Provisional text
JUDGMENT OF THE COURT (Seventh Chamber)
9 July 2026 (*)
( Reference for a preliminary ruling – Own resources of the European Union – Protection of the European Union’s financial interests – Regulation (EC, Euratom) No 2988/95 – European Regional Development Fund (ERDF) – Regulation (EU) No 1303/2013 – European Neighbourhood Instrument (ENI) – Regulation (EU) No 232/2014 – Implementing Regulation (EU) No 897/2014 – Cross-border Cooperation Programme for the Black Sea Region – Public procurement – Directive 2014/24/EU – Direct award – Concept of ‘irregularity’ – Late performance of the service – Failure to implement a penalty clause – Financial corrections – Proportionality – Reasons for the decision imposing the financial correction )
In Case C‑186/25,
REQUEST for a preliminary ruling under Article 267 TFEU from the Administrativen sad – Varna (Administrative Court, Varna, Bulgaria), made by decision of 26 February 2025, received at the Court on 7 March 2025, in the proceedings
Institut po ribni resursi Varna
v
Rakovoditel na Natsionalnia organ po Savmestna operativna programa za transgranichno satrudnichestvo ‘Chernomorski baseyn 2014-2020’ i direktor na direktsia ‘Upravlenie na teritorialnoto satrudnichestvo’,
THE COURT (Seventh Chamber),
composed of F. Schalin, President of the Chamber, M. Gavalec (Rapporteur) and Z. Csehi, Judges,
Advocate General: T. Ćapeta,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after considering the observations submitted on behalf of:
– the Bulgarian Government, by T. Mitova and R. Stoyanov, acting as Agents,
– the European Commission, by J. Aquilina, D. Drambozova and C. Ehrbar, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
1 This request for a preliminary ruling concerns the interpretation of Article 2(m), Article 31(3), Articles 52 to 56 and 74 of Commission Implementing Regulation (EU) No 897/2014 of 18 August 2014 laying down specific provisions for the implementation of cross-border cooperation programmes financed under Regulation (EU) No 232/2014 of the European Parliament and the Council establishing a European Neighbourhood Instrument (OJ 2014 L 244, p. 12), of point 36 of Article 2 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ 2013 L 347, p. 320, and corrigendum OJ 2016 L 200, p. 140), of Article 33, Article 36(1), Article 61 and Article 63(2) of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ 2018 L 193, p. 1), of Article 2(2) and (3) 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) and Article 41 of the Charter of Fundamental Rights of the European Union (‘the Charter’).
2 The request has been made in proceedings between the Director of the Institut po ribni resursi Varna (Institute of Fishery Resources, Varna; ‘the Institute’ or ‘the beneficiary’) and the Rakovoditel na Natsionalnia organ po Savmestna Operativna programa za transgranichno satrudnichestvo ‘Chernomorski baseyn 2014-2020’ i direktor na direktsia ‘Upravlenie na teritorialnoto satrudnichestvo’ (Head of the National Authority responsible for the ‘Black Sea Basin 2014-2020’ Joint Operational Programme for Cross-Border Cooperation and director of the Directorate ‘Management of Territorial Cooperation’; ‘the national authority’), concerning a decision by which that authority imposed financial corrections owing to, first, a lack of transparency in a public procurement procedure and, second, the late performance of a contract in the context of implementing a project funded by the Joint Operational Programme for Cross-Border Cooperation ‘Black Sea Basin 2014–2020’.
Legal context
European Union law
Regulation No 2988/95
3 Article 2 of Regulation No 2988/95 provides as follows:
‘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.
2. No administrative penalty may be imposed unless a Community act prior to the irregularity has made provision for it. In the event of a subsequent amendment of the provisions which impose administrative penalties and are contained in Community rules, the less severe provisions shall apply retroactively.
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.’
4 Article 4(1), (2) and (4) of that regulation provides:
‘1. As a general rule, any irregularity shall involve withdrawal of the wrongly obtained advantage:
– by an obligation to pay or repay the amounts due or wrongly received,
– by the total or partial loss of the security provided in support of the request for an advantage granted or at the time of the receipt of an advance.
