested measures of organisation of procedure, including that the Court require the Commission to furnish certain documents and provide clarification concerning various factual aspects.

22 After the Commission’s defence was lodged at the Registry of the General Court on 24 June 2016, the Court granted, on 18 July 2016, pursuant to Article 83 of the Rules of Procedure, the applicant’s request to submit a reply limited to commenting on the two annexes submitted by the Commission and asked the Commission to reply with a rejoinder.

23 The applicant lodged its reply on 7 August 2016 and the Commission lodged its rejoinder on 28 September 2016.

24 Acting on the proposal of the Judge-Rapporteur, the General Court (Ninth Chamber) decided to open the oral part of the procedure and, under measures of organisation of procedure, to put written questions to the parties to be answered at the hearing.

25 The parties presented oral argument and their replies to the questions from the Court at the hearing on 2 March 2017.

28 The applicant puts forward, in the application, four pleas against the contested decision. First, the Commission infringed the principle of the retroactive application of the more lenient law, by disregarding, as to the substance, certain provisions of the Financial Regulation in the version applicable from 1 January 2016. Secondly, the Commission disregarded essential procedural requirements by adopting the contested decision without having asked for and obtained a recommendation from the Article 108 panel, as provided for by the provisions of the same version of the Financial Regulation, and by not agreeing to review its decision in the light of the remedial measures adopted by the applicant, contrary to those provisions. Thirdly, the applicant claims, in the alternative, that the Commission infringed Article 133a of the Implementing Regulation in the version applicable at the time when the alleged facts occurred, which laid down the criteria to be used by the Commission in determining the duration of an exclusion such as that decided on in the present case, in compliance with the principle of proportionality. Finally, the principle of proportionality and the principle ne bis in idem were in any event infringed, in so far as the applicant had already been excluded from EU contracts and grants, in respect of the same facts, before the contested decision was adopted.

30 At the hearing, the applicant waived the second part of that plea, according to which the Commission had wrongly refrained from revising the contested decision, as provided for in Article 106(9) of the Financial Regulation in the version applicable from 1 January 2016, after receiving the letter of 29 January 2016 from the applicant’s lawyers, referred to in paragraph 15 above, which outlined the remedial measures taken to prevent the re-occurrence of acts such as those at issue. Formal note of the above was taken in the minutes of the hearing. It is therefore necessary to examine the first part of the plea only.

31 The applicant claims that the Commission itself stated in the contested decision that the procedural rules to be complied with were those applicable at the time when the decision was taken. Given that the contested decision was adopted on 28 January 2016, it was necessary to comply with the procedural rules arising from the Financial Regulation in the version applicable from 1 January 2016 and, in particular, to consult with the Article 108 panel, provided for in paragraph 5 et seq. of that article, before adopting that decision.

32 The applicant states, in essence, that, according to the provisions of Article 105a(2), read in conjunction with those of Article 106(1) and (2), and Article 131(4) of the Financial Regulation in the version applicable from 1 January 2016, in the event that significant breaches of contractual obligations are discovered following checks, audits or investigations by an authorising officer, OLAF or the Court of Auditors, an exclusion can be imposed on the beneficiary of the grant concerned only having regard to established facts or other findings contained in a recommendation issued by the Article 108 panel. Given that the Commission acknowledges that it did not adopt the contested decision on the basis of such a recommendation, the applicant states that the purpose of providing for the involvement of the Article 108 panel was to safeguard the rights of defence enjoyed by economic operators, in particular in order to redress the imbalance in the power relations between the Commission and grant applicants or beneficiaries that is detrimental to the latter group. It argues that if the Article 108 panel had been involved in the procedure, the decision taken by the Commission could have been different, in particular because this would have led to the clarification of certain facts, as the applicant would have been able to present its arguments to a more independent body and would have been in a position to provide more detail about the remedial measures it had taken.

