Kingdom of Spain v European Commission (T-54/11)

Contents

Judgment of the General Court (Third Chamber)15 January 2013^note((ERDF — Reduction of financial assistance — Aid for the operational programme falling within Objective 1 (2000-2006) concerning the region of Andalusia (Spain) — Article 39(3)(b) of Regulation (EC) No 1260/1999 — Three-month period — Directive 93/36/EEC — Negotiated procedure without prior publication of a tender notice))In Case T-54/11,Kingdom of Spain, represented initially by M. Muñoz Pérez, subsequently by S. Martínez-Lage Sobredo, and finally by A. Rubio González and N. Díaz Abad, lawyers,vEuropean Commission, represented by A. Steiblytė and J. Baquero Cruz, acting as Agents,THE GENERAL COURT (Third Chamber),composed of O. Czúcz, President, I. Labucka (Rapporteur) and D. Gratsias, Judges,Registrar: J. Palacio González, Principal Administrator,having regard to the written procedure and further to the hearing on 26 June 2012,gives the following

Judgment

Background to the dispute

1Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (OJ 1999 L 161, p. 1), adopted in the context of the economic and social cohesion policy of the European Union, aims to reduce disparities between the levels of development of the various regions of the European Union and to promote economic and social cohesion. Designed to improve the effectiveness of Community structural assistance, it simplifies the functioning of the fund, inter alia by reducing the number of priority objectives from seven, from 1994 to 1999, to three, for 2000 to 2006, and determines more precisely the responsibilities of the Member States and the European Union during programming, implementation, monitoring, evaluation and supervision.

2By Decision C(2000) 3965 of 29 December 2000, the Commission of the European Communities approved the Objective 1 integrated operational programme for Andalusia (Spain) (2000-2006) and set the maximum contribution of structural funds at EUR 6 152 700 000. That decision has been the subject of multiple amendments, most recently by Commission Decision C(2007) 1782 of 16 February 2007, fixing the maximum contribution of the European Regional Development Fund (ERDF) at EUR 6 427 411 070.

3One of the projects included in that aid involved the introduction of an Andalusian Health Service health card (Tarjeta sanitaria del Servicio Andaluz de Salud project), the aim of which was the development and use of an individual online medical record for each citizen of the Autonomous Community of Andalusia, thus enabling access to public health professionals from that community.

4The project originates in a cooperation agreement dated 24 July 1995 between the General State Administration (Ministry of Labour) and the Regional Government (Junta de Andalucía) with a vie w to the use of a common individual health card for healthcare — managed by the Regional Government of Andalusia — and for social security — managed by the General State Administration. The implementation of that agreement involved the establishment of an information system for the Centros de Salud (health centres) (First Aid) of the various provinces of Andalusia (Almería, Cordova, Jaén, Málaga, Cádiz).

5In due course, the Andalusian Health Service (‘AHS’) completed the computerisation of the other provinces through the implementation of the project known as Diraya, designed for the creation of an electronic medical file, ‘Historia de Salud Digital del Ciudadano’ (Digital Citizen Health Record). To this end, the AHS developed and set up, over the course of successive phases, an information system evolved from the initial health card project.

6As Phase III of the project presented some deficiencies and risks, the AHS was compelled to establish Phases IV-1, IV-2 and V. Phase IV-1, for which supply contract No 2075/2003 was signed, involved the running of a pilot project in hospitals in Cordova (Spain) and Seville (Spain) relating to the migration of local clinical data to a centralised database (a single user database) in order to centralise the information within a data processing centre, enabling interoperability between the healthcare centres. The AHS developed a turnkey project, providing the equipment necessary to centralise the database and ensuring its implementation. The purpose of supply contract No 2120/2005 was to supplement supply contract No 2075/2003 by providing local computer servers to the health centres in order to resolve the capacity problems identified in the project. That was necessary in order to achieve the aims fixed by Phase IV-1 of the project. Those two supply contracts were awarded to the allotted undertaking in the context of a negotiated procedure without prior publication of a tender notice.

7In the context of an audit carried out in all of the Member States, in order to verify the functioning of the management and control systems of the ERDF for the period 2000 to 2006, the Commission analysed the investigation procedures carried out by the intermediate body, the Junta de Andalucía, pursuant to Article 4 of Commission Regulation (EC) No 438/2001 of 2 March 2001 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards the management and control systems for assistance granted under the Structural Funds (OJ 2001 L 63, p. 21).

8Following that examination, preliminary conclusions of the audit were communicated, on 25 April 2007, in the form of a report to the Spanish authorities, who submitted supplementary information on 30 October 2009.