2. Application of the measures referred to in paragraph 1 shall be limited to the withdrawal of the advantage obtained plus, where so provided for, interest which may be determined on a flat-rate basis.
…
4. The measures provided for in this Article shall not be regarded as penalties.’
5 Article 5(1) of the regulation provides as follows:
‘Intentional irregularities or those caused by negligence may lead to the following administrative penalties:
…’
Regulation No 1303/2013
6 Article 2 of Directive 1303/2013, headed ‘Definitions’, provides:
‘For the purposes of this Regulation, the following definitions apply;
…
(36) “irregularity” means any breach of Union law, or of national law relating to its application, resulting from an act or omission by an economic operator involved in the implementation of the [European Structural and Investment Funds (ESI Funds)], which has, or would have, the effect of prejudicing the budget of the Union by charging an unjustified item of expenditure to the budget of the Union.’
Regulation (EU) No 232/2014
7 Regulation (EU) No 232/2014 of the European Parliament and of the Council of 11 March 2014 establishing a European Neighbourhood Instrument (OJ 2014 L 77, p. 27) stated, in recitals 9 and 14:
‘(9) Furthermore, it is important to foster and facilitate cooperation between the [European] Union and its partners and other participating countries for their common benefit, in particular through the best and most effective coordination of resources provided and the pooling of contributions from internal and external instruments of the Union budget, in particular for the benefit of cross-border cooperation and regional cooperation projects, infrastructure projects of Union interest involving neighbouring countries, and other areas of cooperation.
…
(14) The Union should seek the most efficient use of available resources in order to optimise the impact of its external action. That should be achieved through coherence and complementarity between the Union's instruments for external action, as well as the creation of synergies between the [European Neighbourhood Instrument (“the ENI”)], other Union instruments for financing external action and other policies of the Union. This should further entail mutual reinforcement of the programmes devised under the instruments for financing external action.’
8 Article 7 of that regulation, entitled ‘Programming and indicative allocation of funds for country and multi-country indicative programmes’, provided, in paragraph 7:
‘When it is necessary to implement more effectively measures for the common benefit of the Union and partner countries, in areas such as transnational cooperation and interconnections, funding under this Regulation can be pooled together with funding under other relevant Union regulations. In that event, the [European] Commission shall decide which single set of rules is to apply to implementation.’
9 Article 9 of that regulation, entitled ‘Programming and allocation of funds for cross-border cooperation’, provided, in paragraph 2:
‘Joint operational programmes shall be co-financed by the [European Regional Development Fund (“the ERDF”)]. The overall amount of the contribution from the ERDF shall be determined pursuant to Article 4(4) of Regulation (EU) No 1299/2013 [of the European Parliament and of the Council of 17 December 2013 on specific provisions for the support from the European Regional Development Fund to the European territorial cooperation goal (OJ 2013 L 347, p. 259)]. This Regulation shall apply to the use of that contribution.’
Regulation (EU) No 236/2014
10 Recital 8 of Regulation (EU) No 236/2014 of the European Parliament and of the Council of 11 March 2014 laying down common rules and procedures for the implementation of the Union's instruments for financing external action (OJ 2014 L 77, p. 95) stated:
‘The Union should seek the most efficient use of available resources in order to optimise the impact of its external action. That should be achieved through coherence and complementarity between the Union's instruments for external action, as well as the creation of synergies between the Instruments and other policies of the Union. This should further entail mutual reinforcement of the programmes devised under the Instruments, and, where appropriate, the use of financial instruments that have a leverage effect.’
Implementing Regulation No 897/2014
11 Recital 12 of Implementing Regulation No 897/2014 states:
‘Since programmes are usually to be implemented through shared management, management and control systems should be in line with Union rules, in particular Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council [of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ 2012 L 298, p. 1)] and Commission Delegated Regulation (EU) No 1268/2012 [of 29 October 2012 on the rules of application of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union (OJ 2012 L 362, p. 1)], as well as with [Regulation] No 2988/95. The Commission should ensure that Union funds are used in accordance with the applicable rules during the implementation of the programmes.’
