ACHILLEION (Structural Funds – European Regional Development Fund (ERDF) - Durability of investment operations - Judgment) [2023] EUECJ C-313/22 (13 July 2023)

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(Reference for a preliminary ruling – Structural Funds – European Regional Development Fund (ERDF) – Co-financing – Regulation (EC) No 1260/1999 – Articles 30(4) and 39(1) – Durability of investment operations – ‘Substantial modification’ of a co-financed investment operation – Recovery of aid in the event of transfer of the establishment which is the subject of that operation – Effect of the specific circumstances surrounding that transfer)

REQUEST for a preliminary ruling under Article 267 TFEU from the Elegktiko Synedrio (Court of Auditors, Greece), made by decision of 28 January 2022, received at the Court on 11 May 2022, in the proceedings

composed of M. Safjan, President of the Chamber, N. Piçarra and M. Gavalec (Rapporteur), Judges,

– the Greek Government, by K. Boskovits, E. Panopoulou, G. Papadaki and E. Tsaousi, acting as Agents,

– the Czech Government, by J. Očková, M. Smolek and J. Vláčil, acting as Agents,

– the European Commission, by M. Farley, I. Georgiopoulos and P. Rossi, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

1 This request for a preliminary ruling concerns the interpretation of various provisions of EU law, in particular Article 30 of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (OJ 1999 L 161, p. 1).

2 The request has been made in proceedings between Achilleion Anomymi Xenodocheiaki Etaireia and Elliniko Dimosio (Greek State) concerning the partial recovery of financial aid granted for the modernisation of a hotel and the creation of three new jobs.

‘(4) … in order to increase the concentration and simplify the operation of the Structural Funds the number of priority objectives should be reduced as compared with [Council] Regulation (EEC) No 2052/88 [of 24 June 1988 on the tasks of the Structural Funds and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments (OJ 1988 L 185, p. 9)]; … those objectives should be redefined as promoting the development and structural adjustment of regions whose development is lagging behind, economic and social conversion of areas facing structural difficulties and adapting and modernising policies and systems of education, training and employment;

(6) … Whereas cultural development, the quality of the natural and the man-made environment, the qualitative and cultural dimension of life and the development of tourism contribute to making regions economically and socially more attractive in so far as they encourage the creation of sustainable employment;

(7) … the European Regional Development Fund (ERDF) is the primary contributor to attaining the objective of promoting the development and structural adjustment of the regions whose development is lagging behind and economic and social conversion of areas facing structural difficulties;

(41) … in accordance with the principle of subsidiarity, the rules on eligible expenditure should be the relevant national rules where there are no Community rules, although they may be laid down by the [European] Commission where they are clearly needed for the uniform and equitable implementation of the Structural Funds across the Community; … however, the starting and closing dates for the eligibility of expenditure should be defined and it should be stipulated that investment projects may not undergo major modification; … consequently, in order to ensure the efficiency and durable impact of the Funds’ assistance, all or part of the assistance from a Fund should remain attached to an operation only where its nature or its implementation conditions do not undergo a substantial modification which would result in diverting the assisted operation from its original objectives’.

4 Article 12 of Regulation No 1260/1999, entitled ‘ Compatibility’, provided:

‘Operations financed by the Funds or receiving assistance from the [European Investment Bank (EIB)] or from another financial instrument shall be in conformity with the provisions of the Treaty, with instruments adopted under it and with Community policies and actions, including the rules on competition, on the award of public contracts, on environmental protection and improvement and on the elimination of inequalities and the promotion of equality between men and women.’

‘1. Expenditure in respect of operations shall be eligible for a contribution from the Funds only if these operations form part of the assistance concerned.

3. The relevant national rules shall apply to eligible expenditure except where, as necessary, the Commission lays down common rules on the eligibility of expenditure in accordance with the procedure referred to in Article 53(2).

4. The Member States shall ensure that an operation retains the contribution from the Funds only if that operation does not, within five years of the date of the decision of the competent national authorities or the managing authority on the contribution of the Funds, undergo a substantial modification:

(a) affecting its nature or its implementation conditions or giving to a firm or a public body an undue advantage;

(b) resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change of location of a productive activity.

The Member States shall inform the Commission of any such modification. Where such a modification occurs, Article 39 shall apply.’

6 Title IV of that regulation, entitled ‘Effectiveness of assistance from the Funds’, contained a Chapter II, entitled ‘Financial control’, which included Article 38 of that regulation, entitled ‘General provisions’. Article 38(1) provided:

‘Without prejudice to the Commission's responsibility for implementing the general budget of the European Communities, Member States shall take responsibility in the first instance for the financial control of assistance. To that end, the measures they take shall include:

(h) recovering any amounts lost as a result of an irregularity detected and, where appropriate, charging interest on late payments.’

7 Chapter II also includes Article 39 of Regulation No 1260/1999, entitled ‘Financial corrections’, which provided in paragraph 1:

‘The Member States shall, in the first instance, bear the responsibility for investigating irregularities, acting upon evidence of any major change affecting the nature or conditions for the implementation or supervision of assistance and making the financial corrections required.

The Member State shall make the financial corrections required in connection with the individual or systemic irregularity. The corrections made by the Member State shall consist in cancelling all or part of the Community contribution. The Community funds released in this way may be re-used by the Member State for the assistance concerned, in compliance with the arrangements to be defined pursuant to Article 53(2).’

