Provisional text

delivered on 3 March 2022 (1)

Case C‑620/20 P

International Management Group (IMG)

European Commission

( Appeal – Financial Regulation – Protection of the Union’s financial interests – Development cooperation – Budget implementation under indirect management by an international organisation – Decision not to entrust budget implementation to an entity because of doubts as to its status – Annulment – Compensation – Sufficiently serious breach of a rule of law conferring rights on individuals – Principle of good administration – Implementation of a judgment annulling a decision )

The financial regulations allow funds from the EU budget to be implemented through the mechanism of indirect management. The Commission employed that mechanism in 2013 by entrusting the management of certain development cooperation funds to the entity International Management Group (‘IMG’), the status of which as an international organisation is now in issue.

In 2014, the Commission suspended relations with IMG on account of doubts regarding its legal status and, in 2015, informed IMG that it would not be concluding any further delegation agreements for indirect management with it.

IMG appealed those Commission decisions to the General Court, which dismissed its claims. (2) On appeal, however, the Court of Justice upheld IMG’s appeal, annulled the Commission’s decisions and referred the case back to the General Court for a ruling on the claim for damages pursued by that entity. (3)

That case having been referred back to the General Court, the latter finally dismissed the claim for compensation. (4) IMG is appealing that judgment of the General Court.

I.Legal framework

I refer to the presentation of the financial rules applicable to indirect management of the EU budget that is contained in the judgment in C‑183/17 P and C‑184/17 P, there being no need to reproduce those regulations here.

That judgment sets out the applicable provisions of Regulation (EC, Euratom) No 1605/2002 (5) (in particular Articles 53 and 53d thereof); Regulation (EC, Euratom) No 2342/2002 (6) (in particular Article 43 thereof); Regulation No 966/2012 (7) (in particular Articles 58(1) and 84 to 86); and Delegated Regulation (EU) No 1268/2012 (8) (in particular Article 43 thereof).

II.Background to the disputes

The background to the disputes is set out in detail in the judgment in Joined Cases C‑183/17 P and C‑184/17 P and in the judgment under appeal, to both of which I refer.

From the former, I reproduce the following facts: (9)

—‘— According to its statute, as included in the Court’s case file, IMG was established on 25 November 1994 as an international organisation named “International Management Group – Infrastructure for Bosnia and Herzegovina”, with its headquarters in Belgrade (Serbia), in order to provide the States participating in the reconstruction of Bosnia and Herzegovina with an entity specifically created for that purpose. Since then, IMG has gradually broadened the scope of its activities and, on 13 June 2012, concluded an agreement concerning the seat of the organisation with the Kingdom of Belgium.

—On 7 November 2013, the Commission adopted Implementing Decision C(2013) 7682 final on the Annual Action Programme 2013 in favour of Myanmar/Burma to be financed from the general budget of the European Union (“the initial decision”) on the basis of Article 84 of Regulation No 966/2012.

—Article 1 of that decision provides that the Annual Action Programme 2013 in favour of Myanmar/Burma, as set out in Annexes 1 and 2 to the decision, is approved.

—Article 3 of the decision provides that budget tasks implemented by joint management may be entrusted to the entities referred to in Annexes 1 and 2 to the decision, subject to the conclusion of a delegation agreement.

—Annex 2 to the decision describes the second action constituting the Action Programme 2013 in favour of Myanmar/Burma. Sections 5 and 8 of that annex state, in essence, that the action is to take the form of a programme for trade development the cost of which, estimated at EUR 10 million, will be financed by the European Union and implemented by joint management with IMG. Point 8.3.1 of the annex states that IMG is an international organisation already established in Myanmar/Burma and associated with the implementation of projects financed by the European Union in that State.

—On 17 February 2014, OLAF informed the Commission that it had opened an investigation relating to IMG’s status.

—On 24 February 2014, the Secretary-General of the Commission forwarded that information to the Director-General for International Cooperation and Development of that institution, drawing his attention to the possibility of adopting precautionary measures on the basis of Article 7(6) of Regulation No 883/2013.

—On 26 February 2014, that Director-General adopted precautionary measures on the basis of that provision, on the ground that OLAF’s initial analysis had given rise to uncertainty regarding IMG’s status (‘the precautionary measures of 26 February 2014’). Those measures consisted, in essence, of a temporary prohibition on (i) concluding any new delegation agreement with IMG for indirect management of the EU budget on the basis of Regulation No 966/2012 and (ii) extending any delegation agreement previously concluded with IMG for joint management of the EU budget on the basis of Regulation No 1605/2002.

—On 25 April 2014, that Director-General sent a letter to IMG (‘the letter of 25 April 2014’), in which he informed it of three new items of information in the Commission’s file, relating to the fact that (i) five Member States presented by IMG as being its members did not consider themselves to be members, (ii) the Secretary-General of the United Nations (UN) had stated that IMG was not a specialist UN agency, and (iii) there was some doubt regarding the powers of the persons who had represented certain States when the act establishing IMG was signed. The Commission’s Director-General for International Cooperation and Development also indicated that, in the light of the doubts raised by those factors regarding IMG’s status, he had instructed his departments to suspend on a temporary basis, as far as IMG was concerned, recourse to procedures by which budgetary tasks are implemented by international organisations.

—On 15 December 2014, the Commission received the report drawn up by OLAF following its investigation (‘the OLAF report’), together with a number of recommendations. In that report, OLAF stated, in essence, that IMG was not an international organisation for the purposes of the 2002 and 2012 Financial Regulations, and recommended that the Commission impose sanctions on IMG and recover the amounts paid to IMG in that capacity.

—On the following day, the Commission adopted the decision of 16 December 2014, on the basis of Article 84 of Regulation No 966/2012. Pursuant to Article 1 of that decision, Annex 2 to the initial decision was replaced by a new annex, Sections 1 and 4.3 of which state, in essence, that the trade development programme provided for by the initial decision would be implemented by indirect management, no longer by IMG, but by Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (“GIZ”).

—On 16 January 2015, the Legal Service of the Commission drew up a note entitled “Legal analysis of the [OLAF report] [in the] investigation … concerning [IMG]” (“the Legal Service note”).