12 Article 2 of the same implementing regulation, entitled ‘Definitions’, provides:
‘For the purposes of this Regulation[,] the following definitions apply:
…
(m) “irregularities” means any infringement of a financing agreement, a contract or of applicable law resulting from an act or omission by an economic operator involved in the implementation of the programme, which has, or would have, the effect of prejudicing the budget of the Union by charging an unjustified item of expenditure to the budget of the Union’.
13 Article 31 of that implementing regulation, entitled ‘National authorities and responsibilities of participating countries’, provides, in paragraphs 1 and 3:
‘1. The national authority which has been appointed pursuant to point (a) of Article 20(6) shall inter alia:
(a) be responsible for the set up and effective functioning of management and control systems at national level;
…
3. Participating countries shall prevent, detect and correct irregularities, including fraud and the recovery of amounts unduly paid, together with any interest pursuant [to] Article 74 on their territories. They shall notify these irregularities without delay to the Managing Authority and the Commission and keep them informed of the progress of related administrative and legal proceedings.’
14 Title VII of that implementing regulation contains Chapter 4 in which Section 1, entitled ‘Procurement’, includes Article 52, entitled ‘Applicable rules’, which provides:
‘1. If the implementation of a project requires procurement of goods, works or services by a beneficiary, the following rules shall apply:
(a) where the beneficiary is a contracting authority or a contracting entity within the meaning of the Union legislation applicable to procurement procedures, it may apply national laws, regulations and administrative provisions adopted in connection with Union legislation or rules of paragraph 2;
…
2. In all other cases the following obligations shall be complied with:
(a) the contract is awarded to the tender offering best value for money, or as appropriate, to the tender offering the lowest price, while avoiding any conflict of interests;
(b) for contracts with a value of more than EUR 60 000, the following rules shall also apply:
…
3. In all cases, the rules of nationality and origin set forth in Articles 8 and 9 of Regulation … No 236/2014 shall apply.’
15 Article 71 of Implementing Regulation No 897/2014, entitled ‘Financial corrections by the Managing Authority’, provides, in paragraph 1:
‘The Managing Authority shall in the first instance be responsible for preventing and investigating irregularities and for making the financial corrections required and pursuing recoveries. In the case of a systemic irregularity, the Managing Authority shall extend its investigation to cover all operations potentially affected.
The Managing Authority shall make the financial corrections required in connection with individual or systemic irregularities detected in projects, technical assistance or in the programme. Financial corrections shall consist of cancelling all or part of the Union contribution to a project or to technical assistance. The Managing Authority shall take into account the nature and gravity of the irregularities and the financial loss and shall apply a proportionate financial correction. Financial corrections shall be recorded in the annual accounts by the Managing Authority for the accounting year in which the cancellation is decided.’
16 Article 74 of that implementing regulation, entitled ‘Financial responsibilities and Recoveries’, is worded as follows, in paragraph 1:
‘The Managing Authority shall be responsible for pursuing the recovery of amounts unduly paid.’
Directive 2014/24/EU
17 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ 2014 L 94, p. 65) contains Article 72, entitled ‘Modification of contracts during their term’, which provides, in paragraphs 1, 2 and 4:
‘1. Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Directive in any of the following cases:
(a) where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses, or options. Such clauses shall state the scope and nature of possible modifications or options as well as the conditions under which they may be used. They shall not provide for modifications or options that would alter the overall nature of the contract or the framework agreement;
(b) for additional works, services or supplies by the original contractor that have become necessary and that were not included in the initial procurement where a change of contractor:
…
(c) where all of the following conditions are fulfilled:
…
(ii) the modification does not alter the overall nature of the contract;
(iii) any increase in price is not higher than 50% of the value of the original contract or framework agreement. …
…
2. Furthermore, and without any need to verify whether the conditions set out under points (a) to (d) of paragraph 4 are met, contracts may equally be modified without a new procurement procedure in accordance with this Directive being necessary where the value of the modification is below both of the following values:
(i) the thresholds set out in Article 4; and
(ii) 10% of the initial contract value for service and supply contracts and below 15% of the initial contract value for works contracts.
