Important legal notice

61985C0015

European Court reports 1987 Page 01005 Swedish special edition Page 00029 Finnish special edition Page 00029

Opinion of the Advocate-General

Mr President, Members of the Court, Allow me briefly to recall the facts of the case .

On 22 December 1978 the Commission decided, pursuant to Council Regulation ( EEC ) No 355/77, ( 1 ) to grant a contribution from the Guidance Section of the European Agricultural Guidance and Guarantee Fund ( hereinafter referred to as the "EAGGF ") towards a project entitled "Construction of a regional centre for the processing of grape must and for the bottling of wine in the municipality of Frisa ( Chieti )", submitted by the Consorzio Cooperative d' Abruzzo ( hereinafter referred to as the "Consorzio "). The EAGGF' s maximum contribution was fixed at LIT*4*446*450*444 .

The Consorzio subsequently reduced the scope of the project, whereupon the Commission, by decision of 7 April 1982, amended the aforesaid decision and reduced the maximum contribution to LIT*4*298*543*500 .

By decision of 31 October 1984, the Commission made a further amendment to the 1978 decision and reduced the EAGGF' s maximum contribution to LIT*3*343*181*208 without any reference whatsoever to the decision of 7 April 1982 . The 1984 decision differs from the 1982 decision only as regards the amount of the contribution granted .

Hence the question at the heart of the dispute is which of those two decisions should ultimately prevail .

According to the applicant, the 1984 decision should be declared void on the following grounds : failure to give any, or any proper, statement of reasons, misuse of powers and breach of the fundamental principles of legal certainty and of the protection of legitimate expectations . In its view, the 1982 decision conferred certain rights on the Consorzio and led it to assume in relation to third parties certain contractual obligations from which it can no longer be released .

The Commission, on the other hand, considers that the 1982 decision, which was adopted by mistake, is vitiated to such an extent that it must be regarded as legally non-existent or, in the alternative, as having been withdrawn ab initio . Furthermore, the Commission contends that the Consorzio was aware of the illegality of the 1982 decision from the outset and cannot therefore claim to acquire any rights thereunder .

Although it is expressly concerned with an application for the annulment of the 1984 decision, the dispute raises in particular the problem of the existence and the effects of the 1982 decision, namely :

was that decision illegal?

if so, was it vitiated to such an extent that it may be regarded as non-existent?

if not, could it be lawfully withdrawn by the 1984 decision?

Those are the three questions which I intend to consider in turn .

A - Legality of the 1982 decision

According to the Commission, there are two defects which affect the legality of the 1982 decision : first, the incorrect application of the internal rules for determining the maximum contribution available from the EAGGF, and secondly the formal adoption and notification of a text other than that which had been used throughout the internal drafting procedure and which had been submitted to the competent committees for their opinion .

These rules are set out in a working paper drawn up by the Commission' s Directorate-General for Agriculture . Before considering whether the amount of the contribution was in fact miscalculated, it is necessary to determine the nature of those rules and, in particular, whether they are binding .

The Commission considers that such rules, which are based on its power to organize its own departments, are binding on it and do not even confer a discretion upon it as regards the amount of the contributions which it decides to grant . The applicant denies that those rules are legally binding in any way .

It is consistent case-law that "although an internal directive does not have the character of a rule of law which the administration is bound to observe, it nevertheless lays down a rule of conduct indicating the practice to be followed, from which the administration may not depart without giving the reasons which have led it to do so, since otherwise the principle of equality of treatment would be infringed ". ( 2 )

Although that case-law is concerned exclusively with staff disputes, I consider that it can also apply to this case . It follows that if, for the sake of argument, the Commission had wished to contribute an amount other than that which would have resulted from the proper application of the rules by which it had stated itself to be bound, it should have given appropriate reasons justifying such a derogation, in view of the risk of placing the Consorzio at an advantage or at a disadvantage in relation to other recipients of EAGGF contributions .

Just as the Consorzio would have been able to rely on the internal rules if the Commission had granted it a sum smaller than that payable under those rules, the Commission must be able to rely thereon in the opposite circumstances, not in order to exonerate itself after the event from responsibility for the consequences of an error on its part, but so as to not place an excessive burden on the EAGGF and to ensure that equal treatment is accorded to all recipients of EAGGF contributions .

In conclusion, therefore, I consider that the Commission' s disregard of its internal rules for determining the maximum contribution available from the EAGGF may in practice render a decision granting such a contribution unlawful .

In this case the Commission claims that the 1982 decision is contrary, in particular, to the rules applicable in the matter of price adjustments ( paragraph II,1 ). According to those rules, any alterations to a project, in so far as they are consistent with its initial structural conception, are acceptable in principle . If they entail an increase in costs, however, such alterations qualify for a contribution from the EAGGF of only 5% each year and fraction of a year between the date of the estimate and the scheduled date of completion of the work . In its answers to the questions put to it by the Court, the Commission demonstrates with the aid of figures that the 1982 decision merely established that the alterations were generally consistent with the structural conception of the initial project without considering their specific elements or, in particular, the eligibility of the expenditure item-by-item after the alterations were made, having regard to the aforesaid rule on price adjustments .

Instead, according to the Consorzio, the rules laid down for cases in which the eligible costs set out in the initial estimate are exceeded ( in particular paragraph II, 2b ) should have been applied by analogy, since the alterations which it intended to make to its project in fact entailed a reduction in the cost thereof . The Consorzio also points out that there seems to be a contradiction in the fact that the note setting out the calculation of the maximum contribution to be granted for the altered project, which the Commission has annexed to its defence and which fixed the contribution finally granted in 1984 at LIT*3*343*181*208, puts the excess over the initial eligible costs at LIT*1*910*724*583 whilst specifying that the only expenditure ineligible for a contribution from the EAGGF is the cost of land amounting to LIT*68*913*000 ( see page 3 of the reply ).