9In accordance with Article 39(2) of Regulation No 1260/1999, a hearing was organised in Brussels (Belgium) on 25 February 2010, at which the Spanish authorities undertook to provide additional information, which they did on 17 March 2010.

10By letter of 15 April 2010, the Commission sent the draft minutes of the hearing to the Spanish authorities, on which they submitted their comments by letter of 29 April 2010.

11The final version of the minutes of the hearing was sent by the Commission to the Spanish authorities by letter of 30 June 2010.

12By Commission decision C(2010) 7700 final of 16 November 2010 reducing the assistance from the ERDF to the Objective 1 integrated operational programme for Andalusia (2000-2006) (‘the contested decision’), the Commission reduced the amount of aid granted to that programme by EUR 3 836 360.40. It carried out that financial correction, notified to the Spanish authorities on 17 November 2010, on the ground that contracts Nos 12075/2003 and 2120/2005 (together, ‘the contested contracts’), submitted for part-financing, had been allocated in accordance with the negotiated procedure without prior publication of a tender notice, in breach of EU law on public contracts.

13On 25 January 2011, the Spanish authorities sent the request for final payment to the Commission.

Procedure and forms of order sought

14By application lodged at the Registry of the General Court on 27 January 2011, the Kingdom of Spain brought the present action.

15The Kingdom of Spain claims that the General Court should:— annul the contested decision in so far as it imposes a financial correction of 100% on the ERDF-financed expenditure for the contested contracts;— order the Commission to pay the costs.

16The Commission contends that the General Court should:— dismiss the action in its entirety;— order the Kingdom of Spain to pay the costs.

Law

17In support of its action for annulment, the Kingdom of Spain puts forward two pleas in law alleging, respectively, non-compliance with the time-limit of three months laid down by Article 39(3)(b) of Regulation No 1260/1999 and the improper application of Article 39(3)(b) of that regulation and of the rules on public procurement in the European Union.

The first plea in law, alleging non-compliance with the time-limit of three months under Article 39(3)(b) of Regulation No 1260/1999

18The Kingdom of Spain claims that the contested decision was adopted after the period specified in Article 39(3)(b) of Regulation No 1260/1999 and that it is, therefore, vitiated by unlawfulness.

19The main issue of disagreement between the parties concerns the question as to whether the period laid down in Article 39(3)(b) of Regulation No 1260/1999 is imperative or merely indicative. Indeed, the validity of the contested decision is subject to that question.

20The Kingdom of Spain is of the opinion that, in the event that no agreement is reached during the bilateral meeting provided for in Article 39(2) of Regulation No 1260/1999, the Commission has three months to take a decision to reduce the payment on account or make financial corrections. After the expiry of that period, it can no longer take such a decision. The Kingdom of Spain maintains that that interpretation of Article 39(3) of Regulation No 1260/1999 is the only effective interpretation of that provision. It adds that that period is a ‘time-limit’, aiming to guarantee the principle of legal certainty which protects the Member States. According to the Kingdom of Spain, that is a reasonable period for the Member States to find out whether the costs incurred will or will not be financed by the European Union through the ERDF.

21By contrast, the Commission considers that that period is purely indicative and that non-compliance with that period does not cause the file to lapse. The Commission relies, in that regard, on the case-law of the Court of Justice relating to the European Agricultural Guidance and Guarantee Fund (EAGGF), which shows that periods such as those laid down in Article 39(3) of Regulation No 1260/1999 are indicative, because no sanctions have been prescribed in the event of non-compliance by the Commission. Those periods are therefore indicative. The Commission justifies the indicative character of the period by referring to the nature of the financial corrections, the essential object of which is to ensure that the expenditure incurred by the national authorities was in compliance with EU law.

22According to the actual wording of Article 39(3)(b) of Regulation No 1260/1999, ‘[a]t the end of the period set by the Commission, the Commission may, if no agreement has been reached and the Member State has not made the corrections and taking account of any comments made by the Member State, decide within three months to make the financial corrections required by cancelling all or part of the contribution of the Funds to the assistance concerned’.

23Under Article 5(3) of Commission Regulation (EC) No 448/2001 of 2 March 2001 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards the procedure for making financial corrections to assistance granted under the Structural Funds (OJ 2001 L 64, p. 13), ‘[w]henever the Member State objects to the observations made by the Commission and a hearing takes place under the second subparagraph of Article 39(2) of Regulation No 1260/1999, the three-month period within which the Commission may take a decision under Article 39(3) of that Regulation shall begin to run from the date of the hearing’.