33 The applicant disputes that it is possible, as suggested by the Commission, in particular in its letter of 1 March 2016, referred to in paragraph 17 above, to consider that the procedural rules to be taken into account are those applicable at the time when ‘the procedure was completed’, an indeterminate point in time which would frustrate checks to verify whether procedural rules are being correctly applied over time. Only the date on which the decision was adopted should be taken into account. In that connection, the applicant refers specifically to the judgment of 26 March 2015, Commission v Moravia Gas Storage (C-596/13 P, EU:C:2015:203, paragraphs 33 and 41).

34 In its defence, the Commission acknowledges that the date of the contested decision is later than 1 January 2016 and notes in that regard that the preamble of that decision refers to Article 105a, Article 106(1)(e), Article 108(1) and Article 131(4) of the Financial Regulation in the version applicable from that date. However, according to the Commission, the principle of the immediate application of procedural rules is a general principle which should be implemented in the light of the specific features of the situation at issue. In the present case, the part of the procedure involving the applicant, that is to say the adversarial procedure, was completed before 31 December 2015, under the procedural rules applicable at that time. The internal stage of the procedure was, for its part, concluded on 17 December 2015 following the inter-service consultation which resulted in the decision to adopt the penalty imposed. The subsequent delay was used simply to finalise the contested decision. Had a decision been made to apply, from 1 January 2016, all of the new procedural rules and to refer the matter to the Article 108 panel, this would have led to repetition of the already completed adversarial procedure. However, as regards the final adoption of the contested decision, the new procedural rules were applied, in particular the provisions contained in Article 105a(2) and Article 131(4) of the Financial Regulation in the version applicable from 1 January 2016, from which it follows that the decision had to be issued by the Directorate-General for Neighbourhood and Enlargement Negotiations.

35 In that regard, first of all, it should be recalled that, according to a generally accepted principle and save as otherwise provided, a new rule applies immediately to situations yet to arise and to the future effects of situations which arose under the old rule. On the other hand, it does not normally apply to legal situations that have arisen and become definitive under that old rule (see, to that effect, judgments of 9 December 1965, Singer, 44/65, EU:C:1965:122, p. 1200; of 15 February 1978, Bauche, 96/77, EU:C:1978:26, paragraph 48; and of 26 March 2015, Commission v Moravia Gas Storage, C-596/13 P, EU:C:2015:203, paragraph 32). It is otherwise, subject to the principle of the non-retroactivity of legal acts, only if the new rule is accompanied by special provisions which specifically lay down its conditions of temporal application (see judgment of 7 November 2013, Gemeinde Altrip and Others, C-72/12, EU:C:2013:712, paragraph 22 and the case-law cited).

36 It is also settled case-law that rules of procedure apply, in principle, to all proceedings that were pending at the time when they entered into force, (see, to that effect, judgments of 12 November 1981, Meridionale Industria Salumi and Others, 212/80 to 217/80, EU:C:1981:270, paragraph 9; of 6 July 1993, CT Control (Rotterdam) and JCT Benelux v Commission, C-121/91 and C-122/91, EU:C:1993:285, paragraph 22; and of 26 March 2015, Commission v Moravia Gas Storage, C-596/13 P, EU:C:2015:203, paragraph 33). It is also otherwise only if the new rule is accompanied by special provisions which specifically lay down its conditions of application over time or according to the degree of progress of the procedures concerned.

37 In the present case, Regulation 2015/1929, under which the Financial Regulation was amended with effect from 1 January 2016, does not contain any specific transitional provisions accompanying the fixing of that general application date. The same applies to Regulation 2015/2462 as regards amendments to the Implementing Regulation with effect from the same date.

38 However, as was held in the judgment of 8 November 2007, Andreasen v Commission (F-40/05, EU:F:2007:189, paragraphs 165 and 166), to which the parties’ attention was drawn in preparation for the hearing, to apply a new procedural rule to a procedure already commenced under the previous procedural rule, and a fortiori to a completed procedure, could have the result, if that procedure must then be recommenced, of giving retroactive effect to the new procedural rule and not simply applying it to an ongoing situation or to the future effects of a situation arising under the previous rule. In such a case, the application of the new procedural rule results in the retroactive annulment of procedures or procedural steps which complied with the rule in force when they were completed.