—On 8 May 2015, the Commission sent a letter to IMG informing it of how it intended to follow up on the OLAF report, in which it stated that, although it would not act on the majority of the recommendations made by OLAF, it had decided, inter alia, that, until there was absolute certainty regarding IMG’s status as an international organisation, its department would not enter into any new delegation agreement with IMG based on the indirect management with an international organisation model provided for by Regulation No 966/2012. It is that part of the letter that constitutes the decision of 8 May 2015 referred to in paragraph 1 above’.

III.Judgment in Joined Cases C‑183/17 P and C‑184/17 P

IMG brought before the General Court two actions against the Commission’s decisions of 16 December 2014 (Case T‑29/15) and 8 May 2015 (Case T‑381/15). In both cases, it sought the annulment of those decisions and, in the latter, compensation for the damage caused.

On 2 February 2017, the General Court delivered judgments dismissing the actions in Cases T‑29/15 and T‑381/15 respectively.

IMG brought two appeals against those judgments. In ruling on those appeals in the judgment in Joined Cases C‑183/17 P and C‑184/17 P, the Court of Justice upheld the second ground raised in each appeal and set aside the judgments at first instance.

In the opinion of the Court of Justice, the General Court had committed an error of law ‘by justifying the adoption of the [Commission] decisions at issue by the doubts it had regarding IMG’s status as an “international organisation” within the meaning of the 2002 and 2012 Financial Regulations’. (10)

According to the Court of Justice, the considerations set out by the General Court as justification for the Commission’s doubts were not such as to substantiate those doubts in law. (11)

The Court of Justice stated that upholding the second ground in each appeal had the following consequences:

—The error of law committed by the General Court meant that the judgments in Cases T‑29/15 and T‑381/15 had to be set aside in their entirety.

—The state of both cases was such as to permit final judgment, in so far as IMG had sought the annulment of the decisions of 16 December 2014 and 8 May 2015.

—Those two decisions were vitiated by the same error of law as the judgments in Cases T‑29/15 and T‑381/15 and therefore had to be annulled in their entirety.

—Conversely, the state of the claim for damages for harm caused to IMG by the decision of 8 May 2015 was such as to permit final judgment and therefore had to be referred back to the General Court.

IMG asked the Court of Justice to interpret paragraphs 1 to 3 of the operative part of the judgment in Joined Cases C‑183/17 P and C‑184/17 P. It claimed in this regard that the Commission could not be in any doubt as to its international organisation status for the purposes of the 2002 and 2012 Financial Regulations.

The Court of Justice dismissed IMG’s application for interpretation, (12) on the ground, in particular, that it had merely held that the doubts expressed by the Commission, on the basis of a number of legal factors, regarding IMG’s status as an international organisation were incorrect. By contrast, it in no way decided the issue of whether or not, on the basis of an analysis not vitiated by any errors of law and of all the relevant factors, it should be found that IMG had such a status. (13)

IV.Judgment under appeal

Further to the ruling given in the judgment of the Court of Justice in Joined Cases C‑183/17 P and C‑184/17 P, the General Court, having received the parties’ observations, delivered the judgment under appeal, dismissing IMG’s claim for damages for the harm allegedly caused by the decision of 8 May 2015.

In the judgment under appeal, the General Court:

—Held that the claim was inadmissible inasmuch as it sought compensation for a number of heads of damage which were additional to those set out in the application initiating the proceedings, or the nature of which had been modified by comparison with that of those in the application. In particular, it declared inadmissible the claims by which IMG sought compensation in kind for certain heads of material and non-material damage which it asserted it had sustained as a result of the decision of 8 May 2015.

—Found the claim to be admissible in so far as it related to material damage quantified at EUR 3 million, on the one hand, and non-material damage set at a symbolic sum of EUR 1, on the other hand.

—Maintained that, although vitiated by unlawfulness for the reasons set out in the judgment in Joined Cases C‑183/17 P and C‑184/17 P, the decision of 8 May 2015 had not breached a ‘rule of law intended to confer rights on individuals’. For that reason, it held to be unfounded IMG’s argument that the provisions of the 2002 and 2012 Financial Regulations should be interpreted, in the light of the teachings of public international law relating to the concept of ‘international organisation’, as conferring on the entities recognised by the Commission as having that status an ‘acquired right’ to be treated as such.

—Noted that, even if it is accepted that the recognition of a given entity as having international organisation status may be definitive in public international law, the principle of sound financial management referred to in Articles 310 and 317 TFEU compels the Commission to adopt all of the measures necessary to protect the Union’s financial interests, in particular when entrusting the performance of budgetary activities to international organisations.

—Added that it follows from the judgment of the Court of Justice in Joined Cases C‑183/17 P and C‑184/17 P (paragraphs 88 to 90) that, even if a given entity had been recognised as having international organisation status within the meaning of the 2002 and 2012 Financial Regulations, that status may subsequently be called into question by the Commission if that is justified.

—Dismissed as unfounded IMG’s argument that the unlawfulness of the decision of 8 May 2015, as declared by the Court of Justice, was to be regarded as amounting to a breach of the principle of good administration laid down in Article 41 of the Charter and, more specifically, of the obligation to examine its status as an international organisation carefully and impartially in the light of the 2002 and 2012 Financial Regulations, account being taken of the relevant matters of fact and law. (14)

—It stated finally that the infringement of the 2002 and 2012 Financial Regulations which IMG claimed to have been committed did not in any event appear to be ‘sufficiently serious’ within the meaning of the case-law, since IMG had not demonstrated that the Commission had discretion when it came to applying those regulations.

In short, the General Court found that there had not been a sufficiently serious breach of a rule of law intended to confer rights on individuals and that, for that reason, IMG’s claim for damages must be dismissed in its entirety.

V.Other procedural steps that may have a bearing on the dispute

While the proceedings in Case T‑381/15 RENV were ongoing before the General Court, the Commission and IMG exchanged correspondence concerning implementation of the judgment in Joined Cases C‑183/17 P and C‑184/17 P. That exchange shows that they interpreted the legal bases of that judgment differently:

—For the Commission, the annulment of the decisions of 14 December 2014 and 8 May 2015 was based on their failure to state the reasons for which they were adopted.