24It is not apparent from the wording of those articles that non-compliance with that three-month period precludes the Commission from taking, after the expiry of that period, a decision to make or not make financial corrections. Consequently, non-compliance with such a period does not give rise to an implied decision by the ERDF to defray the expenditure incurred by the national authorities.

25That conclusion is fully supported, first of all, by a teleological interpretation of Article 39 of Regulation No 1260/1999. In that regard, it must be pointed out that, according to the case-law, the essential purpose of the clearance of the accounts is to ensure that the expenditure incurred by the national authorities is in accordance with EU rules (Case 349/85 Denmark v Commission [1988] ECR 169, paragraph 19).

26To this end, Articles 38 and 39 of Regulation No 1260/1999 provide for a cooperation procedure between the Member States and the Commission, offering the Member States concerned all the guarantees necessary for them to present their point of view (see, to that effect, Case C-61/95 Greece v Commission [1998] ECR I-207, paragraph 39). Under that procedure, the Commission and the Member States strive to identify and analyse, in a spirit of cooperation based on partnership, all relevant data, in order to prevent the ERDF from defraying irregular expenditure and in order to apply the necessary financial corrections.

27It should also be noted that the Commission is required to reject the defrayal by the ERDF of expenditure which has not been incurred in accordance with EU rules. That obligation does not disappear merely because the Commission’s decision was taken after the expiry of the three-month period, running from the date of the hearing, laid down in Article 39(3) of Regulation No 1260/1999 read in conjunction with Article 5(3) of Regulation No 448/2001. In the absence of any sanction attaching to the failure by the Commission to comply with that period, that period cannot — in the light of the nature of the procedure provided for in Articles 38 and 39 of Regulation No 1260/1999, the essential object of which is to ensure that the expenditure incurred by the national authorities is in compliance with EU law — be regarded as mandatory, provided that the interests of the Member State are not impaired (see, by analogy, judgment of 22 May 2012 in Case T-345/10 Portugal v Commission, not published in the ECR, paragraph 32). The Commission must endeavour to comply with that period, but, because of the complexity of the verification of such expenditure, it may be necessary for it to have more time to conduct an in-depth analysis with a view to avoiding the defrayal of irregular expenditure.

28Therefore, it must be concluded that, in the absence of clear evidence of legislative intent to the contrary in Article 39(3)(b) of Regulation No 1260/1999 and Article 5(3) of Regulation No 448/2001, that period is, in principle, merely indicative and failure to comply with it has no effect on the lawfulness of the Commission’s decision. This interpretation does not deprive Article 39(3) of Regulation No 1260/1999 of its effectiveness, as the Kingdom of Spain claims in the present case, since it is apparent from the last subparagraph of paragraph 3 of that article that ‘[i]n the absence of a decision to do either (a) or (b) the interim payments shall immediately cease to be suspended’. In addition, it is important to point out that the Kingdom of Spain has neither claimed nor established that its interests have been harmed as a result of the elapse of the contested period.

29However, in the absence of provisions imposing a mandatory time-limit in Regulation No 1260/1999, the fundamental requirement of legal certainty has the effect of preventing the Commission from indefinitely delaying the exercise of its powers (see, to that effect, Joined Cases C-74/00 P and C-75/00 P Falck and Acciaierie di Bolzano v Commission [2002] ECR I-7869, paragraph 140).

30In that regard, to the extent that the Kingdom of Spain’s argument can also be interpreted as a reproach directed at the Commission that the period taken for the adoption of the contested decision was unreasonable, it must be noted that examination of the course of the procedure has not revealed any delay such as to undermine the fundamental requirements of legal certainty and that decisions be taken within a reasonable period of time. In particular, in accordance with Article 39(2) of Regulation No 1260/1999, a meeting was organised in Brussels on 25 February 2010 between the Commission and the Kingdom of Spain with a view to reaching an agreement on the comments made by the Commission and regarding the absence of justification for the ERDF contribution in respect of the two contested contracts, in the context of the health card project. The parties recognise that, during that meeting, the Kingdom of Spain undertook to provide supplementary information to the Commission, which it did on 17 March 2010. The final version of the minutes of the hearing was sent by the Commission to the Spanish authorities by letter dated 30 June 2010. It is undisputed, in the present case, that the information submitted contained new elements on which the Commission relied in adopting the contested decision on 16 November 2010.

31It follows from all the foregoing that the first plea in law must be dismissed as unfounded.

The second plea in law, alleging improper application of Article 39(3)(b) of Regulation No 1260/1999 and of the rules on public procurement in the European Union

32The Kingdom of Spain criticises the Commission for having corrected that part of the funding of the project provided by the ERDF, on the ground that the disputed contracts were not concluded in conformity with EU legislation on public procurement. On the contrary, it considers that the contracts were lawfully awarded.