I do not share the Commission' s opinion that the latter submission, which in fact calls in question the actual terms of the 1984 decision, is inadmissible on the ground that it was put forward for the first time in the reply . In my view, that submission does not constitute a fresh submission but the applicant' s response to the arguments relied upon by the Commission in the defence in support of its contention that there was an error in the application of the aforesaid rules . From the applicant' s point of view, the main purpose of that submission is to show that the difference between the 1982 and 1984 decisions is the result not of a clerical error but of a divergent interpretation .

Having said that, I believe that, in substance, the Commission' s argument must prevail . To begin with, the rule referred to by the applicant does not seem to be applicable to the circumstances of this case . Secondly, although the alterations made by the Consorzio to its initial project involved a substantial reduction of certain investments which would normally have been reflected by a decrease in total costs, they entailed at the same time a substantial increase in unit costs with the result that there was only a slight reduction in the total cost of the work envisaged ( from LIT*9*856*319*000 to LIT*8*666*000*000 ). In order to prevent recipients of EAGGF contributions from compensating for increased costs, resulting either from inadequate documentation in the file or from delays in implementing the projects, by curtailing the scope of their projects, the maximum contribution available for an altered project must be calculated on the basis of initial unit costs, which may be increased by 5% per annum to take account of price adjustments for the work initially envisaged and retained in the altered project, and on the basis of the total cost of the work not initially envisaged .

It follows from the foregoing considerations that the method of calculation on which the 1982 decision was based is not in conformity with the rules laid down . Since the Commission has clearly not given any particular reason to justify its departure in this case from the rules of conduct by which it has stated itself to be bound especially with a view to according equal treatment to recipients of contributions, I must conclude that the Commission is right in stating that the 1982 decision is illegal ( or, as the Commission puts it in paragraph 5 of its rejoinder, vitiated by an abuse of powers ).

2 . The procedural defect

Article 14 ( 1 ) of Regulation No 355/77 provides that "the Commission shall decide upon aid from the Fund according to the procedure laid down in Article 22 after consulting the Fund Committee on the financial aspects ".

The reference to the procedure laid down by Article 22 relates to the opinion to be given by the Standing Committee on Agricultural Structure in accordance with the normal management committee rules . I shall return to this point in due course .

In December 1981 the Commission had referred to the EAGGF Committee and the Standing Committee on Agricultural Structure a draft decision amending the 1978 decision and reducing the maximum contribution available from the EAGGF from LIT*4*446*450*440 to LIT*3*343*181*208 . Is the fact that the contribution finally fixed by the decision of 7 April 1982 was different and amounted to LIT*4*298*543*500 such as to affect the legality of that decision?

That raises a preliminary matter : are the two aforesaid committees consulted only on the question whether or not a contribution should in principle be made or are they also consulted on the amount of the contribution to be granted ( for that is the only point on which the 1982 decision differs from the draft decision submitted to those committees for their opinion )?

It must be stated that the Commission' s reasoning in that regard seems to be contradictory . On the one hand, it states that the fact that the 1982 decision was not in conformity with the draft which was submitted to the competent committees ( and on which they gave a favourable opinion ) constitutes a procedural defect which renders the decision illegal . On the other hand, the Commission claims that only the decision granting the contribution is submitted to those committees for their opinion, whilst the amount of the contribution is determined automatically by the internal rules for calculating the latter ( see paragraph 6 of the rejoinder ). If the consultation did not relate to the amount of the contribution, I fail to see how a difference in the amount alone could vitiate the procedure for adopting the decision to such an extent as to render it illegal . In any event, the 1978 decision firmly established that a contribution would be made .

In my view, however, the aforesaid committees must, as is the nature of things and by virtue of Regulation No 355/77 itself, also be consulted on the amount of the contributions to be granted .

In the first place, the EAGGF Committee is to be expressly consulted on the financial aspects ( see Article 14 of Regulation No 355/77 ). Moreover, all the decisions state that the EAGGF Committee was consulted "particularly on the subject of the financial resources available ". Such consultation is possible only in relation to the amount of the contribution envisaged for each individual project .

Secondly, all the decisions provide that "having regard to the expenditure which may be taken into consideration by the Fund, it seems advisable to grant for the implementation of the project in question a contribution from the Fund not exceeding LIT ...". Those decisions thus refer to the fact that, by virtue of Article 17 of Regulation No 355/77, ( 3 ) the aid granted by the Fund may not exceed a maximum amount expressed as a percentage of the investment made . It is only logical, therefore, that consultation should also relate to the question whether or not the maximum amount is to be granted for a given project .

Thirdly, as we have seen, the possibility cannot be ruled out, from a legal point of view, that the Commission may derogate, for exceptional reasons which must be duly stated, from its own internal rules for calculating the maximum contribution available . Should the Commission avail itself of that possibility, the competent committees must of course state their views on the proposed derogation and on the relevant procedure .

Finally, the 1982 and 1984 decisions expressly provide that "the measures laid down in this decision are in conformity with the opinion of the Standing Committee on Agricultural Structure ". The calculation of the amount of the contribution is one of those measures .

That being so, is the fact that the decision adopted by the Commission is not in conformity with the draft approved by the competent committees capable of rendering the decision illegal?

It is clear from Article 14 of Regulation No 355/77 in conjunction with Article 14 of Regulation ( EEC ) No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy, ( 4 ) in contrast to Article 13 of that regulation ( which lays down the so-called management committee procedure that must be applied where reference is expressly made to it ), that in such matters the EAGGF Committee operates as a mere advisory body whose opinions are not binding . The Commission may therefore depart from that committee' s opinion in adopting its decision .

Hence the EAGGF Committee may be deemed to have been properly consulted even if in the final analysis the amount of the contribution granted by the Commission is higher than the amount specified in the draft decision submitted to that committee .