8 That regulation was repealed, with effect from 1 January 2007, by Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No 1260/1999 (OJ 2006 L 210, p. 25). However, Article 105(1) of Regulation No 1083/2006 provides that that regulation does not affect the continuation or modification, including the total or partial cancellation, of assistance co-financed by the Structural Funds or of a project co-financed by the Cohesion Fund approved by the Commission on the basis of Regulation No 1260/1999 or any other legislation which applies to that assistance on 31 December 2006, which consequently applies thereafter to that assistance or the projects concerned until their closure.

9 Commission Regulation (EC) No 1685/2000 of 28 July 2000 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards eligibility of expenditure of operations co-financed by the Structural Funds (OJ 2000 L 193, p. 39) contained an Annex entitled ‘Eligibility rules’. Under Rule No 1, point 1.10 of that annex, in the version resulting from Commission Regulation (EC) No 448/2004 of 10 March 2004 (OJ 2004 L 72, p. 66) (‘the Annex to Regulation No 1685/2000’), ‘Member States may apply stricter national rules for determining eligible expenditure under points 1.6, 1.7 and 1.8’, concerning costs relating to the depreciation of real estate or equipment, contributions in kind and overheads.

10 Chapter II 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), entitled ‘Financial corrections by Member States’, contained Article 2 of that regulation, which provided, in paragraphs 1 and 2:

‘1. In the case of systemic irregularities, enquiries under Article 39(1) of Regulation [No 1260/1999] shall cover all the operations liable to be affected.

2. When cancelling all or part of the Community contribution, Member States shall take into account the nature and gravity of the irregularities and the financial loss to the Funds.’

11 Points 4.12 and 4.14 of the Guidelines on national regional aid (OJ 1998 C 74, p. 9) are worded as follows:

‘4.12. Job creation means a net increase in the number of jobs … in a particular establishment compared with the average over a period of time. Any jobs lost during that period must therefore be deducted from the apparent number of jobs created during the same period …

4.14 Aid for job creation must be made conditional, through its method of payment or through the conditions associated with its acquisition, on the maintenance of the employment created during a minimum period of five years.’

12 Article 14 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108 TFEU] (OJ 1999 L 83, p. 1), entitled ‘Recovery of aid’, provided in paragraph 1 thereof:

‘Where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary …. The Commission shall not require recovery of the aid if this would be contrary to a general principle of Community law.’

13 Under Article 1(2) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ 1995 L 312, p. 1), ‘“irregularity” shall mean any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.’

‘1. Administrative checks, measures and penalties shall be introduced in so far as they are necessary to ensure the proper application of Community law. They shall be effective, proportionate and dissuasive so that they provide adequate protection for the Communities’ financial interests.

3. Community law shall determine the nature and scope of the administrative measures and penalties necessary for the correct application of the rules in question, having regard to the nature and seriousness of the irregularity, the advantage granted or received and the degree of responsibility.

4. Subject to the Community law applicable, the procedures for the application of Community checks, measures and penalties shall be governed by the laws of the Member States.’

‘As a general rule, any irregularity shall involve withdrawal of the wrongly obtained advantage:

16 Article 4 of Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles [107 and 108 TFEU] to State aid to small and medium-sized enterprises (OJ 2001 L 10, p. 33), as amended by Commission Regulation (EC) No 364/2004 of 25 February 2004 (OJ 2004 L 63, p. 22) (‘Regulation No 70/2001’), entitled ‘Investment’, provided:

‘1. Aid for investment in tangible and intangible assets inside or outside the Community shall be compatible with the common market within the meaning of Article [107(3) TFEU] and shall be exempt from the notification requirement of Article [108(3) TFEU] if it fulfils the conditions of paragraphs 2 to 6.

3. Where the investment takes place in areas and in sectors which qualify for regional aid at the moment the aid is granted, the aid intensity shall not exceed the ceiling of regional investment aid determined in the map approved by the Commission for each Member State by more than:

(a) 10 percentage points gross in areas covered by Article [107(3)(c) TFEU], provided that the total net aid intensity does not exceed 30%; or

(b) 15 percentage points gross in areas covered by Article [107(3)(a) TFEU], provided that the total net aid intensity does not exceed 75%.

The higher regional aid ceilings shall only apply if the aid is granted under the condition that the investment is maintained in the recipient region for at least five years and the beneficiary’s contribution to its financing is at least 25%.

4. The ceilings fixed in paragraphs 2 and 3 shall apply to intensity of the aid calculated either as a percentage of the investment’s eligible costs or as a percentage of the wage costs of employment created by the carrying-out of an investment (aid to job creation) or a combination thereof, provided the aid does not exceed the most favourable amount resulting from the application of either calculation.

6. In cases where the aid is calculated on the basis of jobs created, the amount of the aid shall be expressed as a percentage of the wage costs over a period of two years relating to the employment created under the following conditions:

17 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) provided:

‘Management and control systems shall include procedures to verify the delivery of the products and services co-financed and the reality of expenditure claimed and to ensure compliance with the terms of the relevant Commission decision under Article 28 of [Regulation No 1260/1999] and with applicable national and Community rules on, in particular, the eligibility of expenditure for support from the Structural Funds under the assistance concerned, public procurement, State aid (including the rules on the cumulations of aid), protection of the environment and equality of opportunity.

18 Under Article 477 of the Astikos Kodikas (Civil Code) (FEK A’ 164/24.10.1984), ‘if a person promises, through a contract concluded with the creditor, to settle the debt of another person, the debtor is not released; an additional obligation arises for the promisor, unless the contrary is clearly evident’.

‘If assets or undertakings have been transferred by contract, the purchaser shall be liable to the creditor for the debts associated with the assets or business up to the value of the assets transferred. The transferor’s liability shall continue to exist. An agreement to the contrary, concluded between the contracting parties to the detriment of the creditors, shall be null and void vis-à-vis the latter.’