—For IMG, on the other hand, the annulment compelled the Commission to recognise its status as an international organisation within the meaning of the 2002 and 2012 Financial Regulations.

In the course of that exchange, the Commission, on 18 July 2019, sent IMG a letter in which it expressed the view that, in the judgment in Joined Cases C‑183/17 P and C‑184/17 P, the Court of Justice had not concluded that IMG was an international organisation. The implementation of that judgment, therefore, required not ‘the automatic recognition of IMG as an international organisation but the re-evaluation of its legal status in the light of the information available and the financial rules applicable’. (15)

IMG brought an action against that letter before the General Court (Case T‑645/19), seeking, first, the annulment of the letter and, second, compensation for the damage so caused to it.

By order of 9 September 2020, (16) the General Court dismissed the action in Case T‑645/19. By Case C‑619/20 P, IMG has lodged an appeal against that order.

Finally, IMG has brought before the General Court a new action for a declaration of non-contractual liability against the Commission (Case T‑752/20, IMG v Commission, still pending) in which it seeks compensation for the material and non-material damage it claims to have sustained as a result of the conduct of the Commission and of OLAF in the course of the investigation of which it was the subject.

VI.Forms of order sought by the parties and procedure before the Court of Justice in Case C‑620/20 P

IMG claims that the Court should:

—Set aside the judgment of the General Court of 9 September 2020 in Case T‑381/15/RENV.

—Grant the appellant the relief sought at first instance, as revised, and, accordingly:

–Order the respondent to pay compensation for the material and non-material damage as defined in its observations after Case T‑381/15 RENV was referred back to the General Court.

–Order the respondent to pay all the costs.

The Commission contends that the Court of Justice should dismiss the appeal and order IMG to pay the corresponding costs.

The Court of Justice has decided to join the appeals in Cases C‑619/20 P and C‑620/20 P for the purposes of the judgment.

At the Court’s direction, this Opinion will be confined to Case C‑620/20 P.

VII.Analysis of the appeal in C‑620/20 P

A.Preliminary point: the ground of appeal raised by the Commission

By letter of 16 June 2021, the Commission informed the Court Registry of a consideration which it described as ‘a significant new development’, namely the communication to IMG on 8 June 2021 of the (negative) assessment of its status as an international organisation which had been carried out in order to implement the judgment in Joined Cases C‑183/17 P and C‑184/17 P in the light of the 2002, 2012 and 2018 Financial Regulations.

In accordance with that assessment, which would apply retrospectively from 2014, IMG cannot implement Union funds through the mechanism of indirect management by an international organisation.

The Commission considers that that circumstance might render the appeals in Cases C‑619/20 P and C‑620/20 P devoid of purpose and is therefore raising it as a (new) ground of appeal in accordance with Article 127 of the Rules of Procedure of the Court of Justice.

IMG opposed the Commission’s claim and, in addition, brought before the General Court an action for annulment of the Commission decision contained in the letter of 8 July 2021. (17)

By that new ground of appeal, the Commission seeks from the Court a ruling now on whether or not IMG has international organisation status and a declaration that the appeal has become devoid of purpose.

The Commission’s claim is inadmissible in the context of this appeal, since:

—First, the lawfulness of the Commission’s decision of 8 July 2021 is a matter of issue before the General Court in Case T‑509/21, still pending.

—Second, this appeal is concerned solely with the consequences of the unlawfulness found to be present in the judgment in Joined Cases C‑183/17 P and C‑184/17 P. When adjudicating upon it, the Court must determine whether that unlawfulness gave rise to liability on the part of the Union. That question does not cease to be material, and IMG does not cease to have an interest in bringing an action for compensation in relation to a bygone situation, simply because the Commission decided in 2021 that IMG is not an international organisation within the meaning of the Union’s financial regulations.

—Third, the subject matter of the appeal cannot be at variance with that of the judgment under appeal. (18)

B.First ground of appeal: infringement of the judgment in Joined Cases C‑183/17 P and C‑184/17 P

1.Arguments of the parties

IMG argues that, in the judgment under appeal, the General Court did not adhere to the ruling of the Court of Justice in the judgment in Joined Cases C‑183/17 P and C‑184/17 P.

In its view, the General Court, instead of taking the unlawfulness of the decision of 8 May 2015 as read, allows the Commission to carry on calling into question its status as an international organisation, notwithstanding that the judgment in Joined Cases C‑183/17 P and C‑184/17 P declared the Commission’s misgivings with respect to the nature of IMG to be unfounded.

The Commission disagrees with IMG’s line of argument and seeks to have this ground of appeal dismissed.

2.Assessment

The second paragraph of Article 61 of the Statute of the Court of Justice provides that, ‘where a case is referred back to the General Court, that Court shall be bound by the decision of the Court of Justice on points of law’.

To my mind, the General Court does not infringe that provision, or disregard the findings of the judgment in Joined Cases C‑183/17 P and C‑184/17 P, in refusing to grant the compensation sought by IMG after stating that that judgment does not give rise to an obligation to regard that entity as an international organisation authorised under the 2002 and 2012 Financial Regulations to be entrusted with budgetary implementation tasks and to receive the funds perform them by way of indirect management.

In particular, contrary to the argument put forward by IMG, the judgment in Joined Cases C‑183/17 P and C‑184/17 P does not support the inference that, once the Commission has recognised an entity as having international organisation status, it can no longer reconsider its status as such.

The judgment in Joined Cases C‑183/17 P and C‑184/17 P and the later order in Case C‑183/17 P-INT do support the inference, however, that the Commission’s recognition of IMG as an international organisation for the purposes of the 2002 and 2012 Financial Regulations was not final and could, subject to certain conditions, be re-evaluated.

The order in Case C‑183/17 P-INT is particularly expressive in this regard. As I have already noted, in that order, the Court of Justice defines the meaning of the judgment in Joined Cases C‑183/17 P and C‑184/17 P by stating that it had not prejudged whether or not, following an analysis of all the relevant information, IMG had international organisation status. This was a matter for the General Court to determine.