39 In the present case, the Commission states, in essence, that the adversarial procedure preceding the adoption of the decision on the penalty was already completed on 1 January 2016, when the new version of the Financial Regulation became applicable. According to the Commission, to involve, in those circumstances, the Article 108 panel, as provided for in the provisions of the Financial Regulation applicable from 1 January 2016, would have resulted in recommencing an adversarial procedure that had been properly conducted under the rules of procedure then applicable.

40 It must be held, as the Commission contends, that the adversarial procedure was, in the present case, completed before 1 January 2016. It was brought, on the basis of Article 131(5), read in conjunction with Article 109(1) of the Financial Regulation in the version applicable until 31 December 2015 and on the basis of Article 145 of the Implementing Regulation in the same version, by the Commission’s letter of 31 August 2015 referred to in paragraph 4 above. This is clear from the last paragraph of that letter. The adversarial procedure relating to the penalty ended in October 2015 with the lodging, within the time limit set by the Commission, of the applicant’s observations in reply, which were summarised in paragraph 7 above. In the absence of new complaints or requests for clarification or documents from the Commission issued subsequently, that procedure was not extended further. It must therefore be concluded from the documents before the Court that the adversarial procedure was properly conducted and completed in view of the rules that were applicable to it.

41 Furthermore, it should be noted that the provisions of the version of the Financial Regulation applicable from 1 January 2016, set out in particular in Article 108 of that regulation, have very substantially changed the course of the procedure prior to the adoption of a decision such as the contested decision since, following a referral by the authorising officer responsible who sends the file to the Article 108 panel, that panel must itself ensure that the adversarial procedure is instituted against the operator concerned and must then issue a recommendation to the authorising officer responsible, so that he can adopt a decision including, where appropriate, penalty measures. In their versions applicable until 31 December 2015, on the other hand, neither the Financial Regulation nor the Implementing Regulation provided for a procedural step subsequent to the adversarial procedure, which was carried out by the authorising officer responsible himself, other than that in respect of the final stage of adoption of the decision. The change in the rules did not, therefore, merely add an additional step to the existing preliminary procedure, a step which could have been observed without calling into question what had been done before, but resulted in the replacement of the existing preliminary procedure, to a large extent, by a new preliminary procedure. It should be added that, contrary to the submissions, respectively, of the Commission and of the applicant, the ‘procedure’ did not end following the inter-service consultation on 17 December 2015 or on an indeterminate or unverifiable date. The procedure prior to the adoption of the contested decision was in the present case completed in October 2015, when the adversarial procedure ended, and the penalty procedure as a whole concluded on 28 January 2016, when the contested decision was adopted.

42 It follows from the foregoing that, in the light of the rules applicable to it, the entire procedure prior to the adoption of the contested decision was properly carried out and completed before 1 January 2016.

43 The fact that the contested decision was adopted after the implementation of the new version of the Financial Regulation, with the introduction of the Article 108 panel, cannot cast doubt on that assessment. Even if the introduction of that panel was intended to strengthen the rights of the defence of parties contracting with the Union who may be subject to a penalty under the Financial Regulation, no express or implied provision of Regulation 2015/1929 or Regulation 2015/2462 can be interpreted as giving Article 105a(2) and Article 106(2) of the Financial Regulation, in the version applicable from 1 January 2016, which provide in a number of cases for the intervention of the Article 108 panel, a retroactive scope which would imply recommencing the preliminary procedure completed properly before that date, in particular having regard to compliance with the adversarial principle (see, by analogy, judgment of 8 November 2007, Andreasen v Commission, F-40/05, EU:F:2007:189, paragraphs 165 to 171).