20 The referring court states that an ‘undertaking’ within the meaning of Article 479 means an object of law consisting of an assortment of different elements, namely things (movable and immovable property), rights, intangible assets (business name, trade mark, distinctive signs) and factual situations and relationships vis-à-vis the market (clientele, reputation, location of premises, prospects and hopes for development), with that grouping forming an organisation and economic unit belonging to a particular entity.

21 According to that court, it is apparent from Articles 1 to 4 of Proedrikó Diátagma 178/2002: Métra schetiká me tin prostasía ton dikaiomáton ton ergazoménon se períptosi metavívasis epicheiríseon, egkatastáseon í tmimáton egkatastáseon í epicheiríseon, se symmórfosi pros tin Odigía 98/50/EK tou Symvoulíou (Presidential Decree No 178/2002 on the measures relating to the protection of workers’ rights in the event of transfers of undertakings, establishments or parts of undertakings or establishments, in order to comply with Directive 98/50/EC (FEK A’ 162/12.7.2002)) that a transfer of an undertaking is any taking over or continuation of an economic activity by a third party, provided that the identity of the undertaking or business concerned is retained. In such a case, the change of the person of the employer entails, irrespective of the legal cause and the form of the transfer in question, the automatic subrogation of the new employer to the existing employment relationships and the discharge of the former employer for the period subsequent to that change. However, even after such a transfer, the latter remains liable, jointly and severally with the new employer, for obligations arising from a contract of employment or from an employment relationship until such time as they are taken over by the successor. This effect arises independently of any consent of the workers.

22 Article 18(5) of the Koini Ypourgiki Apofasi 192249/EYS 4057, Rýthmisi themáton pou aforoún tin efarmogí dráseon ton kratikón enischýseon stous tomeís tis metapoíisis kai tou tourismoú sto plaísio ton dekatrión (13) Perifereiakón Epicheirisiakón Programmáton tou K.P.S 2000-2006 sýmfona me to árthro 35 tou n. 3016/2002 (Joint Ministerial Order No 192249/EYS 4057, Regulation of questions relating to the implementation of State aid actions in the processing and tourism sectors under the thirteen (13) Regional Operating Programmes of the CCS 2000-2006, pursuant to Article 35 of Law 3016/2002 (FEK Βʹ 1079/19.08.2002) of the Minister for Economic Affairs, Finance and the Minister for Development (‘the Joint Ministerial Order’) provides that, in the event of a grant of financial aid for an investment, the beneficiary is required to refrain from making any transfer of the fixed assets of the subsidised undertaking during a period of five years from the adoption of the completion decision for that investment.

The dispute in the main proceedings and the questions referred for a preliminary ruling

23 On 10 May 2004, the company Gousios V. Ntagkoumas G. AXE, the predecessor company of Achilleion, submitted a request to the Region of Western Macedonia (Greece) for its investment in the modernisation of a hotel located in a municipality in that region to be included in an aid scheme for the financial support of small and medium-sized enterprises (SMEs) in that region in the tourism sector. On 27 January 2005, the Secretary General of the Region of Western Macedonia decided to include that investment in the aid scheme.

24 The purpose of that investment was the construction, modernisation and refurbishment of existing hotel buildings and the provision of hotel equipment and an energy saving system. It was envisaged that three jobs would be created once the project had been completed.

25 The total amount of the investment in question was EUR 201 900 and the total amount of aid was EUR 90 000. The starting date for the eligibility of expenditure relating to that project had been set at 10 May 2004, whereas the deadline for completion of the project was 18 months from the date on which that investment was included in the aid scheme concerned.

26 By a completion decision of 8 June 2006, it was found that the investment had been completed during the period of eligibility and that three new jobs had been created.

27 Following an inspection carried out in 2009, it was found that the hotel concerned had been transferred on 9 November 2006 to Gousios Vaios – Monoprosopi EPE, contrary to the obligation provided for in Article 18(5) of the Joint Ministerial Order, not to transfer fixed assets of the undertaking in receipt of the aid for a period of five years from the date of the completion decision, that is to say, in the present case until 8 June 2011.

28 Therefore, in 2010, the State Secretary for the Economy, Competitiveness and Maritime Affairs adopted a decision by which he imposed on the applicant in the main proceedings a financial correction of EUR 82 500, of which 75% corresponded to ERDF funds and 25% to national funds. The purpose of that decision was to recover the aid, minus the amount corresponding to the period of five months during which the applicant in the main proceedings had operated that hotel in accordance with the obligation referred to in the preceding paragraph.

29 In an action brought at first instance by the applicant in the main proceedings against that decision, the Elegktiko Sinedrio (Court of Auditors, Greece), sitting as a chamber, dismissed that appeal by judgment, holding that the financial correction and recovery of the aid which was the subject of that decision were lawful, in so far as the applicant in the main proceedings had failed to comply with that obligation and had thus infringed Article 30(4) of Regulation No 1260/1999 and Article 18(5) of the Joint Ministerial Order.

30 The applicant in the main proceedings brought an appeal on a point of law against that judgment before the referring court, the Elegktiko Sinedrio (Court of Auditors), sitting this time in plenary session.

31 In the context of that appeal, it claims, first of all, that that judgment is vitiated by a misinterpretation of Article 30(4) of Regulation No 1260/1999, in so far as it was held that the transfer of the hotel concerned constituted an automatic ground for recovering the aid paid, without its being ascertained whether the investment transaction in question had actually undergone a substantial modification in terms of its implementation conditions or as a result of obtaining an undue advantage.