Thus, the setting aside of the judgment of the General Court and annulment of the Commission decision by the Court of Justice did not indicate, as the judgment under appeal rightly infers, that the financial rules confer on the applicant a right to continue to be recognised as an international organisation and, as such, to conclude with the Commission delegation agreements for indirect management.

It could also be noted that the Commission has an obligation to re-evaluate the status of an international organisation such as IMG before entrusting it with the indirect management of funds from the EU budget whenever doubts as to its nature as such arise.

The first ground of appeal must therefore be dismissed as unfounded.

C.Second ground of appeal: infringement of the concept of international organisation as provided for in the financial rules

1.Arguments of the parties

IMG accuses the judgment under appeal of: a) misinterpreting the concept of international organisation as provided for in the financial regulations; b) infringing international recognition and the hierarchy of norms; and c) failing to adhere to the interpretation of the EU financial regulations adopted in the judgment in Joined Cases C‑183/17 P and C‑184/17 P.

According to IMG, the General Court confused the classification of an entity as an international organisation with its capacity to manage the Union’s finances. The Commission has a duty to ensure the sound financial management of funds from the EU budget, but it cannot disregard the very existence of an international organisation, that is to say its ability to assert rights against third parties in international law.

The Commission rejects IMG’s reasoning and contends that the ground of appeal should be dismissed as irrelevant or manifestly unfounded.

2.Assessment

Paragraph 4 of the operative part of the judgment in Joined Cases C‑183/17 P and C‑184/17 P states that the case is to be referred back to the General Court for a ruling on ‘the claim for damages submitted by [IMG] in respect of the harm allegedly caused to that entity by the decision of the Commission [contained in its letter of 8 May 2015]’.

In order to dispose of that claim, the General Court did not need to rule on IMG’s status as an international organisation in the light of the rules of international public law by which the EU is bound. It was sufficient for it to note, as it did in paragraphs 78 to 80 of the judgment under appeal, that the concept of international organisation that is used in the 2002 and 2012 Financial Regulations is the same as that employed in international law, except that those regulations use it for the specific purpose of implementing the EU budget.

The General Court stated, (19) rightly in my view, that, when examining whether the applicant is an international organisation for the purposes of concluding delegation agreements for indirect management, the Commission ‘is required not only to have regard to the principles of international law relating to international organisations, but also to take all the measures necessary to protect the financial interests of the European Union, in accordance with the principle [of sound financial management] referred to above’. (20)

In this case, therefore, IMG’s nature as an international organisation under international law is not a factor relevant to determining the Union’s non-contractual liability. This will have been triggered only if the unlawfulness of the Commission decision (of 8 May 2015) annulled by the Court of Justice may be classified as a sufficiently serious breach of an EU provision conferring rights on individuals.

The rules of international law cited by IMG, albeit that they form part of EU law, do not confer on an international organisation the right not to have its status as such re-evaluated once this has been recognised by the European Union. (21) Re-evaluation by the Commission, where there is sufficient evidence to support this step, is consistent with the task entrusted to it of ensuring the sound financial management of the EU budget.

Furthermore, an international organisation cannot claim that its participation in the indirect management of funds from the EU budget over a period of time secures its right to carry on its participation in the future.

Under the 2002 and 2012 Financial Regulations, the Commission has a broad discretion authorising it to choose the international organisations best suited to the indirect management of funds from its budget, in keeping with the requirements of the principle of sound financial management.

IMG’s remaining arguments on the recognition of international organisations are irrelevant because they start from the erroneous premiss that, in the judgment in Joined Cases C‑183/17 P and C‑184/17 P, the Court conferred that status on IMG.

In any event, the Commission having adopted its new decision of 8 July 2021, (22) and IMG having brought an action for the annulment of that decision in Case T‑509/21, it is in the course of those proceedings that it will fall to be determined whether or not that entity may be classified as an international organisation for the purposes of the indirect management of funds from the EU budget. The Court of Justice obviously cannot pre-empt what the General Court’s judgment will be on that action.

The second ground of appeal must therefore be dismissed as unfounded, on the one hand, and irrelevant, on the other.

D.Third ground of appeal: breach of the principle of good administration

1.Arguments of the parties

IMG submits that the General Court erred in finding (paragraphs 90 to 93 of the judgment under appeal) that there has been no breach of the principle of good administration such as to trigger the non-contractual liability of the Commission.

The unjustified nature of the doubts over IMG’s status, which led to the annulment by the Court of Justice of the Commission decision of 8 May 2015, presupposes, according to IMG, that that institution committed an unlawful act and breached the principle of good administration (Article 41 of the Charter) by failing to fulfil its obligation to treat IMG’s situation with care and impartiality.

The Commission rejects that argument by IMG and proposes that the ground of appeal be dismissed.

2.Assessment

The third ground of appeal starts from an unsound premiss which hampers its further pursuit: it infers once again from the judgment in Joined Cases C‑183/17 P and C‑184/17 P that the Commission must automatically and irrevocably recognise its status as an international organisation for the purposes of the indirect management of funds from the EU budget.

IMG identifies the unlawful act committed by the Commission in its decision of 8 May 2015 as being a breach of the principle of good administration, and goes on to argue that that breach automatically triggers the non-contractual liability of the European Union.

As I shall argue in greater detail when looking at the fourth ground of appeal (with which the ground of appeal currently under analysis overlaps), a breach of the principle of good administration is not in itself sufficient to render the European Union non-contractually liable. In order for it to be so liable, the underlying breach must be sufficiently serious.

IMG does not present in the context of this ground any arguments proving the presence of a sufficiently serious breach. More specifically, it does not state how the errors of law and assessment on account of which the Court of Justice annulled the Commission decision of 8 May 2015 constitute a sufficiently serious breach of the principle of good administration (in particular in relation to the obligation to act impartially).

The third ground of appeal must therefore be dismissed as unfounded.

E.Fourth ground of appeal: misinterpretation of the concept of a sufficiently serious breach of a rule of law intended to confer rights on individuals

1.Arguments of the parties

According to IMG, the General Court, in paragraphs 87 to 98 of the judgment under appeal, misapplied the requirement that a declaration as to the non-contractual liability of the European Union must be based on a sufficiently serious breach of a rule of law intended to confer rights on individuals.