33This plea is divided, in essence, into two parts, each justifying, according to the Kingdom of Spain, the use of the negotiated procedure without prior publication of a tender notice. The first is based on the assertion that the aim of the disputed contracts, which is the supply of a product manufactured for the purpose of research, experiment, study or development, justifies the use of the negotiated procedure, under Article 6(3)(b) of Council Directive 93/36/EEC of 14 June 1993 coordinating procedures for the award of public supply contracts (OJ 1993 L 199, p. 1). The second is based on the claim that the disputed contracts have technical specificities, legitimising the use of that exceptional procedure, under Article 6(3)(c) of that directive.

34At the outset, it must be noted that the negotiated procedure is exceptional in nature, Article 6(2) and (3) of Directive 93/36 exhaustively and expressly listing the only exceptions for which recourse to the negotiated procedure is allowed (see Case C-337/05 Commission v Italy [2008] ECR I-2173, paragraph 56 and the case-law cited).

35It must also be pointed out that it is settled case-law that those provisions, as derogations from the rules intended to ensure effectiveness of rights conferred by EU law in the public procurement sector, must be interpreted strictly (see, to that effect, judgment of 15 October 2009 in Case C-275/08 Commission v Germany, not published in the ECR, paragraph 55 and the case-law cited).

36In addition, it must be recalled that the burden of proving the existence of exceptional circumstances justifying the derogation from those rules lies with the person seeking to rely on those circumstances (see, to that effect, Commission v Italy, paragraph 58, and Commission v Germany, paragraph 56).

37In the present case, it is therefore important to verify whether the Kingdom of Spain has furnished proof that the contested contracts could, under Article 6(3)(b) or (c) of Directive 93/36, be the subject of a negotiated procedure without prior publication of a tender notice.

The first part of the second plea in law, relating to Article 6(3)(b) of Directive 93/36

38The Kingdom of Spain claims that Phase III of the project contained many shortcomings and risks, inherent to the local character of the project, which rendered the centralisation and the exchange of data between the various health centres of the AHS impossible. In the context of the project and the Commission’s action plan for a European e-Health Area, the AHS proposed an unprecedented objective, enabling interoperability between healthcare centres, thus guaranteeing the geographical mobility of patients. It submits that that new objective was of an extremely fragile nature, and that it seemed judicious to attain it in the first instance through a pilot project, relating to an area catered to by rural health services and an urban general hospital.

39The Kingdom of Spain alleges that that pilot project involved studying and testing the modalities which were necessary to transfer local data to a user database securely, and, in support of this, its purpose was to develop a new computing product intended for the execution of that transfer in complete security, to enable, once the reliability of the system was verified, the transfer of data to other AHS centres not included in the pilot project. The aim of that project was to carry out testing in order to find the appropriate modalities for that transfer. That aim justifies its classification as ‘a product manufactured for the purpose of research, experiment, study or development’.

40It must be pointed out that, pursuant to Article 6(3)(b) of Directive 93/36, the contracting authorities may award their supply contracts by negotiated procedure without prior publication of a tender notice when the products involved are manufactured purely for the purpose of research, experiment, study or development. This provision does not extend to quantity production to establish commercial viability or to recover research and development costs.

41It is apparent from the documents on the Court’s file that the Spanish authorities were perfectly aware of the equipment necessary to achieve their goal. No element of the technical specifications of the two contracts indicates that the undertaking which was awarded the contracts should develop a new product intended for research, experiment, study or development. In question was the installation of defined computer and non-computer equipment, described in great detail by the Spanish authorities, and already present on the market, which an average provider in that sector would have been capable of doing.

42As regards the technical specifications of contract No 2075/2003, it must be noted that, according to its title and object, it is a ‘contract for the provision of cables, communications, servers and peripherals necessary for the adaptation of the digital medical record for each citizen in the areas of health, outpatient consultation and hospital emergency services in respect of Phase IV-1 of the Andalusian Health Service’s health card project (Diraya)’. That text is taken from the description of the object on page 2 of the document. Then, Chapters 3 to 6 of the technical specifications give a detailed description of all the computer and non-computer equipment which were the subject-matter of the contract. The situation is identical for the budget, where the products and even the brands of the products to be provided are included.

43As regards the installation of the equipment, Chapters 3.7.1 and 4.8.1 of the technical specifications lay out a full series of basic installation services which an average supplier in that sector would have been capable of carrying out for the contracting authority.

44Chapters 5.1 and 5.2 of the technical specifications follow the same scheme as regards the data processing centre.