32 Next, the applicant in the main proceedings submits, first, that that hotel was transferred to a company controlled by one of its two shareholders and that that transfer was necessary to ensure the financial viability of that establishment. Second, in accordance with Article 479 of the Civil Code, under which, in the event of transfer of an undertaking, the transferor entity remains liable for the debts of that undertaking, the applicant in the main proceedings guarantees that the long-term obligations will be honoured by the transferee company.

33 Lastly, the applicant in the main proceedings submits, before the referring court, that there has been an infringement of its freedom to operate a business and of its right to property on the ground that the financial correction ordered by the decision referred to in paragraph 28 of the present judgment should not have been imposed, since all the long-term obligations have been complied with and the objective pursued by the aid granted has been achieved.

34 In those circumstances, the Elegktiko Synedrio (Court of Auditors) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) For the purposes of (i) Article 30(1), (3) and (4) of Regulation No 1260/1999 and Rule No 1, [point 1.10, of the Annex to] Regulation No 1685/2000; (ii) Article 4(3) of Regulation No 70/2001; and (iii) Articles 38 and 39(1) of Regulation No 1260/1999, Article 4 of Regulation No 438/2001, Article 2(2) of Regulation No 448/2001, Article 1(2) of Regulation No 2988/95 and Article 14 of Regulation No 659/1999, does the sale of the assisted undertaking, together with its fixed assets, constitute automatically such a substantial modification of the implementation conditions of the co-financed investment in that undertaking as to justify of itself national legislation, such as Article 18(5) of [the Joint Ministerial Order], which enacts an absolute long-term prohibition on the transfer of the fixed assets of the subsidised undertaking, on pain of total or partial revocation of the decision granting the aid and repayment of all or part of the public grant paid?

(2) Are (i) Article 30(4) of Regulation No 1260/1999; (ii) Article 4(3) of Regulation No 70/2001 and point 4.12 of the Guidelines on national regional aid concerning the principle of the durability of small and medium-sized enterprises in receipt of aid; and (iii) Articles 38 and 39 of Regulation No 1260/1999, Article 2(2) of Regulation No 448/2001, Articles 1(2), 2 and 4 of Regulation No 2988/95 and Article 14 of Regulation No 659/1999 to be understood as meaning that the sale of the fixed assets and of the assisted undertaking itself, further to an internal shareholders’ agreement intended to ensure its viability, does not give rise to a substantial modification to the co-financing operation or to an undue advantage for any of the contracting parties and therefore constitutes neither an irregularity nor a reason to recover the aid, provided that the conditions for the carrying out of the investment are not modified and the transfer falls under a legal regime under which the transferor and the transferee are jointly and severally liable for the debts and for the liabilities that exist at the time of the transfer?

(3) Do Articles 17, 52 and 53 of the Charter of Fundamental Rights of the European Union [“the Charter”] and the principle of legal certainty, interpreted in conjunction with Article 1 of [the First Additional Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed at Paris on 20 March 1952 (“the First Additional Protocol to the ECHR”)], require a fair balance to be struck between financial correction measures and measures for the recovery of aid in accordance with Articles 38[(1)](h) and 39(1) of Regulation No 1260/1999, Article 2(2) of Regulation No 448/2001, Article 4 of Regulation No 2988/95 and Article 14 of Regulation No 659/1999 and the right to the protection of “property” of the recipient of the aid, resulting in partial or even total exemption of the recipient, even where it is found that the transfer gave rise to a substantial modification to the assisted operation or an undue advantage?’

35 Although the admissibility of the request for a preliminary ruling has not been challenged by any of the interested parties which have submitted written observations in the present case, it must be borne in mind that, in the case which gave rise to the judgment of 19 December 2012, Epitropos tou Elegktikou Synedriou (C‑363/11, EU:C:2012:825), the Court, after observing, inter alia, that the proceedings in the context of which the request for a preliminary ruling was made by the Elegktiko Sinedrio (Court of Auditors) were not intended to lead to a decision of a judicial nature, but to carry out a prior review of State expenditure, held that, in such a context, the Elegktiko Sinedrio (Court of Auditors) did not constitute a court or tribunal within the meaning of Article 267 TFEU and that, consequently, that request for a preliminary ruling had to be declared inadmissible.

36 By contrast, as is apparent from the present request for a preliminary ruling and from the provisions of Greek law referred to therein, the Elegktiko Sinedrio (Court of Auditors) exercises, in the context which gave rise to that request, a judicial function and is, therefore, a court or tribunal within the meaning of Article 267 TFEU.

37 In those circumstances, the present request for a preliminary ruling is admissible.

38 As a preliminary point, it should be noted that, by its first and second questions, the referring court asks the Court, inter alia, about the interpretation of Article 2(2) of Regulation No 448/2001, Article 1(2) and Articles 2 and 4 of Regulation No 2988/95, Article 14 of Regulation No 659/1999 and point 4.12 of the Guidelines on national regional aid but, contrary to Article 94(c) of the Rules of Procedure of the Court of Justice, does not set out with the requisite clarity the reasons which led it to question the interpretation of those provisions or the link it establishes between them and the national legislation applicable to the dispute in the main proceedings, with the result that there is no need to interpret those provisions.