In its view, international organisations recognised by the Commission as being able to carry out the indirect management of EU funds have a right under the 2002 and 2012 Financial Regulations not to have their status subsequently re-examined by the Commission.

IMG further considers that the Commission had no discretion and that the breach of the right not to have its status challenged constitutes in itself a sufficiently serious breach of a rule of law intended to confer rights on individuals.

In addition, it maintains that, in paragraphs 90 to 92 of the judgment under appeal, the General Court erred in failing to recognise that the Commission had breached the principle of good administration. That breach occurred because the Commission did not act with the impartiality that that principle entails, and thus committed a sufficiently serious breach of a rule of law intended to confer rights on individuals.

The Commission takes issue with IMG’s arguments and contends that this ground of appeal should be dismissed, suggesting that it is partially inadmissible because unclear with respect to the alleged breach of the principle of good administration.

2.Assessment

In order for the European Union to incur non-contractual liability under the second paragraph of Article 340 TFEU, the following conditions must, according to the Court of Justice, be met: (23)

—the conduct alleged against the Union institution, which must be a sufficiently serious breach of a rule of law intended to confer rights on natural or legal persons, must be unlawful;

—the damage must be a matter of fact; and

—there must be a causal link between the conduct of that institution and the damage complained of.

If any one of those conditions is not satisfied, the action must be dismissed in its entirety and it is unnecessary to consider the other conditions. (24)

The Court of Justice has stated that ‘… only a sufficiently serious breach, not merely any breach, of a rule of EU Law protecting individuals is capable of giving rise to non-contractual liability on the part of the European Union. Furthermore, where an EU institution or body has been given a discretion, only that particular institution’s or body’s manifest and grave disregard of the limits on that discretion is capable of constituting a sufficiently serious breach of EU law’. (25)

A sufficiently serious breach of a rule of law intended to confer rights on natural or legal persons is therefore present where the breach is of a nature such as to open the institution up to the accusation of a manifest and grave disregard of the limits on that discretion.

The factors to be taken into consideration in that connection are, inter alia, the complexity of the situations, the degree of clarity and precision of the rule breached and the measure of discretion left by that rule to the EU institution. (26)

Where an EU institution has only considerably reduced, or even no, discretion, the mere infringement of EU law may be sufficient to establish the existence of a sufficiently serious breach of EU law and to give rise to the European Union’s non-contractual liability. (27)

There is, however, no automatic link between the non-existence of any discretion on the part of the institution and the existence of a sufficiently serious breach. A breach may be regarded as established only where the irregularity in question would not have been committed in similar circumstances by an administrative authority exercising ordinary care and diligence. (28)

The claims made by IMG under this ground of appeal, to the effect that the Commission has committed a twofold breach: of the 2002 and 2012 Financial Regulations, on the one hand, and of the principle of (or right to) good administration, on the other, must be examined in accordance with those criteria.

(a)Infringement of the 2002 and 2012 Financial Regulations

In my opinion, the General Court was right to say that ‘… the provisions on indirect management of the 2002 and 2012 financial regulations which refer to international organisations are not rules of law intended to confer on entities which the Commission has recognised as having status as international organisations a right not to have such status called into question …’. (29)

Thus, the 2002 and 2012 Financial Regulations:

—Confer on the Commission the power to entrust the indirect management of funds from the EU budget to third-party entities (in this case, international organisations). Those regulations do not confer on those entities the right to be selected for indirect management or guarantee that they will continue in their role as indirect managers of the EU budget beyond the particular measure entrusting that task to them.

—Give the Commission a broad discretion to decide, in the general interests of the European Union, with which international organisations it is appropriate to conclude an agreement for indirect management of EU funds, once their status as such has been established. (30)

—Authorise the Commission to review, on a reasoned basis, the international organisation status enjoyed by those entities or to reconsider the advisability of continuing to entrust to them the indirect management of EU funds. (31)

Now, if we take the foregoing premises as read, this part of the fourth ground of appeal cannot succeed, for two reasons:

—First, as I have just noted, the financial regulations do not confer on IMG a right to continue to be recognised as an international organisation and, therefore, to conclude new delegation agreements for indirect management with the Commission.

—Second, even if it were to be accepted (quod non) that those regulations confer that right on the aforementioned international organisations, the Commission’s error in issuing its decision of 8 May 2015 would not manifestly and gravely exceed the limits on its discretion.

I would recall that, in the decision of 8 May 2015, the Commission informed IMG that, until such time as there was absolute certainty with respect to international organisation status, its departments would not be concluding with it any further delegation agreements for indirect management with an international organisation.

It is true that, so far as concerns the doubts [as to IMG’s international organisation status], that decision was not based on an analysis providing adequate justification for its adoption, as the Court of Justice noted in the judgment in Joined Cases C‑183/17 P and C‑184/17 P. Its nullity stemmed from the insufficiency of the evidence adduced by the Commission to justify it.

However, that defect, the result of poor judgment on the Commission’s part, was not apparent at first sight but came to light only after an inter partes exchange of argument and evidence in which a reasonable case both for and against was put forward. (32) It cannot therefore be said that the Commission manifestly exceeded the limits on its discretion.

(b)Breach of the principle of good administration

The right (principle) of good administration is set out in Article 41(1) of the Charter, according to which ‘every person has the right to have his or her affairs handled impartially, fairly and within a reasonable time by the institutions and bodies of the Union’. (33)

That right reflects a general principle of EU law. (34) As the Explanations relating to the Charter state, (35) ‘Article 41 is based on the existence of the Union as subject to the rule of law whose characteristics were developed in the case-law which enshrined inter alia good administration as a general principle of law’.