However, the modification may not alter the overall nature of the contract or framework agreement. …
4. A modification of a contract or a framework agreement during its term shall be considered to be substantial within the meaning of point (e) of paragraph 1, where it renders the contract or the framework agreement materially different in character from the one initially concluded. In any event, without prejudice to paragraphs 1 and 2, a modification shall be considered to be substantial where one or more of the following conditions is met:
(a) the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates than those initially selected or for the acceptance of a tender other than that originally accepted or would have attracted additional participants in the procurement procedure;
(b) the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement;
…’
Regulation 2018/1046
18 Article 33 of Regulation 2018/1046, entitled ‘Performance and principles of economy, efficiency and effectiveness’, provided, in paragraph 1:
‘Appropriations shall be used in accordance with the principle of sound financial management, and thus be implemented respecting the following principles:
(a) the principle of economy which requires that the resources used by the [EU] institution concerned in the pursuit of its activities shall be made available in due time, in appropriate quantity and quality, and at the best price;
(b) the principle of efficiency which concerns the best relationship between the resources employed, the activities undertaken and the achievement of objectives;
(c) the principle of effectiveness which concerns the extent to which the objectives pursued are achieved through the activities undertaken.’
19 Article 36 of that regulation, entitled ‘Internal control of budget implementation’, provided, in paragraph 1:
‘Pursuant to the principle of sound financial management, the budget shall be implemented in compliance with the effective and efficient internal control appropriate to each method of implementation, and in accordance with the relevant sector-specific rules.’
20 Article 63 of that regulation, entitled ‘Shared management with Member States’, provided, in paragraph 2:
‘When executing tasks relating to budget implementation, Member States shall take all the necessary measures, including legislative, regulatory and administrative measures, to protect the financial interests of the Union, namely by:
…
(c) preventing, detecting and correcting irregularities and fraud;
…
Member States shall impose effective, dissuasive and proportionate penalties on recipients where provided for in sector-specific rules or in specific provisions in national law.
…’
Bulgarian law
The ZUSEFSU
21 Article 70 of the Zakon za upravlenie na sredstvata ot evropeyskite fondove pri spodeleno upravlenie (Law on the management of the resources of European funds under shared management, DV No 101 of 22 December 2015), in the version applicable to the dispute in the main proceedings (‘the ZUSEFSU’), provides, in paragraph 1:
‘Financial support from the [European funds under shared management] may be cancelled in whole or in part by effecting a financial correction for the following reasons:
…
3. for breach of the principles of sound financial management, in accordance with the requirements of Article 33, Article 36(1) and Article 61 of [Regulation 2018/1046];
…
5. no audit trail and/or analytical recording of expenditure is available for the project or part of it in the accounting system maintained by the beneficiary;
…
9. by reason of an irregularity constituting a breach of the rules for selecting a successful tenderer under Chapter 4, resulting from an act or omission on the part of the beneficiary, which has or would have the effect of prejudicing European funds under shared management.’
22 Article 73 of the ZUSEFSU provides:
‘(1) The basis for and amount of the financial correction shall be determined by a reasoned decision of the head of the managing authority which approved the project.’
(2) Before adopting the decision referred to in paragraph 1, the management authority must ensure that the beneficiary has the opportunity to submit, within a reasonable period of time that may not be less than two weeks, its written objections regarding the basis for and amount of the financial correction and, as the case may be, to include evidence with that submission.’
(3) The decision referred to in paragraph 1 shall be adopted within one month of the submission of the objections referred to in paragraph 2; it shall state the reasons on which it is based and shall examine the evidence submitted and the objections raised by the beneficiary.’