39 In those circumstances, it must be held that, by those questions, that court asks, in essence, whether Article 30(4) of Regulation No 1260/1999 must be interpreted as meaning that, first, the transfer of an establishment which is the subject of an investment operation co-financed by the Structural Funds of the European Union constitutes, in itself, a ‘substantial modification’, within the meaning of that provision, and, second, it precludes national legislation which obliges the beneficiary of funding paid in respect of such an investment operation not to transfer, without exception, for a period of five years from the adoption of the completion decision for the investment in question, an establishment which is the subject of that operation, failing which a financial correction will be imposed accompanied by total or partial recovery of that funding. The referring court also wishes to know whether Article 38 and Article 39(1) of Regulation No 1260/1999, Rule No 1, point 1.10 of the Annex to Regulation No 1685/2000, Article 4(3) of Regulation No 70/2001 and Article 4 of Regulation No 438/2001 are capable of affecting the answer given to those questions.

40 The first paragraph of Article 30(4) of Regulation No 1260/1999 set out a principle of ‘durability’ according to which the contribution from the Structural Funds to an operation was to be definitively retained only where the operation in question did not undergo a ‘substantial modification’ within five years of the decision of the competent national authorities or the managing authority on the contribution of those funds.

41 Before the referring court, the parties disagree in particular as to whether the transfer of the establishment which is the subject of the investment operation co-financed by the ERDF constitutes a ‘substantial modification’ within the meaning of that provision.

42 In that regard, it should be borne in mind that it is not for the Court to classify specifically the modification at issue in the main proceedings resulting from that transfer. Such a determination is a matter for the national court alone, since the role of the Court of Justice is limited to providing an interpretation of EU law which will be useful to that court for the purposes of adjudicating the dispute before it. That said, the Court may determine the relevant factors capable of assisting the referring court in its assessment (see, to that effect, judgment of 14 November 2013, Comune di Ancona, C‑388/12, EU:C:2013:734, paragraph 19 and the case-law cited).

43 In order for it to be found that a modification falls within the scope of Article 30(4) of Regulation No 1260/1999, it must first be established that the operation thus modified is covered by that provision and, if so, it must then be determined whether that modification meets the two cumulative conditions laid down in points (a) and (b) of the first subparagraph of Article 30(4) (see, to that effect, judgment of 14 November 2013, Comune di Ancona (C‑388/12, EU:C:2013:734, paragraph 20).

44 The first step in making that determination is to consider whether the modification at issue meets the condition laid down in point (b) of the first subparagraph of Article 30(4) of Regulation No 1260/1999, under which the modification must result either from a change in the nature of ownership in an item of infrastructure or a cessation or change of location of a productive activity. In checking that that condition is met, it is necessary to assess the factors which gave rise to the modification at issue and which can therefore be said to constitute its causes (judgment of 14 November 2013, Comune di Ancona, C‑388/12, EU:C:2013:734, paragraph 21).

45 The second step is to consider whether that modification is covered by one of the cases referred to in point (a) of the first subparagraph of Article 30(4) of that regulation, that is to say, whether it affects the nature or implementation conditions of the operation concerned or gives an undue advantage to a firm or public body, those being cases which relate to the effects of that modification (judgment of 14 November 2013, Comune di Ancona, C‑388/12, EU:C:2013:734, paragraph 22).

46 The third step, once the conditions laid down in points (a) and (b) of the first subparagraph of Article 30(4) of Regulation No 1260/1999 have been examined, is to assess whether the modification at issue is substantial (judgment of 14 November 2013, Comune di Ancona, C‑388/12, EU:C:2013:734, paragraph 23).

47 In the present case, since it is not disputed that the co-financed investment operation at issue in the main proceedings falls within the scope of Article 30 of Regulation No 1260/1999, it is for the referring court to ascertain, first, whether the modification concerned satisfies the conditions laid down in point (b) of the first subparagraph of Article 30(4).

48 In that regard, it is not apparent from the request for a preliminary ruling that there has been a cessation or change of location of a productive activity. On the contrary, it appears that, after its transfer, the hotel which was the subject of that transaction continued to be used for the same activity as that specified in the application for funding.

49 As regards the question whether there has been a change in the nature of ownership in an item of infrastructure, it should be noted that the recipient of the funding at issue transferred ownership of that hotel as infrastructure within the meaning of point (b) of the first subparagraph of Article 30(4) of Regulation No 1260/1999, to a company owned by one of its shareholders.

50 In that regard, the fact that the ownership of such an item of infrastructure has undergone a change does not mean that it can automatically be considered that that change affects the very nature of the ownership of that item of infrastructure. It will therefore be for the referring court to ascertain, on the basis of a detailed examination, whether or not, despite the transfer of ownership, the nature of that transfer has been modified. That might not be the case, in view of the wording of the second question referred for a preliminary ruling, of an internal transfer agreement to a company under which the transferor and the transferee are jointly and severally liable for the debts and obligations existing at the time of the transfer.

51 Should the referring court conclude that the condition referred to in point (b) of the first subparagraph of Article 30(4) of Regulation No 1260/1999 is satisfied in the dispute in the main proceedings, it will be for that court, second, in the context of determining whether the modification in question falls within one of the scenarios set out in point (a) of the first subparagraph of Article 30(4) of that regulation, in so far as it affects the nature or implementation conditions of the investment operation in question or in so far as it gives undue advantage to a firm or a public body, to examine the effects of that modification.

52 First, as regards the condition relating to the nature and implementation conditions of the investment operation in question, account must be taken of the objective of the measure in the context of which that operation was financed (judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 54), namely financial support for SMEs in the Region of Western Macedonia in the tourism sector. Such an objective is one of the priority and more general objectives of the Structural Funds and the more specific objectives of the ERDF.

53 As is apparent from recital 4 of Regulation No 1260/1999, the provision of Structural Funds is to meet priority objectives, namely the development and structural adjustment of regions whose development is lagging behind, economic and social conversion of areas facing structural difficulties and adapting and modernising policies and systems of education, training and employment. In addition, according to recital 6 of that regulation, ‘the development of tourism [contributes] to making regions more economically and socially more attractive in so far as [it encourages] the creation of sustainable employment’.