The duty to act diligently which is inherent in the principle of good administration applies generally to the Commission’s actions and requires it to act with care and caution. As the Court states, ‘it is … for the Community administration to be non-contractually liable for wrongful conduct where it fails to act with all necessary care and, as a result, causes harm’. (36)

The Court has held that, ‘where a party claims that the institution competent in the matter has committed a manifest error of assessment, the EU judicature must verify whether that institution has examined, carefully and impartially, all the relevant factors of the individual case on which that assessment was based … That duty to act diligently is inherent in the principle of sound administration and applies generally to the actions of the EU administration’. (37)

In the judgment under appeal, the General Court was excessively laconic in rejecting as follows IMG’s arguments concerning the application of that principle:

—‘In the present proceedings after the General Court’s decision was set aside and the case referred back to it, the applicant is relying on the principle of sound administration in support of its argument that the Commission was not entitled to call into question the status as an international organisation that it had recognised the applicant as having in the past. At the hearing, replying to a question from the General Court, the applicant claimed that, by virtue of that principle, the Commission was required to examine its situation carefully and impartially in the light of all relevant information’. (paragraph 90).

—‘The Commission has a duty to ensure that the entity with which it concludes a delegation agreement for indirect management is an international organisation, even where it has already concluded such an agreement with that entity, since that status cannot be regarded as having definitively become vested … Under the principle of sound administration and the principle of sound financial management …, the Commission cannot be criticised for not concluding new delegation agreements for indirect management with an entity where that entity’s international organisation status can be called into question as a result of relevant factors of which that institution has been made aware’. (paragraph 91).

—‘Furthermore, the applicant has not indicated in what respect the error of law and manifest error of assessment which led the Court of Justice to set aside the contested decision constituted a breach of the principle of sound administration, in particular in respect of the Commission’s duty to act impartially, such as to meet the conditions laid down in the case-law set out in paragraph 89 [of the judgment under appeal] and therefore giving rise to liability on the part of the European Union’. (paragraph 92).

IMG accuses the General Court of having failed to respect the right to good administration as represented in the specific right to have its situation treated with diligence, care and impartiality by the Commission. Strong evidence of this lies in the annulment of its decisions in the judgment in Joined Cases C‑183/17 P and C‑184/17 P.

The Commission rejects that accusation on the ground that, in order for non-contractual liability to be incurred, unlawful conduct alone is not sufficient: it must also be proved that the institution acted without due diligence or impartiality, a state of affairs which, in its view, IMG has failed to establish.

Following the judgment in Joined Cases C‑183/17 P and C‑184/17 P, it is now beyond question that the Commission committed an unlawful act in the decision of 8 May 2015.

An unlawful decision such as that, however, does not automatically breach the principle of good administration (in the form of the public’s right to have its affairs decided diligently by the EU institutions) to an extent such as to render the EU financially liable.

It is true that the decision of 5 May 2015 is vitiated by an error of assessment in relation to the evidence on which it is based. The Commission adopts it, in the exercise of its discretion, on the basis of some but not all of the factors which, subsequently, following the inter partes exchange of argument and evidence in the course of legal proceedings, would prove to be necessary in order to corroborate or reject IMG’s nature as an international organisation.

I do not consider this to be a sufficiently serious breach of the principle of good administration.

Failure to comply with the duty to act diligently cannot be established without taking into consideration the field or the circumstances or the context in which that duty is imposed on the EU institution subject to it. (38)

The Commission acted to protect the sound management of the EU budget, which is an intention appropriate to an administrative authority diligent in its supervision of public funds. Although, as I have said, the doubts regarding IMG’s international organisation status (and, therefore, its ability to undertake the indirect management of EU funds) were not sufficiently serious at that time, there is no denying that its status as such was a matter of some uncertainty.

It is true that, in 2015, the Commission lacked zeal in gathering all of the information on IMG’s true nature and for that reason adopted its decision on an insufficient basis, as the General Court noted. It may be criticised for having failed to carry out at that time a more exhaustive investigation, such as that which prompted it to adopt the new decision of 8 June 2021, to verify that IMG is not an international organisation.

The Commission should not have waited until 8 June 2021 to determine definitively whether or not IMG was an international organisation. It is true that, having asked IMG for information which it failed to provide, the Commission was compelled to approach the Member States that were allegedly IMG members in order to find out about their participation in that entity. Greater administrative diligence was called for, but I do not consider the Commission’s conduct to have been a manifestly serious breach of its duty to act diligently in connection with the right to good administration, which was such as to trigger the Union’s non-contractual liability. (39)

Under a system of non-contractual liability on the part of EU institutions that were less rigorous than that deriving from the case-law of the Court of Justice, the mere annulment of a decision could potentially give rise to a duty to compensate for the damage caused.

The same is not true if the non-contractual liability is triggered not by any infringement but by a sufficiently serious breach of a rule of EU law that protects individuals. Furthermore, ‘where an EU institution or body has been given a discretion, only that particular institution’s or body’s manifest and grave disregard of the limits on that discretion [is capable of constituting a sufficiently serious breach of EU law]’, (40) and that, as I have noted, was not the case here.

It is my view, therefore, that the Commission, although it did not act on the basis of the required evidence when adopting the decision of 5 May 2015, did not commit a sufficiently serious breach by failing to discharge its duty to act diligently. Its error, albeit indisputable, cannot be said to be inexcusable, (41) any more than its conclusions were unreasonable, (42) notwithstanding that they were open to the criticism that they should have been supported by more evidence.

In short, the fourth ground of appeal must be dismissed as unfounded.

F.Fifth, sixth and seventh grounds of appeal: infringements relating to the damage suffered by IMG

1.Arguments of the parties

Under the fifth ground of appeal, IMG claims that, as regards the forms of order sought in paragraph 40, first to third indents, of the judgment under appeal, the General Court breached the principle of compensation in kind, breached the duty to state reasons, failed to meet the conditions governing admissibility, and failed to comply with Article 76(e) and Article 84(1) of the Rules of Procedure [of the General Court].

Under the sixth ground of appeal, IMG submits that, so far as concerns the form of order sought in paragraph 40, fourth indent, of the judgment under appeal, the General Court failed to fulfil the obligation to state reasons and infringed Articles 76(e) and 84(1) of its Rules of Procedure.

Under the seventh ground of appeal, IMG claims that, with respect to the non-material damage, the General Court breached the principle of compensation in kind, failed to comply with the duty to state reasons, infringed Articles 76(e) and 84(1) of its Rules of Procedure and committed an error in the exercise of its unlimited jurisdiction.