The position is quite different with regard to the consultation of the Standing Committee on Agricultural Structure which is a genuine management committee . In that regard, the 1982 decision is inaccurate in stating, in the last recital in its preamble, that "the measures laid down in this decision are in conformity with the opinion of the Standing Committee on Agricultural Structure ". That committee, as we know, was consulted in connection with a different amount . Moreover, if the Commission had wished to adopt measures that were not in conformity with that committee' s opinion, it should, pursuant to Article 22 ( 3 ) of Regulation No 355/77, have communicated its decision forthwith to the Council, which would have been able to adopt a different decision within one month . No such communication was made . Accordingly, for one or other of those reasons, the 1982 decision is illegal for breach of essential procedural requirements, and in particular on account of a procedural defect .

Thus, having considered the question whether the 1982 decision is lawful per se, I must conclude that it is unlawful inasmuch as it infringes the EAGGF' s internal rules and the essential procedural requirements relating to its adoption .

B - Non-existence of the 1982 decision

The Commission, however, goes a step further . It argues that, in view of the aforesaid defects, the 1982 decision has no legal effect . Since it has been illegal from the outset, it must be regarded as non-existent in law .

The Commission therefore asks the Court to apply to this case the principle of the non-existence of a measure, which forms part of the administrative law of most of the Member States .

A comparative study shows that most of the legal systems of the Member States acknowledge the existence of circumstances in which a measure which is irregular owing to a serious defect is deemed not to have any legal effect at all, not even provisionally, with the result that neither the addressee of the measure nor the enacting body is bound to comply with it, there being no need for the prior intervention of the courts . In some legal systems, such measures are non-existent, whilst in others they are automatically null and void .

However, since all those legal systems adhere to the principle that an administrative measure is normally presumed to be lawful, with the result that even an irregular measure is presumed to have the desired legal effects unless it is withdrawn or annulled, the possibility that such a measure may simply be non-existent is restricted to exceptional cases in which the irregularity is so glaring and so obvious that the defects vitiating the measure are immediately apparent . A flagrant irregularity of that kind seems to arise essentially in extreme cases, for instance a manifest abuse of powers or functions, the absence of any signature or the false, uncertain or unlawful subject-matter of the measure, which go far beyond a normal irregularity resulting from an erroneous assessment of the facts or from a breach of the law .

Moreover, the Court has taken that view since 1957 . In its judgment of 12 July 1957 in the Algera case, ( 5 ) it held that "the unlawful nature of an administrative measure entails its complete nullity only in certain circumstances ..." and that "apart from those exceptional cases, the theoretical writing and the case-law of the Member States allow only of voidability and revocability ". It added that "the adoption of an administrative measure creates a presumption as to its validity . That validity can be set aside only by means of annulment or withdrawal, in so far as those measures are permissible ".

Some months later, in its judgment of 10 December 1957 in Joined Cases 1 and 14/57, ( 6 ) the Court recognized that a statement of reasons is an "essential, indeed constituent element" of a reasoned opinion, within the meaning of the fourth paragraph of Article 54 of the ECSC Treaty, with the result that, unlike other formal requirements which cannot affect the character or existence of an act, "in the absence of a statement of reasons the act cannot exist ". The Court came to the conclusion that an application challenging such an act which is non-existent in law is inadmissible for want of subject-matter .

Taking as a basis the same comparative legal findings, Mr Advocate General Trabucchi considered, in his Opinion of 13 December 1973 in Schots-Kortner, ( 7 ) that "in a system such as our Community law system, there appears to be no reason to depart from the criterion followed in the various national legal systems, according to which an act laying down regulations capable of implementation and which complies with the essential requirements as to procedure, form and competence as regards its introduction and publication, is an act which may be rendered invalid owing to some incompatibility of its contents with superior rules or principles, but which can never be repudiated as null and void ". The Court followed that Opinion by stating, in its judgment of 21 February 1974 in the aforesaid case, ( 8 ) that a provision originating with the competent authority and adopted with due regard to the procedural and formal conditions laid down by the Treaties cannot be termed "non-existent", even if the Court has declared that provision unlawful owing to other defects ( see, in particular, paragraph 33 et seq . of the Decision at p.*191 ).

It is true that the latter case was concerned with a legislative provision which as such had the force of law and which the Court did not declare void but simply inapplicable within the meaning of Article 184 of the EEC Treaty . None the less, the judgment seems to me to confirm that very great care must be taken in determining whether a measure adopted by the public authorities is non-existent, since the requirements of legal certainty generally preclude challenging such a measure ab initio, regardless of the time-limits and procedures laid down for the initiation of proceedings . ( Moreover, even where it annuls a provision in a regulation, the Court may restrict the effects of its annulment to the past under the second paragraph of Article 174 of the EEC Treaty ).

In this case it is neither disputed nor open to dispute that the 1982 decision displays outwardly all the characteristics of a decision adopted in the form and under the conditions laid down by Regulation No 355/77 . After being signed on 7 April 1982 by the competent Member of the Commission, it was notified to its addressees, namely the Italian Government and the Consorzio, by registered letters of 27 April 1982, and therefore took effect, in principle, upon such notification, pursuant to Article 191 of the EEC Treaty . Thus, in accordance with the aforesaid principles, it must be presumed valid as from the date of notification, save in exceptional circumstances .

It is extravagant, in my view, to consider the defects vitiating the 1982 decision to be so serious and so manifest as to preclude the Community' s legal system from tolerating even the provisional validity of that decision pending its annulment or withdrawal .

In the first place, breach of the EAGGF' s internal rules for calculating the contribution does not constitute an infringement of a rule of law which is binding in all cases . The Commission may derogate from that rule on certain conditions .

Secondly, the irregularities referred to earlier are far from self-evident . The EAGGF' s internal rules have neither been published nor otherwise brought to the attention of the persons concerned, who may therefore very well have been unable to detect the error . Furthermore, since the competent committees were effectively consulted, the discrepancy between the draft that was submitted to them and the decision that was adopted may have been the result of the fact that their opinion was taken into account .