54 In particular, recital 7 of that regulation states that the ERDF is the primary contributor to attaining the objective of promoting the development and structural adjustment of the regions whose development is lagging behind and economic and social conversion of areas facing structural difficulties.

55 In so far as, provided that the Region of Western Macedonia can be classified as a region whose development is lagging behind or as an area facing structural difficulty, which it is for the referring court to ascertain, the funding at issue in the main proceedings formed part of an objective of developing the Region of Western Macedonia, providing financial support for SMEs in that region and developing the tourism sector, the fact that the entity in charge of that project, namely the applicant in the main proceedings, was replaced by a transferee company, namely Gousios Vaios – Monoprosopi EPE, does not in itself imply that that objective has not been achieved and, therefore, that a modification of the nature or implementation conditions of the co-financed investment operation at issue in the main proceedings has taken place (see, by analogy, judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 56).

56 Thus, it cannot be inferred from the mere fact that the establishment which is the subject of that transaction was transferred that there was a modification in the nature or implementation conditions of that operation within the meaning of point (a) of the first subparagraph of Article 30(4) of Regulation No 1260/1999 (see, by analogy, judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 57).

57 It is therefore for the referring court to ascertain whether the transfer at issue in the main proceedings led to a modification in the nature or implementation conditions of the operation co-financed by the ERDF in the light of the objective pursued by the funding, as noted in paragraph 52 of the present judgment.

58 Second, as regards the other condition laid down by way of alternative in point (a) of the first subparagraph of Article 30(4) of Regulation No 1260/1999, it should be noted that that condition means that it must be ascertained whether the modification of the operation concerned gives undue advantage to a firm or a public body.

59 In a case such as that at issue in the main proceedings, it follows from that condition that the durability of a co-financed investment operation requires that no undue advantage has been conferred on either the transferor or the transferee. The creation of such an advantage, either for the owner who transferred the business in question or for the transferee company, would amount to a substantial modification to the operation in question within the meaning of that provision (see, by analogy, judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 59).

60 Nevertheless, even where prima facie evidence shows that there has been undue advantage, the beneficiary of the funding must be given the possibility of showing that the transfer of the establishment by means of the subsidised operation in question did not give the beneficiary itself or that company any advantage (see, by analogy, judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 60).

61 The Court has held that, where a competent national authority is called upon to investigate whether undue advantage was given to a firm or public body, that authority must necessarily determine what the undue advantage specifically is (see, by analogy, judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 66).

62 In the present case, it is for the referring court to take into account, where appropriate, the specific and actual effects of the transfer, the effect of that transfer on the funding at issue, the existence and nature of the consideration fixed for the transfer of the hotel concerned and all the relevant factors for assessing whether that transfer conferred an advantage on the transferor and/or the transferee. In that context, factors to be taken into account include the fact that the transferor and the transferee are, under Greek law, jointly and severally liable for the debts and obligations existing at the time of that transfer.

63 Moreover, as regards the beneficiary of the funding, the existence and significance of such an advantage must be assessed against any difference between the advantages, pecuniary or other, that that beneficiary was to derive from the operation as initially envisaged and those which it did derive from it following the transfer of the establishment which is the subject of that operation (see, by analogy, judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 61).

64 As for the transferee company, it should be noted that that transfer may confer an undue advantage on it where it receives, without its being objectively explained by the circumstances of the case, income greater than that which the recipient of the funding received up to the date of the transfer. An undue advantage may also be found where the consideration which the transferee company has paid in respect of the transfer has not been determined in accordance with market conditions (see, by analogy, judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 62).

65 Third, should the referring court find that the two cumulative conditions referred to in paragraph 43 of the present judgment are satisfied, it will be for that court to ascertain whether the modification at issue is ‘substantial’ within the meaning of the first subparagraph of Article 30(4) of Regulation No 1260/1999, that is to say, if it is fairly significant (judgment of 14 November 2013, Comune di Ancona, C‑388/12, EU:C:2013:734, paragraph 35).

66 As regards, first of all, the question whether a change in the nature of ownership of an item of infrastructure within the meaning of point (b) of the first subparagraph of Article 30(4) of Regulation No 1260/1999 is that significant, it must be held that, in the case of a transfer such as that at issue in the main proceedings, there can be no question of there being a substantial modification if the transferee, as the new owner of the infrastructure concerned, remains obligated, under the provisions of the transfer agreement or applicable statutory provisions, to continue to operate that infrastructure in accordance with, first, the terms and conditions attached to the funding in question and, second, the objective pursued at the time it is granted and if, moreover, it is apparent from a detailed examination that the change in the nature of ownership of that infrastructure was not objectively made with the aim of circumventing the rules relating to the contribution of the Funds, which it is for the referring court to ascertain.

67 As regards, next, the question whether a change affecting the nature or implementation conditions of the operation concerned within the meaning of point (a) of the first subparagraph of Article 30(4) of that regulation is significant, it should be noted that, according to recital 41 of that regulation, assistance from one of the Structural Funds should remain attached to an operation only where its nature or its implementation conditions do not undergo a substantial modification which would result in diverting the assisted operation from its original objectives. Consequently, where a modification satisfies the condition laid down in point (a) of the first subparagraph of Article 30(4) of Regulation No 1260/1999, in that it affects the nature or implementation conditions of an operation, that modification may be classified as a ‘substantial modification’ for the purposes of Article 30(4) of that regulation only if it significantly reduces the ability of the operation at issue to attain its designated objective (judgment of 14 November 2013, Comune di Ancona, C‑388/12, EU:C:2013:734, paragraphs 36 and 37).