44 Furthermore, the applicant has not invoked any rule regarding the final stage of the adoption of the contested decision by the authorising officer responsible that was not observed, whether under the Financial Regulation and the Implementing Regulation in their versions applicable until 31 December 2015 or under the same regulations in their versions applicable from 1 January 2016.

45 In those circumstances, it must be concluded that the applicant has not established any procedural irregularity that could, where relevant, constitute an infringement of essential procedural requirements and which could taint the contested decision with unlawfulness. The second plea must therefore be dismissed.

The plea alleging infringement of the principle of the retroactive application of the more lenient law

46 The applicant submits that compared to the provisions applicable at the time when the alleged facts occurred, those of the Financial Regulation in the version applicable from 1 January 2016 include several elements which must be considered as more lenient as regards the penalties incurred in a case such as this. First, the maximum duration of an exclusion was reduced to three years, under Article 106(14)(c), whereas previously it was five years. Secondly, Article 106(7)(a) now provides that where the operator concerned has taken certain remedial measures demonstrating its reliability, an exclusion cannot be imposed on it, whereas previously such a circumstance was only to be taken into account when determining any penalty. Thirdly, Article 106(3) now includes, amongst the criteria for assessing a potential penalty ‘any other mitigating circumstances, such as the degree of collaboration of the economic operator with the relevant competent authority and its contribution to the investigation’, whereas, before, those elements were not referred to. The Commission did not apply those more lenient provisions, thus disregarding the principle of the retroactive application of the more lenient law.

47 The Commission, for its part, is of the opinion that the contested decision does not contravene the principle of retroactive application of the more lenient law.

48 In general terms, the provisions of the Financial Regulation applicable from 1 January 2016 on the detection of risks and imposition of administrative penalties are no more lenient or less stringent than before, as is clear from recital 8 of Regulation 2015/1929, which states that the rules for exclusion from participation in procurement procedures and the obtaining of grants should be improved in order to strengthen the protection of the financial interests of the European Union.

49 More specifically, the mitigating circumstances to which the applicant refers are merely examples of such circumstances, which have already been taken into account within the framework of the provisions applicable at the time when the facts alleged occurred. In that regard, Article 133a of Regulation No 2342/2002 states that in order to determine the duration of exclusion and to ensure compliance with the principle of proportionality, the institution responsible shall take into account in particular the seriousness of the facts, including their impact on the European Communities’ financial interests and image and the time which has elapsed since the infringement, the duration and recurrence of the offence, the intention or degree of negligence of the entity concerned and the measures taken by the entity concerned to remedy the situation. Furthermore, in the course of the adversarial procedure, the applicant did not specifically raise the issue of its cooperation with the competent authority or its contribution to the investigation.

50 As regards the issue of the remedial measures put forward by the applicant, the Commission argues, in essence, relying on Article 106(7)(a) of the Financial Regulation in the version applicable from 1 January 2016, that in order for such measures to be taken into account they must have enabled the economic operator concerned to demonstrate its reliability. There was no such requirement previously, according to the Commission, and efforts in that regard were simply taken into account as mitigating circumstances. The new regime is therefore not more lenient than its predecessor.

51 In respect of the last two aspects put forward by the applicant, the legislation applicable from 1 January 2016 is therefore not more lenient than that applicable at the time when the facts alleged occurred.

52 Lastly, as regards the upper limit of the duration of an exclusion, which is, indeed, lower than the previous maximum of five years, the Commission states that during the procedure there was never any question of exceeding the new upper limit of three years, since the duration of the exclusion originally announced was two years and an 18-month exclusion period was ultimately imposed. The versions of the Financial Regulation and the Implementing Regulation applicable from 1 January 2016 contain no rule providing for a reduction in the duration of penalties proportionate to the reduction of their upper limit. Consequently, there was no failure to comply with a more lenient rule in respect of the duration of the exclusion imposed.