45It is apparent from the foregoing that all the details concerning the equipment, supervision, quality of service, security and services were described with precision in the specifications. In those circumstances, it must be concluded that contract No 2075/2003 is not a contract for the provision of products manufactured solely for the purpose of research, experiment, study or development, within the meaning of Article 6(3)(b) of Directive 93/36.

46As regards the technical specifications of contract No 2120/2005, it must be observed that, according to its title and its object, it is a ‘contract for the supply of equipment and supplementary support for Phase IV-1 of the Andalusian Health Service’s health card project (Diraya)’.

47Paragraph 1 of the technical specifications provides that file C-2075/03 (namely contract No 2075/2003) formed the basis for the running of the Diraya file for Andalusia in the Cordova North health zone and in Seville hospital. The future action for the implementation of Diraya in the rest of the health system would ensue from its testing, its verification and its evaluation.

48Chapters 3 to 12 of the technical specifications state clearly and precisely the computer and non-computer equipment required, as well as the brands and models. The budget is similarly detailed. Finally, Chapter 13 of the technical specifications describes the services to be supplied under the contract, that is the installation and the use of the supplies described in the previous chapters of the technical specifications. Also for that contract, the contracting authority was fully aware of its needs and the equipment and services necessary to meet those needs.

49It follows from the foregoing that contract No 2120/2005 also cannot be considered to be a contract for the provision of products manufactured purely for the purpose of research, experiment, study or development, within the meaning of Article 6(3)(b) of Directive 93/36.

50It follows from all the foregoing, and without there being any need to consider the admissibility of this part of the second plea in law, which is contested by the Commission, that that part of the second plea must be dismissed as unfounded, since the Spanish authorities have failed to show that the disputed contracts could, pursuant to Article 6(3)(b) of Directive 93/36, be the subject of a negotiated procedure without prior publication of a tender notice.

The second part of the second plea in law, relating to Article 6(3)(c) of Directive 93/36

51The Kingdom of Spain claims that the pilot project has a technical specificity linked to the implementation of the system and the migration of data. It claims that it was essential to apply certain comprehensive and secure transfer procedures, which had necessarily to be based on a thorough knowledge of the existing data models, patterns, tables and relationships between local databases in Phase III of the project. According to the Kingdom of Spain, the undertaking selected was the only undertaking which possessed such knowledge, since it managed and operated those local installations at the time of the award of the contract, as the undertaking selected for the earlier phases of the health card project.

52It must be noted that, pursuant to Article 6(3)(c) of Directive 93/36, the contracting authorities may award their supply contracts by negotiated procedure, without prior publication of a tender notice, when, for technical or artistic reasons, or for reasons connected with protection of exclusive rights, the products supplied may be manufactured or delivered only by a particular supplier.

53It must be noted that it is not apparent from the documents added to the file before the Court by the parties that the Kingdom of Spain examined whether there were other undertakings capable of responding to the call for tender under the same conditions, or under better conditions than the successful undertaking. It does not refer to any steps taken to that effect, whether within Spanish territory, or more widely in the European Union. The Kingdom of Spain is content to observe that the selected undertaking was particularly well placed to respond to the call for tender, due to the technical specificity of the disputed contracts linked to the implementation of the system and the migration of data, since it was awarded contracts in the phases previous to Phase IV-1 and that, therefore, it already possesses extensive knowledge of the existing local databases.

54It must be noted in that regard that that does not show that that undertaking was the only one capable of possessing that knowledge and that another undertaking would not have been capable of acquiring such knowledge. Indeed, it cannot be ruled out that, if serious research had been conducted in the European Union, undertakings capable of providing a tailored service could have been identified (see, to that effect, Commission v Germany, paragraphs 62 and 63). Furthermore, nor does the Kingdom of Spain establish how the contested contracts were technically specific so as to justify recourse to the negotiated procedure without prior publication of a tender notice. The contracts in issue in the present case are contracts for the provision of standard products (see paragraphs 45 to 47, 50 and 51 above).

55It follows that the Kingdom of Spain cannot successfully rely on Article 6(3)(c) of Directive 93/36 to justify, as far as the contested contracts are concerned, the use of the negotiated procedure without prior publication of a tender notice.

56It follows from all of the foregoing considerations that the second part of the second plea in law must be rejected as unfounded.

57Consequently, the second plea in law must be rejected in its entirety and, therefore, the action must be dismissed in its entirety.

Costs

58Under Article 87(2) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Kingdom of Spain has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission.

Operative part

On those grounds,THE GENERAL COURT (Third Chamber)hereby:

1.Dismisses the action;

2.Orders the Kingdom of Spain to pay the costs.

Delivered in open court in Luxembourg on 15 January 2013.