68 Therefore, in the context of the examination which it is for the national court to carry out in that regard, it must be ascertained whether the transferee company concerned may be classified as an SME. Whilst it is true that the material in the file, in particular the fact that it is a single-member limited liability company, contains evidence in that regard, it is important to ensure that the funding concerned contributes, inter alia, to the attainment of the objective of financial support to SMEs.

69 If, following such an examination, it transpires that that company cannot be classified as an SME and that the ability of the operation concerned to achieve that objective is reduced, or even rendered non-existent, the referring court may find that there has been a substantial modification affecting the nature or implementation conditions of that operation.

70 As regards, lastly, the question whether a modification giving undue advantage to a firm or public body within the meaning of point (a) of the first subparagraph of Article 30(4) of Regulation No 1260/1999 is substantial, it must be clarified, as observed in paragraph 65 of the present judgment, that, in order to come within the scope of Article 30(4) of Regulation No 1260/1999, the modification giving rise to the undue advantage in question must be of a certain significance, which rules out undue advantages the size or amount of which are minimal or insignificant.

71 It follows that it will be for the referring court to assess, in the light of all the relevant circumstances and taking into account the factors set out in paragraphs 47 to 70 of the present judgment, whether the transfer of the establishment which is the subject of the co-financed investment operation at issue in the main proceedings constitutes a ‘substantial modification’ within the meaning of Article 30(4) of Regulation No 1260/1999.

The requirements stemming from the principle of durability laid down in Article 30(4) of Regulation No 1260/1999

72 Under Article 30(3) of Regulation No 1260/1999, the relevant national rules are to apply to eligible expenditure, except where, as necessary, the Commission lays down, within the framework of detailed rules for the application of Article 30 adopted by it, common rules on the eligibility of expenditure.

73 Furthermore, in accordance with Article 12 of Regulation No 1260/1999, operations financed by the Structural Funds must be in conformity with the FEU Treaty and with instruments adopted thereunder.

74 By laying down exclusively, in Article 30(4) thereof, the conditions relating to the durability of co-financed operations, Regulation No 1260/1999 clearly removed that question from national law (see, by analogy, judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 79).

75 In the present case, under Article 18(5) of the Joint Ministerial Order, where financial aid is granted for an investment, the beneficiary of that aid is required to refrain from any transfer of the fixed assets of the subsidised undertaking for a period of five years from the adoption of the completion decision for that investment. It follows that, in the event of a transfer, by the beneficiary of such aid, of an establishment which is the subject of a co-financed investment operation, effected during the five years following the adoption of the completion decision for that investment, a financial correction is systematically made.

76 It is clear that such national legislation is incompatible with Article 30(4) of Regulation No 1260/1999, as interpreted by the Court.

77 Contrary to what is stated in paragraph 60 of the present judgment, that national legislation does not allow the beneficiary of funding to demonstrate, in the event of transfer of an establishment which is the subject of a co-financed investment operation, that either or even both of the two conditions referred to in points (a) and (b) of the first subparagraph of Article 30(4) are not satisfied or that the modification of the operation at issue is not sufficiently significant to be classified as ‘substantial’ within the meaning of that provision.

78 Furthermore, as regards the period during which, in a case such as that at issue in the main proceedings, the durability of an operation is required, it must be borne in mind that, in accordance with the first subparagraph of Article 30(4) of Regulation No 1260/1999, an operation retains the contribution from the Structural Funds if it does not undergo a substantial modification within five years of the decision by the competent national authority or the managing authority on the contribution of the Funds. Usually, that period is shorter than that provided for by national legislation requiring the beneficiary of funding to refrain from any transfer of the fixed assets of the subsidised undertaking during a period of five years from the adoption of the completion decision for the investment concerned (see, by analogy, judgment of 8 May 2019, Järvelaev, C‑580/17, EU:C:2019:391, paragraph 81).

79 It follows that Article 30(4) of Regulation No 1260/1999 precludes national legislation which obliges the beneficiary of funding paid in respect of such an investment operation not to transfer, without exception, for a period of five years from the adoption of the completion decision for the investment in question, an establishment which is the subject of that operation, failing which a financial correction will be imposed.

80 That conclusion is not invalidated by Article 38 and Article 39(1) of Regulation No 1260/1999, by Rule No 1, point 1.10 of the Annex to Regulation No 1685/2000, by Article 4(3) of Regulation No 70/2001 or by Article 4 of Regulation No 438/2001.

81 First, under Article 38(1)(e) and (h) of Regulation No 1260/1999, the Member State concerned must examine whether a modification which falls outside the scope of Article 30(4) of that regulation and which, therefore, is not to be assessed in the light of the latter provision does not constitute an irregularity within the meaning of Articles 38 and 39 of that regulation, in respect of which it is necessary, subsequently, to make the necessary financial corrections (see, to that effect, judgment of 3 September 2014, Baltlanta, C‑410/13, EU:C:2014:2134, paragraph 47 and the case-law cited. Accordingly, Articles 38 and 39 do not, in principle, apply to a situation covered by the first subparagraph of Article 30(4), characterised by the absence of a ‘substantial modification’ of the operation concerned.

82 Second, Rule No 1, point 1.10 of the Annex to Regulation No 1685/2000 merely allowed Member States to apply stricter national rules to determine the amount of eligible expenditure, without, however, authorising them to depart from the durability requirements laid down in Article 30(4) of Regulation No 1260/1999.