Nor, finally, is it possible in my view to accept the Commission' s argument to the effect that the measure in question is non-existent because the Commission did not intend to adopt it in that form, as is clear from the existence of a clerical error in the document presented to the competent Member of the Commission for him to sign .

In that regard, I would recall the words of Mr Advocate General Roemer in his Opinion of 11 March 1965 in Case 36/64 ( Sorema v High Authority (( 1965 )) ECR 329 at p.*344 ):

"In private law (( the )) discrepancy between the real intention and the form of its declaration comes within the procedure available for rectifying mistakes ( Irrtumsanfechtung ), which allows a later correction to be made with consequences which are laid down by law . The opinion is unanimously held that this instrument is unknown to public law ".

The conclusion must therefore be drawn that, although the 1982 decision was irregular, it did indeed exist and was capable of producing the desired legal effects pending either its annulment by a judicial decision or its withdrawal or repeal by an administrative decision .

I must therefore consider the Commission' s alternative defence, namely that if the 1982 decision were to be regarded as having come into existence, it was withdrawn by the 1984 decision .

C - Withdrawal of the 1982 decision

In this section I propose to examine in more detail the objections which the applicant raised against the 1984 decision in support of its contention that the Commission did not validly withdraw the 1982 decision .

In order to justify its failure to state in the 1984 decision the reasons for the withdrawal of the 1982 decision, the Commission contends that there was no need to give any reasons because the 1982 decision was to be deemed non-existent .

However, it is difficult in my view for the Court to accept that reasoning and to take into consideration the subjective belief of one of the parties . If the Court itself reaches the conclusion, as I have suggested, that the 1982 decision did come into existence, it must perforce base its assessment on the objective information set out in the documents before it .

That information consists of the two Commission decisions and the Commission' s letter of 24 October 1984 .

First of all, it must be stated that the two decisions both have as their purpose, according to their title, to amend the decision of 22 December 1978 granting a contribution from the Guidance Section of the EAGGF towards the project in question .

Moreover, the two decisions are identical word for word except, of course, as regards the amount of the contribution granted ( and the share of the cost of financing the project to be borne by the Consorzio, which increases in proportion to the decrease in the contribution ). In the 1984 "copy", the Commission adhered so closely to the 1982 "original" that it omitted to adjust the second recital in keeping with the various amendments which had been made to Regulation No 355/77 between 27 April 1982 and 31 October 1984, and repeated in the operative part ( Article 1 ) the error concerning the date ( 22 December 1981 instead of 22 December 1978 ). The 1984 decision also provides that "the work is to commence in December 1981 and is to last 24 months"!

Accordingly, there is nothing in the second decision to indicate that it repeals and replaces the first decision . Nor does it follow by implication from a comparison of the two decisions that the 1984 decision was adopted because in 1982 one document had been substituted for another or because the contribution had been miscalculated .

The Commission could quite properly have availed itself of the method which it had used a little earlier in Regulation ( EEC ) No 440/82 of 25 February 1982 correcting Regulation ( EEC ) No 2901/81 fixing the monetary compensatory amounts ( Official Journal 1982, L*55, p.*49 ).

The last recital in the preamble to that regulation reads as follows : "Whereas a check has revealed that Annex I to that regulation does not correspond to that submitted for the opinion of the management committee; whereas it is necessary to amend the regulation in question ".

It remains to be seen whether the inadequate statement of reasons in the 1984 decision is "redeemed" by the explanations furnished by the Commission in the registered letter which it sent to the Italian Government and to the Consorzio on 24 October 1984, some days before notifying the new decision to them .

In that letter the Commission refers to its telex message of 6 November 1981 in which it had pointed out that the contribution would be reduced from LIT*4*446*million to LIT*3*343*million . The Commission also refers to the information communicated orally to the Consorzio' s representatives who were in Brussels on 3 November 1981, and to the fact that the two committees had been consulted on a draft decision involving a contribution of LIT*3*343*million .

In my view, however, this case is not concerned with the kind of situation which the Court had in mind when it acknowledged that a summary and succinct statement of reasons could be sufficient because the addressee of the decision had been fairly closely involved in the procedure culminating in its adoption and had been made aware of the reasons for its adoption . ( 9 )

Here there is no summary and succinct statement of reasons, only two identical sets of reasons leading to different and mutually incompatible conclusions . The logical principle that the reasons stated may not be contradictory has thus been contravened .

However, even if the addressees of the decision were able, as a result of the explanations set out in the Commission' s letter, to understand what had happened, it must be borne in mind that the requirement that a decision must state the reasons on which it is based was not laid down solely in the interest of the individuals directly affected by the decision .

According to the case-law of the Court, Article 190 of the EEC Treaty requires that regulations, directives and decisions "should contain a statement of the reasons which led the institution to adopt them, so as to make possible a review by the Court and so that the Member States and the nationals concerned may have knowledge of the conditions under which the Community institutions have applied the Treaty ". ( 10 )

My interpretation of that passage is that any measure adopted by a Community institution must state, even if in a concise form, which reasons were decisive with regard to its adoption .

As in this case the Commission has failed to state the reasons which led it to adopt a decision differing from the 1982 decision, I suggest that the Court hold that the 1984 decision contains an inadequate statement of reasons .

It remains to be determined whether in 1984 the Commission was entitled, in view of the circumstances of the case regarding both its own conduct and that of the Consorzio and having regard to the interests at stake on both sides, to withdraw the 1982 decision . The applicant challenges the Commission' s right to do so on two further grounds which it has developed in support of its application, namely : ( a ) misuse of powers by the Commission in amending arbitrarily and without giving any reasons a decision on the basis of which the applicant had concluded certain contracts with third parties, which constitute irrevocable obligations on its part, and ( b ) breach of certain fundamental principles of the Treaty, namely the principles of legal certainty and of the protection of legitimate expectations, which preclude a measure which has been duly approved and has duly entered into force in accordance with the principles of Community law from being amended once it has produced the legal effects which it was intended to produce and, in any event, from being amended in a manner that was quite unforeseeable more than two years after the addressee of the measure had derived therefrom certain rights which must be regarded as acquired rights .