‘No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national law or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed. If, subsequent to the commission of a criminal offence, the law provides for a lighter penalty, that penalty shall be applicable.’

54 As was noted in the judgement of 11 March 2008, Jager (C-420/06, EU:C:2008:152, paragraphs 59 and 60), that principle forms part of the constitutional traditions common to the Member States and, accordingly, must be considered to be one of the general principles of EU law which the Court ensures are respected. It is, more specifically, set out in the second sentence of Article 2(2) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests (OJ 1995 L 312, p. 1), which lays down the general rules relating to administrative checks, measures and penalties concerning irregularities which have, or would have, the effect of prejudicing the general budget of the Union or budgets managed by it and which thus applies in the present case. According to that provision, the competent authorities are required to apply retroactively, to conduct constituting an irregularity, the subsequent amendments made by provisions contained in Union sectoral rules introducing more lenient administrative penalties.

55 In the event of developments in the rules governing administrative penalties, which would lead to certain aspects of the new rules being more lenient, but in other aspects more stringent than the old rules, it is necessary, in order to determine which is the more lenient rule, not to carry out an abstract analysis, but to determine which, in the specific circumstances, is the most favourable to the undertaking in question, having regard to its situation (see, to that effect, judgment of 9 December 2014, Riva Fire v Commission, T-83/10, not published, under appeal, EU:T:2014:1034, paragraph 85; ECtHR, 17 September 2009, Scoppola v. Italy, CE:ECHR:2009:0917JUD001024903, paragraph 109, and ECtHR, 18 July 2013, Maktouf and Damjanović v. Bosnia and Herzégovina, CE:ECHR:2013:0718JUD000231208, paragraph 65).

56 In the present case, by comparing, in view of the situation in the present case, the provisions concerning the penalties incurred by the Financial Regulation and the Implementing Regulation, on the one hand, in their versions applicable at the time when the facts arose and, on the other hand, in their versions applicable from 1 January 2016, the following findings can be made.

57 Article 106(7)(a) of the Financial Regulation in the version applicable from 1 January 2016, which establishes that an operator that has taken remedial measures demonstrating its reliability cannot be excluded from the contracts and grants of the Union, is clearly a more lenient provision than the previously applicable provision. Where those conditions are met, even if it may require strict proof, it is now possible to obtain a full exemption from an exclusion penalty, whereas previously that did not necessarily result in such an exemption. That provision is relevant in the specific circumstances of the present case in so far as, in its reply to the Commission of 5 October 2015, made in the context of the adversarial procedure and summarised in paragraph 7 above, the applicant expressly submitted, in detail, the remedial measures which it had adopted following the events in question, and in so far as the Commission did not consider those measures to be insignificant, since it took them into account, as is apparent from paragraph 68 of the contested decision, to determine the duration of the exclusion imposed. Therefore, as regards which was the more lenient regulation, Article 106(7)(a) of the Financial Regulation in the version applicable from 1 January 2016 constituted a more lenient provision that can benefit the applicant.

58 In that regard, as explained in paragraph 9 above, not only did the Commission expressly refer, in the contested decision, to the provisions of the Financial Regulation and the Implementing Regulation relating to the penalties applicable at the time when the alleged facts occurred, but it also appears to have failed to take account of Article 106(7)(a) of the Financial Regulation in the version applicable from 1 January 2016, which establishes that an operator that has taken certain remedial measures demonstrating its reliability cannot be excluded from the contracts and grants of the Union. Although the contested decision shows that the remedial measures taken by the applicant were taken into account to determine the duration of the exclusion imposed, no reason is given in that decision as to why those measures were insufficient to satisfy the conditions laid down in the abovementioned provision. It must be concluded that the Commission failed to examine whether or not it should apply that provision. It should be pointed out in that regard that the argument put forward in the Commission’s defence, that the applicant failed to recognise, in the course of the adversarial procedure, its intention to arrange the fake tenders criticised in the OLAF report demonstrated that its reliability had not been restored, cannot be accepted. An economic operator subject to a penalty procedure always has the right to defend itself against complaints made against it and the exercise of that right does not prejudice the assessment of its reliability subsequent to the facts alleged against it, taking into account the remedial measures it may have adopted. This confirms that taking into account Article 106(7)(a) of the Financial Regulation, in the version applicable from 1 January 2016, was likely to have led to a more lenient decision for the applicant.