83 Third, under Article 4(3) of Regulation No 70/2001, in order to benefit from higher regional aid ceilings and continue to be exempted from the notification requirement, the investment concerned must be maintained in the beneficiary’s region for at least five years. It is clear that that provision cannot be applied to the dispute in the main proceedings and that, in any event, it does not prevent the transfer of the fixed assets of the subsidised undertaking to another undertaking, provided that the investment concerned is maintained in the region of the beneficiary of the funding at issue.

84 Fourth, it should be noted that Article 4 of Regulation No 438/2001, under which Member States may adopt procedures to check, inter alia, the veracity of the expenditure claimed by way of assistance from the Structural Funds concerned, does not allow Member States to introduce new conditions as regards the rules relating to the durability of operations.

85 In the light of the foregoing, the answer to the second and third questions referred is that Article 30(4) of Regulation No 1260/1999 must be interpreted as:

– meaning that the transfer of an establishment which is the subject of an investment operation co-financed by the European Union Structural Funds is capable of constituting a ‘substantial modification’ of that operation within the meaning of that provision, which it is for the referring court to ascertain, taking into account all the matters of fact and law at issue, in the light of the conditions laid down in that provision;

– precluding national legislation which obliges the beneficiary of funding paid in respect of an investment operation co-financed by the European Union Structural Funds not to transfer, without exception, for a period of five years from the adoption of the completion decision for the investment in question, an establishment which is the subject of that operation, failing which a financial correction will be imposed accompanied by total or partial recovery of that funding.

86 As a preliminary point, it should be noted that, by its first and second questions, the referring court asks the Court, inter alia, about the interpretation of Article 38(1)(h) of Regulation No 1260/1999, Article 2(2) of Regulation No 448/2001, Article 4 of Regulation No 2988/95, Article 14 of Regulation No 659/1999 and the principle of legal certainty but, contrary to Article 94(c) of the Rules of Procedure, does not set out with the requisite clarity the reasons which led it to question the interpretation of those provisions and that principle or the link it establishes between them and the national legislation applicable to the dispute in the main proceedings, with the result that there is no need to interpret those provisions and that principle.

87 In those circumstances, it must be held that, by that question, that court asks, in essence, whether Article 30(4) and Article 39(1) of Regulation No 1260/1999, read in conjunction with Articles 17 and Article 52(1) of the Charter, must be interpreted as meaning that the financial corrections provided for in Article 39(1) must not be made where the transfer of an establishment which is the subject of an investment operation co-financed by the European Union Structural Funds constitutes a substantial modification of that operation within the meaning of Article 30(4). That court also wishes to know what degree of protection is ensured by the right to property recognised under Article 17 of the Charter, read in conjunction with Article 52(2) and (3), and Article 53 of the Charter, as well as Article 1 of the First Additional Protocol to the ECHR.

88 Under the second subparagraph of Article 30(4) of Regulation No 1260/1999, Member States are to inform the Commission of any substantial modification of a co-financed operation within the meaning of the first subparagraph of Article 30(4), since such an amendment entails the application of Article 39 of that regulation.

89 Under Article 39(1), read in conjunction with the second subparagraph of Article 30(4), it is for the Member States to investigate irregularities and to act upon evidence of such a substantial modification and to make the financial corrections provided for in Article 39(1).

90 It follows that, where they find that there has been a substantial modification within the meaning of the first subparagraph of Article 30(4) of Regulation No 1260/1999 of an operation co-financed within the period indicated in that provision, under Article 39(1) of that regulation, the Member States are required, by way of financial correction, to cancel the Community contribution in whole or in part and thus, where appropriate, recover in whole or in part the funding granted.

91 As regards the beneficiary, its obligation to repay that funding cannot be treated in the same way as an infringement of the right to property, recognised in Article 17 of the Charter.

92 It follows unambiguously from Article 30(4) and Article 39(1) of Regulation No 1260/1999 that such repayment takes place in the event of a substantial modification of a subsidised operation, resulting from failure to comply with the durability requirement of that operation, which constitutes a condition for its eligibility.

93 Consequently, a beneficiary who is obliged to repay funding granted to it, as a mere consequence of the failure to comply with the eligibility conditions of the subsidised operation at issue, cannot rely on the protection conferred by Article 17 of the Charter (see by analogy, judgment of 26 May 2016, Ezernieki, C‑273/15, EU:C:2016:364, paragraph 49).

94 Given that, in the present case, there is no question of a limitation on the exercise of the right to property recognised in Article 17 of the Charter, there is no need to analyse such an obligation or its scope in the light of Articles 52 and 53 of the Charter and Article 1 of the First Additional Protocol to the ECHR.

95 In those circumstances, the answer to the third question is that Article 30(4) and Article 39(1) of Regulation No 1260/1999, read in conjunction with Article 17 of the Charter, must be interpreted as meaning that the financial corrections provided for in Article 39(1) must be made where the transfer of an establishment which is the subject of an investment operation co-financed by the European Union Structural Funds constitutes a substantial modification of that operation within the meaning of Article 30(4).

96 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

1. Article 30(4) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds

must be interpreted as meaning that the financial corrections provided for in Article 39(1) must be made where the transfer of an establishment which is the subject of an investment operation co-financed by the European Union Structural Funds constitutes a substantial modification of that operation within the meaning of Article 30(4).

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> ACHILLEION (Structural Funds – European Regional Development Fund (ERDF) - Durability of investment operations - Judgment) [2023] EUECJ C-313/22 (13 July 2023) URL: http://www.bailii.org/eu/cases/EUECJ/2023/C31322.html Cite as: EU:C:2023:574, ECLI:EU:C:2023:574, [2023] EUECJ C-313/22

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