The 1984 decision is manifestly not vitiated by a misuse of powers, in the sense in which that concept has been repeatedly defined by the Court . "A decision may amount to a misuse of powers only if it appears, on the basis of objective, relevant and consistent facts, to have been taken for purposes other than those stated" ( paragraph 30 of the judgment of 21 June 1984 in Case 69/83 Lux v Court of Auditors (( 1984 )) ECR 2447 ). I fail to see what the "purposes other than those stated" can be . The Commission certainly did not intend to call in question the obligations assumed by the Consorzio in relation to third parties, but merely sought to rectify the - in its view initially incorrect - exercise of its powers in relation to the grant of EAGGF contributions . If it becomes apparent that those obligations should have prevented the Commission from rectifying its 1982 decision, the 1984 decision should be annulled on the ground that it unlawfully withdraws a previous measure, and not on account of a misuse of powers . In my view, therefore, this submission is difficult to distinguish from the submission alleging a breach of fundamental principles and, together with the latter submission, is designed to support the proposition that the withdrawal of the 1982 decision was unlawful .

2 . Unlawful withdrawal

The Court' s case-law concerning the withdrawal of administrative measures has been firmly established since the well-known judgments of 12 July 1957 in Algera, ( 5 ) 22 March 1961 in SNUPAT ( 11 ) and 12 July 1962 in Hoogovens . ( 12 ) In its more recent judgments, moreover, the Court has recalled and summarized the principles established by those decisions :

To begin with, "the retroactive withdrawal of a legal measure which has conferred individual rights or similar benefits is contrary to the general principles of law ". ( 13 )

Next, even if withdrawal on grounds on unlawfulness always takes effect from the present, it does not have retroactive effect in certain cases in view of vested rights . ( 14 )

In order to protect those vested rights, the retroactive withdrawal of a wrongful or erroneous administrative decision is subject to very strict conditions . ( 15 )

One of those conditions is that the unlawful measure must be withdrawn within a reasonable period (" the Court accepts the principle of the revocability of illegal measures at least within a reasonable period of time" Algera (( 1957 )) ECR 39 at p.*56 ).

That criterion of "a reasonable period" is of considerable importance where, as in this case, the decision involved confers individual rights, a category of rights which deserves a very high degree of legal protection .

However, that criterion is not applicable automatically, as it were, without reference to the other circumstances of the case .

In adopting a decision to withdraw a measure, it is for the body which enacted the unlawful measure to carry out, subject to review by the Court, ( 16 ) a general assessment of all the interests involved . A genuine comparison of that kind between the public interest and private interests will ultimately tip the scales in favour of either the principle of legality, leading to the ( retroactive ) withdrawal of the measure, or the principle of legal certainty, leading only to the measure' s repeal ( for the future ). ( 17 ) In making that comparison, it is necessary to weigh in practice the interests of the individual in maintaining a situation which he could treat as definitive against the Community' s interest in ensuring compliance with the relevant rules and in the re-establishment of legality .

In a relatively recent judgment ( Alpha Steel ), ( 18 ) the Court summarized that comparison between legal certainty and legality in the following terms : "the withdrawal of an unlawful measure is permissible, provided that the withdrawal occurs within a reasonable time and provided that the Commission has had sufficient regard to how far the applicant might have been led to rely on the lawfulness of the measure ". In that case, taking the view that Alpha Steel had not relied upon, nor could have been justified in relying upon, the lawfulness of the decision which had been withdrawn and that the delay could be explained and had not adversely affected the applicant, the Court held that the decision had been lawfully withdrawn within a reasonable time ( paragraphs 11 and 12 of the decision ). Accordingly, legal certainty had not been affected because the decision had been withdrawn within an acceptable period and the re-establishment of legality was facilitated particularly by the fact that the decision in question was manifestly illegal and this was known to the addressee .

How does that affect this case?

( a ) Did the Commission withdraw the measure within a reasonable period?

There can be no doubt, as I have stated elsewhere in this Opinion, that this case is concerned with the ( retroactive ) withdrawal of an illegal decision .

That decision has created individuals rights . The individuals concerned have no automatic rights under Regulation No 355/77 to a contribution from the EAGGF towards their investment projets . It is only the decision granting the contribution which confers rights on them . In that regard the Commission has a broad discretion which also extends to fixing the amount of the contribution granted . Regulation No 355/77 specifies only the maximum percentage of the total cost of each project, which the EAGGF' s contribution may not exceed . I would point out, moreover, that for specific reasons the Commission may occasionally depart from its own internal rules for calculating the contribution . It could, if necessary, even amend them from one day to the next . Since it is the decision granting the contribution which confers the aforesaid rights and determines their scope and extent, considerable though not necessarily decisive importance attaches to the period within which the 1982 decision could lawfully be withdrawn . It must be stated that over two and a half years elapsed between 7 April 1982, the date of the first decision, and 31 October 1984, the date of the second decision .

In my view, that period is excessive for two reasons . In the first place, the relevant departments of the Commission undoubtedly received a copy certified as being in conformity with the decision notified to the Consorzio . They were therefore in a position to establish within a few days of the notification of that decision that it did not correspond to the final version of the text .

Moreover, according to the first subparagraph of Article 19 ( 2 ) of Regulation No 355/77, the Commission may at any time demand production of "all supporting documents which are of relevance in proving that the financial or other conditions laid down for each project have been fulfilled ". It may even, in certain circumstances, go so far as to suspend, reduce or discontinue the EAGGF' s contribution .