59 Moreover, it cannot be ruled out that, in a case such as the present, the lowering of the maximum period of exclusion from five years to three years, resulting from Article 106(14)(c) of the Financial Regulation in the version applicable from 1 January 2016, may lead an authorising officer responsible, other things being equal, when applying that version of the Financial Regulation, to impose an exclusion period on the operator concerned that is less than if it had applied the previous versions of the Financial Regulation and the Implementing Regulation. In the present case, the Commission itself submitted, in its letter of 1 March 2016, referred to in paragraph 17 above, that account had been taken of the lowering of the ceiling of the duration of exclusion in order to impose an exclusion period of 18 months rather than a two-year period as initially envisaged. Consequently, Article 106(14)(c) of the Financial Regulation, in the version applicable from 1 January 2016, also constituted, in the specific circumstances, a more lenient provision capable of benefiting the applicant, even if the duration of exclusion envisaged by the Commission in its letter of 31 August 2015 was already below the new ceiling.

60 Nevertheless, in spite of what was submitted in the letter of 1 March 2016, referred to in paragraph 59 above, the fact that that provision was taken into account also does not appear in the contested decision, in particular in paragraph 45 et seq. in the part entitled ‘Duration of the exclusion’, as the Commission confirmed at the hearing.

61 It may be observed, moreover, that there is certainly a provision in the regime applicable from 1 January 2016 which appears to be more stringent than was provided for under the regime applicable at the time when the facts alleged occurred. Indeed, as set out in paragraph 14 above, the latter regime did not provide for the possibility of publishing a penalty decision or the essential elements relating thereto, contrary to what is provided in the version of the Financial Regulation applicable from 1 January 2016. However, under the latter version, not only is such publication not compulsory but, in the present case, the Commission has neither envisaged nor decided on such publication, which would have been, moreover, contrary to the principle of non-retroactivity of administrative penalties not provided for at the time when the alleged facts occurred (see, by analogy, judgment of 28 June 2005, Dansk Rørindustri and Others v Commission, C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P, EU:C:2005:408, paragraph 202). Consequently, that aspect is not relevant in the present case.

62 It is thus clear from the actual assessment of the situation that, in order to comply with the principle of retroactive application of the more lenient punitive law, the Commission should apply the penalty rules resulting from the Financial Regulation and the Implementing Regulation in their versions applicable from 1 January 2016.

63 The contested decision must therefore be annulled, as it was adopted, as noted in paragraphs 58 and 60 above, without any indication that consideration was given to the provisions of a more lenient sanctions regime which, if applied retroactively to the facts of the present case, could have resulted in a more lenient decision. It is therefore not necessary to examine the other two pleas raised by the applicant or the requests for measures of organisation of procedure formulated by the applicant.

64 Under Article 134(1) 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 the Commission has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the applicant.

1. Annuls the decision of the Commission of 28 January 2016 imposing the administrative penalty of exclusion of NC from procurement and grant award procedures financed from the general budget of the European Union for a period of 18 months and consequently registering it in the Early Detection and Exclusion System database provided for in Article 108 (1) of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002;

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> NC v Commission (Grants - OLAF investigation - Finding of irregularities : Judgment) [2017] EUECJ T-151/16 (27 June 2017) URL: http://www.bailii.org/eu/cases/EUECJ/2017/T15116.html Cite as: ECLI:EU:T:2017:437, EU:T:2017:437, [2017] EUECJ T-151/16

Court of Justice of the European Communities (including Court of First Instance Decisions)