The Commission objects to those three grounds of appeal and contends that they should be dismissed.

2.Assessment

In my view, the Court of Justice must reject these three grounds of appeal as irrelevant if it dismisses the previous ones.

It is settled case-law that ‘the Union may incur non-contractual liability … only if a number of conditions are fulfilled, namely the unlawfulness of the conduct alleged against the Union institution, the fact of damage and the existence of a causal link between the conduct of the institution and the damage complained of …. [I]f any one of those conditions is not satisfied, the action must be dismissed in its entirety and it is unnecessary to consider the other conditions for non-contractual liability …’. (43)

Up until this point, I have attempted to argue that there is not a sufficiently serious breach of a rule of law conferring rights on IMG. Since the first of the conditions precedent to the incurrence of non-contractual liability on the part of the Union is not fulfilled, there is no need to comment on the fact of the damage or the quantum of the damages.

I therefore propose that the fifth, sixth and seventh grounds of appeal be dismissed as irrelevant.

VIII.Costs

In accordance with Article 138(1) of the Rules of Procedure, which is applicable to the appeal by virtue of Article 184(2) thereof, the unsuccessful party is to be ordered to pay the costs if these have been applied for in the successful party’s pleadings.

Since the Commission applied for costs and IMG has been unsuccessful, the latter must be ordered to pay the costs.

IX.Conclusion

In the light of the foregoing considerations, I propose that the Court:

(1)Declare the new ground of appeal raised by the Commission inadmissible.

(2)Dismiss the first, third and fourth grounds of appeal as unfounded.

(3)Dismiss the second ground of appeal as partly unfounded and partly ineffective.

(4)Dismiss the fifth, sixth and seventh grounds of appeal as ineffective.

(5)Order International Management Group to bear its own costs and those of the Commission, with the exception of those relating to the new ground of appeal raised by that institution.

—

1Original language: Spanish.

2Judgment of the General Court of 2 February 2017, IMG v Commission (T‑381/15, not published, EU:T:2017:57).

3Judgment of the Court of Justice of 31 January 2019, International Management Group v Commission (C‑183/17 P and C‑184/17 P, EU:C:2019:78; ‘judgment in C‑183/17 P and C‑184/17 P’).

4Judgment of the General Court of 9 September 2020, IMG v Commission (T‑381/15 RENV, not published, EU:T:2020:406). ‘The judgment under appeal’.

5Council Regulation of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1), as amended by Council Regulation (EC, Euratom) No 1995/2006 of 13 December 2006 (OJ 2006 L 390, p. 1) (‘the 2002 Financial Regulation’).

6Commission Regulation of 23 December 2002 laying down detailed rules for the implementation of Regulation No 1605/2002 (OJ 2002 L 357, p. 1), as amended by Commission Regulation (EC, Euratom) No 478/2007 of 23 April 2007 (OJ 2007 L 111, p. 13).

7Regulation 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 No 1605/2002 (OJ 2012 L 298, p. 1). This was itself repealed by Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014 and (EU) No 283/2014 and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ 2018 L 193, p. 1).

8Commission Delegated Regulation of 29 October 2012 on the rules of application of Regulation No 966/2012 (OJ 2012 L 362, p. 1).

9Judgment in Joined Cases C‑183/17 P and C‑184/17 P, paragraphs 16 to 28.

10Judgment in Joined Cases C‑183/17 P and C‑184/17 P, paragraph 97.

11Ibidem, paragraphs 94 to 96. Those paragraphs state:

-Regarding the doubt concerning ‘whether several Member States presented by IMG as being members of the organisation are in fact members, it is apparent from the General Court’s own findings that the Commission’s doubts in that respect concerned only “some” of IMG’s members – more specifically, 5 out of a total of 16. However, the consequence in international law of such doubts, even if they were in fact well founded, would not be to deprive the entity of which those States are not – or no longer – members of its status as an “international organisation”, all the less so when, as in the present case, the States concerned form only a small part of the entity in question’.

-In respect of the ‘doubts concerning the powers of the persons who represented certain States when IMG was established, it should, similarly, be noted that those doubts could, potentially, call into question the validity of the signature, by those States in particular, of the act establishing IMG, but not the validity of the actual creation of that entity, given that any irregularities in representation referred to concerned only a small number of participating States’.

-As for the ‘third consideration that the UN Secretary indicated to OLAF that IMG was not a specialist UN agency, it is sufficient to state that it is irrelevant in law. As follows from paragraph 91 above, the 2002 and 2012 Financial Regulations do not require a given entity to be a UN agency in order for it to be classified as an “international organisation”. Furthermore, in the present case, it is not disputed that IMG has never held itself out to be such an agency, but maintains that it is an “international public sector organisation” established by an intergovernmental agreement …’.

12Order of 9 June 2020, International Management Group v Commission (C‑183/17 P-INT, EU:C:2020:507; ‘the order in C‑183/17 P-INT’).

13Ibidem, paragraph 23.

14The General Court based that conclusion on three considerations. First, it is settled case-law that that principle ‘does not, in itself, confer rights upon individuals, except where it constitutes the expression of specific rights’. In addition, it follows from the legal assessments made previously by that court that the Commission may call into question IMG’s status as an international organisation within the meaning of the 2002 and 2012 Financial Regulations. Finally, IMG has not shown in what way the unlawfulness on account of which the Court of Justice annulled the decision of 8 May 2015 constitutes a breach of the principle of good administration, more specifically, the duty of care incumbent on the Commission.

15The Commission then reiterated its request that IMG produce the documents mentioned in its letter of 6 May 2019 and stated that, if it did not do so, it would address itself directly to the States which IMG considered to be its members.

16Order of 9 September 2020, IMG v Commission (T‑645/19, not published, EU:T:2020:388).

17Case T‑509/21.

18Paragraph 39 of the judgment under appeal states, with respect to the subject matter of the dispute following the appeal and referral of the case back to the General Court, that, ‘at the hearing, in reply to a question from the Court, the parties confirmed that the subject matter of the present proceedings was confined to reparation of the damage resulting from the Commission’s decision, contained in its letter of 8 May 2015 and annulled by the Court of Justice, not to conclude further delegation agreements for indirect management with the applicant “until there was absolute certainty regarding [its] status as an international organisation” …’. No emphasis in the original.