In order to ensure that the Commission is kept informed that projects are being implemented under the conditions and within the period prescribed by the decision, Article 2 of Commission Regulation ( EEC ) No 1685/78 of 11 July 1978, ( 19 ) which was adopted on the basis of Article 19 ( 5 ) of Regulation No 355/77, provides that "on the expiry of two years from the date of notification of the decision granting aid, the department or agency shall forward to the Commission a document describing the progress made on uncompleted projects ".

In this case, according to the actual wording of the 1982 decision, work on the Consorzio' s project should have started in September 1981 and should have been completed within 24 months .

It follows from the foregoing considerations that if the Commission had exercised its supervisory and investigative powers within the periods expressly laid down, it would not have had to await either the presentation of a demand for payment by the Consorzio ( see paragraph 5 of the defence ) or the first progress report on the work ( see the letter of 24 October 1984 in Annex VIII to the defence ), before noticing the errors made in 1982 . Thus the decision could have been withdrawn at an earlier date and its withdrawal would no doubt have had a lesser impact on the obligations already assumed by the Consorzio .

In that regard, I agree with the Commission that, from its point of view, those obligations constitute res inter alios acta and are not invalidated by the reduction in the amount of the contribution . However, the principle of legal certainty, to which the applicant refers, serves in the first place to protect the legal position of the addressee of an administrative measure . There is a strong possibility that the Consorzio might not have assumed some of the aforesaid obligations had it known from the outset, or learnt sooner, that the amount of the EAGGF' s contribution was to be reduced . Hence the applicant may very well have been adversely affected by the Commission' s delay in correcting its errors .

That observation cannot be called in question by the finding that the Consorzio had in any event undertaken to meet out of its own resources the expenditure not covered by the contributions of the EAGGF and the Italian Government . An undertaking to share in the costs is merely in the nature of things and is expressly provided for by Article 17 ( 2 ) of Regulation No 355/77, which sets a limit to the financial contribution of the beneficiary of the aid . However, the beneficiary must not be confronted from one day to the next with the need to make a contribution towards expenditure in excess of the amount which he had anticipated .

That is the context in which, in my view, it is necessary to place the statement made by the applicant at the end of the reply concerning the liability allegedly incurred by the Commission, owing to the errors of its officials, for the damage which the applicant has suffered as a result of the withdrawal of the 1982 decision, which prevented it from performing certain contractual obligations it had assumed in relation to third parties . In these proceedings, the Commission was right to raise an objection of inadmissibility to any claim for damages since this issue was referred to for the first time in the reply . Allow me to add, however, that I do not consider such a claim a priori to be wholly devoid of substance and that it would have been prudent to put it forward in the application as an alternative claim in the event of the 1984 decision being upheld .

Accordingly, having said that in passing, I conclude that the period of time which elapsed notwithstanding the means of verification available to the Commission may well have affected the Consorzio' s interests and the delay in adopting the 1984 decision must therefore be regarded as excessive, particularly since the implementation of the project should in principle have been completed by the date on which that decision was adopted . It seems to me, therefore, that the applicant must, for reasons relating to legal certainty and the protection of its legitimate expectations, be allowed to rely on the rights which it acquired under the 1982 decision, unless of course it was or should have been aware that that decision was unlawful .

( b ) Was the applicant justified in relying on the legality of the measure?

As evidence of the Consorzio' s bad faith, the Commission has produced a number of documents allegedly showing that the Consorzio was aware that the 1982 decision was adopted as a result of an error and was therefore unlawful .

The fact remains that all those documents date from the end of October and the beginning of November 1981 and therefore predate the notification of the decision of 7 April 1982 by almost six months .

They are couched in terms which clearly envisage a reduction in the amount of the EAGGF' s contribution following the alteration of the project in question . A telex sent on 6 November 1981 to the Consorzio ( Annex IV to the defence ) even states that the amount should be reduced from LIT*4*446*million to LIT*3*343 million .

None the less, there is a presumption of good faith until proof to the contrary is adduced and I do not consider that those documents are sufficient to rebut that presumption .

The Commission' s internal memorandum concerning the telephone conversation of 30 October 1981 ( Annex II to the defence ) refers only to a "possible reduction" in the amount of the contribution .

The undertaking given by the Consorzio by telex of 3 November 1981 ( Annex III to the defence ), according to which "as regards Version I/159/78 of the project it shall meet out of its own resources expenditure not covered by the contributions from the EAGGF and Italy", is not expressly concerned with a specific reduction in the EAGGF' s contribution ( as the Commission would have us believe in paragraph 4 of its defence ) and merely constitutes confirmation of an undertaking that is an essential pre-condition for any grant of aid by the EAGGF .

As regards the Commission' s telex message of 6 November 1981, referring to the sum of LIT*3*343*million, it is not entirely unequivocal since it states that "this agreement in principle is conditional on the opinion of the (( Standing )) Committee (( on Agricultural Structure )) and on the Commission' s final decision ".

As I emphasized earlier, the Standing Committee is consulted not only on the principle of granting a contribution ( which, moreover, has been established since 1978 ) but also on the amount thereof .

Accordingly, that telex message may well have led the Consorzio to believe that the amount might be adjusted upwards by the Standing Committee .

Admittedly, the Consorzio may have sought information from the Italian experts sitting on the committee, and it may have learnt that the latter had given a favourable opinion on the decision to grant a contribution of LIT*3*343*million . But it has not been established that the Consorzio actually obtained such information .

Furthermore, the Consorzio may have believed that the amount in question could still be altered by the Commission itself . An individual has no way of knowing that such decisions are adopted, on the basis of a delegation of powers, by the Member of the Commission responsible for agriculture ( who merely confirms the draft decision on which the Standing Committee has given a favourable opinion ) and are not discussed internally .

Finally, the letter of 12 November 1981 ( Annex I to the rejoinder ), explains, admittedly, that "the contribution ... has had to be reduced on the basis of the rules which we are required to apply in cases of this kind", but the Consorzio would not have been unjustified in assuming that the Commission may, in exceptional cases, derogate from those rules which are of a purely internal nature .