19Paragraph 80 of the judgment under appeal.

20On this principle, see the judgments of 16 July 2020, ADR Center v Commission (C‑584/17 P, EU:C:2020:576, paragraphs 100 to 102); and of 28 February 2019, Alfamicro v Commission (C‑14/18 P, EU:C:2019:159, paragraphs 65 to 67).

21According to the Commission, re-evaluation is a frequent administrative practice (which takes place in particular where there is a legislative amendment to the financial rules, as occurred as a result of Delegated Regulation 2015/2462) and, other than in the case of IMG, has never given rise to litigation.

22Points 29 and 30 of this Opinion.

23Judgments of 28 October 2021, Vialto Consulting v Commission (C‑650/19 P, EU:C:2021:879, paragraph 138); of 5 February 2021, Dalli v Commission (C‑615/19 P, EU:C:2021:133, paragraph 41); and of 5 September 2019, European Union v Guardian Europe and Guardian Europe v European Union (C‑447/17 P and C‑479/17 P, EU:C:2019:672, paragraph 147); of 13 December 2018, European Union v Kendrion (C‑150/17 P, EU:C:2018:1014, paragraph 117); and of 4 July 2000, Bergaderm and Goupil v Commission (C‑352/98 P, EU:C:2000:361, paragraph 42).

24Judgment of 5 February 2021, Dalli v Commission (C‑615/19 P, EU:C:2021:133, paragraph 42); and of 5 September 2019, European Union v Guardian Europe and Guardian Europe v European Union (C‑447/17 P and C‑479/17 P, EU:C:2019:672, paragraph 148).

25Judgment of 4 April 2017, European Ombudsman v Staelen (C‑337/15 P, EU:C:2017:256, paragraph 37).

26Judgment of 30 May 2017, Safa Nicu Sepahan v Council (C‑45/15 P, EU:C:2017:402, paragraph 30).

27Judgments of 28 October 2021, Vialto Consulting v Commission (C‑650/19 P, EU:C:2021:879, paragraph 142); of 20 January 2021, Commission v Printeos (C‑301/19 P, EU:C:2021:39, paragraph 103); and of 10 December 2002, Commission v Camar and Tico (C‑312/00 P, EU:C:2002:736, paragraph 54).

28Judgments of 10 September 2019, HTTS v Council (C‑123/18 P, EU:C:2019:694, paragraph 43); of 23 March 2004, European Ombudsman v Lamberts (C‑234/02 P, EU:C:2004:174, paragraph 49); and of 4 April 2017, European Ombudsman v Staelen (C‑337/15 P, EU:C:2017:256, paragraph 31).

29Paragraph 88 of the judgment under appeal.

30Judgment in Joined Cases C‑183/17 P and C‑184/17 P, paragraph 89: ‘… when the Commission plans to adopt a decision entrusting budget management tasks to a given entity on that basis, it has a duty to satisfy itself that that entity has international organisation status’.

31Ibidem, paragraph 90: ‘… [W]hen, after a decision entrusting budget implementation tasks to a given entity which has international organisation status has been adopted, the Commission adopts decisions such as [the decision at issue], on the basis of factors that are, in its view, such as to call that status into question, those decisions must be justified in law and in fact’.

32This is borne out, in my opinion, by the fact that, in the Opinion in Joined Cases C‑183/17 P and C‑184/17 P (EU:C:2018:782), Advocate General Saugmandsgaard Øe took the view that ‘the General Court properly exercised its discretion when concluding that, having regard to the evidence in the file, it was legitimate and lawful for the Commission to decide not to entrust EU budget implementation tasks to IMG, as a sort of precautionary measure, so long as doubts regarding its legal [status] continued to exist’ (point 64).

33According to the Court of Justice, EU institutions and bodies are required to respect the fundamental rights of the European Union, which include the right to good administration enshrined in Article 41 of the Charter [judgments of 21 October 2021, Parliament v UZ (C‑894/19 P, EU:C:2021:863, paragraphs 51 and 52); and of 27 March 2019, August Wolff and Remedia v Commission (C‑680/16 P, EU:C:2019:257, paragraph 24 and the case-law cited)].

34Judgments of 8 May 2014, N. (C‑604/12, EU:C:2014:302, paragraph 49); and of 19 June 2014, Commune de Millau and SEMEA v Commission (C‑531/12 P, EU:C:2014:2008, paragraph 97).

35OJ 2007 C 303, p. 17.

36Judgment of 16 December 2008, Masdar (UK) v Commission, C‑47/07 P, EU:C:2008:726, paragraph 91.

37Judgment of 22 November 2017, Commission v Bilbaína de Alquitranes and Others (C‑691/15 P, EU:C:2017:882, paragraph 35).

38Judgments of 4 April 2017, European Ombudsman v Staelen (C‑337/15 P, EU:C:2017:256, paragraph 40); and of 30 January 1992, Finsider and Others v Commission (C‑363/88 and C‑364/88, EU:C:1992:44, paragraph 24).

39This, moreover, is an irregularity that might have been committed by any other administrative authority with doubts concerning the legal nature of an organisation about to be involved in the indirect management of public funds.

40Judgment of 4 April 2017, European Ombudsman v Staelen (C‑337/15 P, EU:C:2017:256, paragraph 37).

41Judgments of 30 January 1992, Finsider and Others v Commission (C‑363/88 and C‑364/88, EU:C:1992:44, paragraph 22); and of 4 July 2000, Haim (C‑424/97, EU:C:2000:357, paragraphs 42 and 43).

42Judgment of 22 October 1991, Nölle (C‑16/90, EU:C:1991:402, paragraph 13).

43Judgment of 5 February 2021, Dalli v Commission

(C‑615/19 P, EU:C:2021:133, paragraph 42); and of 5 September 2019, European Union v Guardian Europe and Guardian Europe v European Union (C‑447/17 P and C‑479/17 P, EU:C:2019:672, paragraph 148).