The same letter also confirms that, when they visited the Commission on 3 November 1981, the Consorzio' s representatives expressed their dissatisfaction with the proposed reduction in the amount of the contribution . They therefore hoped, rightly or wrongly, that their dissatisfaction might induce the Commission to change its mind, as evidenced by the decision which was finally notified to them .

Thus, although the aforesaid documents confirm that the Commission adopted the 1982 decision only as a result of an error, it seems to me that none of those documents constitutes irrefutable evidence that the Consorzio knew or should have known that the contribution for which it was eligible following the alteration of its project could in no circumstances exceed LIT*3*343*181*208 and that a decision concerning a higher amount was necessarily illegal .

Of course, the Consorzio should have anticipated a reduction, and in the end the contribution was reduced . The 1982 decision reduces the amount of the contribution provided for in the 1978 decision by LIT*147*906*944 .

The Consorzio may even have feared that the reduction would be a substantial one . But I do not believe that the Consorzio must necessarily be deemed to have acted in bad faith when, almost six months after all kinds of dealings with the Commission, it learned that the reduction was only a small one and refrained from asking the Commission whether it had made a mistake . It is impossible, in my view, to establish a principle to the effect that an individual who is treated better than he anticipated is under an obligation to ascertain whether the competent authority has made a mistake .

In my view, moreover, on receiving the decision of 7 April 1982, which was outwardly impeccable, the Consorzio was entitled to rely on its legality . Let me repeat that the errors vitiating the decision are not obvious . In the first place, the rules for calculating the maximum amount of the contribution available from the EAGGF are unpublished internal rules and even if the applicant had been familiar with them it does not necessarily follow that it should have noticed the error . Secondly, it is not apparent from the decision that the competent committees were consulted on a draft other than that which was finally adopted, and even if they had been the applicant would have been entitled to treat the discrepancy as a consequence of that consultation, particularly as it had been informed by the aforesaid telex message of 6 November 1981 that the agreement in principle was conditional on the committee' s opinion and on the Commission' s final decision .

In those circumstances I would point out that, in its judgment of 19 September 1985 in Joined Cases 194 to 206/83 ( Asteris and Others v Commission (( 1985 )) ECR 2815 ), the Court did not permit the applicants to rely, for the purpose of contesting the legality of a Commission regulation, on a discrepancy between the provisions adopted and the preliminary documents indicating the proposals referred to the Management Committee, on the ground that "the information contained in preliminary documents may not be elevated to the status of a rule of law on the basis of which criticism may be directed at the decision which was ultimately adopted by the Commission in consultation with the Management Committee" ( paragraph 17 of the decision ).

Finally, although the Consorzio may not have been absolutely certain of the legality of the 1982 decision on the day on which that decision was notified to it, its conviction must have grown stronger during the 30 months which elapsed between that day and the date on which it was informed for the first time of the Commission' s errors .

It follows, in my view, from the foregoing considerations that the applicant was entitled to rely on the legality of the 1982 decision and that no satisfactory evidence has emerged to suggest that the applicant did not in fact rely upon it .

Finally, out of a sense of duty, and notwithstanding all I have said so far, I should like to return to the question whether or not a comparison between the public interest and the private interests involved, which is referred to in the aforesaid judgment of 22 March 1961 in SNUPAT, can tip the scales in favour of the principle of legality, as opposed to the principles of legal certainty and of the protection of legitimate expectations .

It is true that, if the decision of 31 October 1984 withdrawing the 1982 decision is declared void, the applicant will definitively secure a financial benefit to which it was not in principle entitled . The Consorzio will have an advantage over other agricultural undertakings or cooperatives which have obtained, or will obtain, only a smaller contribution from the EAGGF for similar projects . The Community budget will provide financing which is, in itself, unjustified .

However, if the acquisition of an undue benefit were considered decisive, illegal measures would invariably have to be withdrawn since they generally confer such benefits .

In this case, it seems to me that the requirements of the principle of legality are not such as to justify the withdrawal of the benefit in question .

I would recall that the irregularities concerned are not so serious that they cannot be tolerated .

To begin with, the only rule to have been infringed is an internal rule from which the Commission could itself have derogated on condition that the derogation was justified . Accordingly, the public interest, whether it be that of the Community or of the other parties concerned, in remedying that irregularity is not of an overriding nature .

Secondly, the Court generally considers a procedural defect to be a ground for declaring an individual decision void only in so far as that defect has had harmful consequences for the applicant ( 20 ) or was capable of adversely affecting the applicant' s legal position . ( 21 ) Similarly, in its judgment of 6 October 1982 in Case 302/81, ( 22 ) the Court referred to "a general principle whereby procedural flaws which are beyond the control of the person to whom compensatory amounts (( in this case certain rights or benefits )) should normally be granted must not have effects which are unfavourable to him" ( paragraph 8 of the decision ). Accordingly, the principle of legality does not require that a decision vitiated by a procedural defect should perforce be declared void . Nor should it require the body which enacted such a decision to withdraw it in any circumstances, in particular where the addressee of the decision is not responsible for the defect .

In conclusion, therefore, I do not believe that in this case the principle of legality should take precedence over the principles of legal certainty and of the protection of legitimate expectations .

D - Conclusions

Having come to the end of this lengthy Opinion, allow me to summarize briefly the findings which I have made :

2 . However, that illegality is not such as to render the decision non-existent;

3 . The 1984 decision constitutes a decision withdrawing an earlier measure and contains an inadequate statement of the reasons on which it is based;

4 . Having regard to all the circumstances of the case, including the conduct and interests of both parties, the 1984 decision cannot be deemed to have been adopted within a reasonable period . It follows from that finding, and from other documents in the file, that the applicant was justified in relying on the legality of the decision that was withdrawn and was entitled to derive therefrom certain rights which, according to the principles of legal certainty and of the protection of legitimate expectations, may not be taken away from it .

I therefore suggest that the Court declare void the Commission' s decision of 31 October 1984 amending the decision of 22 December 1978 on the grant of a contribution from the Guidance Section of the EAGGF towards a project entitled "Construction of a regional centre for the processing of grape must and for the bottling of wine in the municipality of Frisa ( Chieti )".

The applicant has also put forward two further claims seeking :

( a ) a declaration that the Commission' s decision of 7 April 1982 is valid and irrevocable, and

( b ) an order requiring the Commission to grant a contribution at the level established by that decision and in accordance with the state of progress of the work contracted out by the Consorzio .

In that regard, I would merely point out that it follows logically from the annulment of the 1984 decision that the 1982 decision remains in force and that, in proceedings for annulment, the Court may not make an order against the Commission . The Commission is required by Article 176 of the EEC Treaty to take the necessary measures to comply with the judgment of the Court .

As, in my view, the Commission has failed in its submissions, I suggest that it be ordered to pay the costs .

(*) Translated from the French .

( 1 ) Council Regulation ( EEC ) No 355/77 of 15 February 1977 on common measures to improve the conditions under which agricultural products are processed and marketed ( Official Journal 1977, L*51, p.*1 ).

( 2 ) Judgment of 30 January 1974 in Case 148/73 Louwage v Commission (( 1974 )) ECR 81; Judgment of 1 December 1983 in Case 343/82 Michael v Commission (( 1983 )) ECR 4023; Judgment of 9 October 1984 in Joined Cases 80 to 83/81 and 182 to 185/82 Adam v Commission (( 1984 )) ECR 3411; Judgment of 13 December 1984 in Joined Cases 129 and 274/82 Lux v Court of Auditors (( 1984 )) ECR 4127 .

( 3 ) This article has been amended on several occasions . In particular, Council Regulation ( EEC ) No 1361/78 of 19 June 1978 ( Official Journal 1978, L*166, p.*9 ) introduced Article 17a which raised the maximum aid granted by the EAGGF for projects implemented in the Mezzogiorno (( Southern Italy )) to 50% of the cost involved .

( 4 ) Official Journal, English Special Edition 1970 I, p.*218 .

( 5 ) Joined Cases 7/56 and 3 to 7/57 Algera v Common Assembly of the European Coal and Steel Community (( 1957 )) ECR 39 at p.*60 .

( 6 ) Joined Cases 1 and 14/57 Société des usines à tubes de la Sarre v High Authority (( 1957 )) ECR 105 at p.*112 .

( 7 ) Joined Cases 15 to 33, 52, 53, 57 to 109, 116, 117, 123, 132 and 135 to 137/73 Schots-Kortner and Others v Council, Commission and Parliament (( 1974 )) ECR 193 at p.*197 .

( 8 ) Schots-Kortner and Others v Council, Commission and Parliament (( 1974 )) ECR 177 .

( 9 ) See, for example, the judgment of 11 December 1980 in Case 1252/79 Lucchini v Commission (( 1980 )) ECR 3753, paragraph 14 of the decision; the judgment of 14 January 1981 in Case 819/79 Federal Republic of Germany v Commission (( 1981 )) ECR 21, paragraph 20 of the decision; and the judgment of 16 May 1984 in Case 9/83 Eisen und Metall Aktiengesellschaft v Commission (( 1984 )) ECR 2071, paragraph 29 of the decision .

( 10 ) Judgment of 7 July 1981 in Case 158/80 REWE v Hauptzollamt Kiel (( 1981 )) ECR 1805 at p.*1833, paragraph 25 of the decision .

( 11 ) Joined Cases 42 and 49/59 SNUPAT v High Authority (( 1961 )) ECR 53 .

( 12 ) Case 14/61 Hoogovens v High Authority (( 1962 )) ECR 253 .

( 13 ) Judgment of 22 September 1983 in Case 159/82 Veri-Wallace v Commission (( 1983 )) ECR 2711, paragraph 8 of the decision .

( 14 ) See in that regard the judgment of 1 June 1961 in Case 15/60 Simon v Court of Justice (( 1961 )) ECR 115 at p.*123 : "even if in certain cases in view of vested rights withdrawal on grounds of unlawfulness does not have a retroactive effect it always takes effect from the present ."

( 15 ) Judgment of 9 March 1978 in Case 54/77 Herpels v Commission (( 1978 )) ECR 585, paragraph 38 of the decision .

( 16 ) Judgment of 13 July 1965 in Case 111/63 Lemmerz Werke v High Authority (( 1965 )) ECR 677, in particular at p.*690 .

( 17 ) Judgment of 22 March 1961 in Joined Cases 42 and 49/59 SNUPAT v High Authority (( 1961 )) ECR 53 at p.*87 . Judgment of 21 September 1983 in Joined Cases 205 to 215/82 Deutsche Milchkontor v Federal Republic of Germany (( 1983 )) ECR 2633 .

( 18 ) Judgment of 3 March 1982 in Case 14/81 Alpha Steel v Commission (( 1982 )) ECR 749, paragraph 10 of the decision .

( 19 ) Commission Regulation ( EEC ) No 1685/78 of 11 July 1978 laying down detailed rules for the implementation of the decision by the Guidance Section of the EAGGF to grant aid for projects designed to improve the conditions under which agricultural products are processed and marketed ( Official Journal 1978, L*197, p.*1 ).

( 20 ) See, in particular, the judgment of 15 July 1970 in Case 41/69 ACF Chemiefarma v Commission (( 1970 )) ECR 661, paragraph 52 of the decision .

( 21 ) See, in particular, the judgment of 23 October 1986 in Case 26/85 Vaysse v Commission (( 1986 )) ECR 3131, paragraph 16 of the decision .

( 22 ) Judgment of 6 October 1982 in Case 302/61 Eggers v Hauptzollamt Kassel (( 1982 )) ECR 3443 .