The ZOP
23 Article 121 of the Zakon za obshtestveni porachki (Law on public procurement) (DV No 13 of 16 February 2016), in the version applicable to the facts in the main proceedings (‘the ZOP’), provides:
‘(1) … Contracting authorities shall keep a file for each public procurement contract in order to ensure documentary traceability (audit trail) of all their actions and decisions, as well as of the actions of public procurement committees, irrespective of whether contracts are awarded electronically.
(2) … the file shall contain all decisions, notices, documentation and other additional documents, explanations, invitations, minutes, final reports of the [procurement] committee, tenders or requests to participate, proof of the measures taken in accordance with Article 44(3) to (5), a description of the reasons why, in the context of electronic submission, means of submission of documents other than electronic means are used. Where a review has been carried out by the Agentsia po obshtestvenite porachki [(Public Procurement Agency)], the opinion of the agency and the reasons given by the contracting entity for not having followed the recommendations shall be attached and, in the cases referred to in Articles 237a and 237b, the reports on the work of the observers and the prior review of legality. The file shall contain the contract or framework agreement and all documents relating to their performance and reporting.
(3) Contracting authorities shall preserve information relating to contracts when applying exceptions to the law.’
24 The ZOP contains supplementary provisions, including paragraph 3, which provides:
Ԥ 3. The present law transposes the requirements of:
1. Directive [2014/24];
…’
25 The Naredba za posochvane na nerednosti, predstavlyavashti osnovaniya za izvarshvane na finansovi korektsii, i protsentnite pokazateli za opredelyane razmera na finansovite korektsii po reda na Zakona za upravlenie na sredstva ot evropeyskite fondove pri spodeleno upravlenie (Decree on the identification of irregularities justifying the application of financial corrections and the percentages applicable in order to determine the amount of the financial corrections in the context of the Law on the management of European funds under shared management) (DV No 27 of 31 March 2017), in the version applicable to the facts in the main proceedings (‘the Naredba’), provides, in Article 1:
‘This decree states:
1. cases of irregularity constituting infringements of the rules for the selection of a contractor under Chapter IV of [the ZUSEFSU], resulting from an act or omission on the part of the beneficiary, which have or would have the effect of prejudicing the resources of [European funds under shared management] and which constitute grounds for a financial correction under Article 70(1)(9) of the ZUSEFSU;
2. the minimum and maximum percentage rates of financial correction fixed for irregularities under Article 70(1)(1), (3) to (7) and (9) of the ZUSEFSU.
…’
26 Article 2 of the Naredba provides:
‘(1) The irregularities under Article 70(1)(9) of the ZUSEFSU and the percentages of financial corrections applicable to those irregularities are set out in Annex No 1.
…
(3) The percentages of financial corrections applicable to irregularities under Article 70(1)(1), (3) to (7) of the ZUSEFSU are set out in Annex No 2.
(4) The differential method shall be used to determine the amount of financial corrections for irregularities under Article 70(1)(2), (8) and (10) of the ZUSEFSU.’
27 The Naredba contains supplementary provisions which are worded, inter alia, as follows:
Ԥ 1. The Naredba also applies to:
…
2. European territorial cooperation programmes in which the Republic of Bulgaria participates for the period 2014-2020 (…, cooperation programme INTERREG V-A Romania – Bulgaria, …, joint operational programme for cross-border cooperation under the European Neighbourhood Instrument “Black Sea Basin 2014-2020”).’
28 Annex No 1 to the Naredba, to which Article 2(1) thereof refers, contains a table which provides, in point 16, that ‘insufficient documentary traceability (audit trail) for the award of a public contract’, described as consisting of ‘the documents required by the ZOP in the procurement file [which] are insufficient to justify the award of the contract, resulting in a lack of transparency’, leads to the application of a correction rate of ‘25%’.
29 Annex No 2 to the Naredba, to which Article 2(3) thereof refers, contains a table, point 2 of which states that ‘breach of the principles of sound financial management in accordance with the requirements of Articles 33, 36(1) and 61 of [Regulation 2018/1046]’ leads to the application of a correction rate of ‘100%’ and that, ‘in accordance with the principle of proportionality, a financial correction may be reduced to 25, 10 or 5% where the nature and gravity of the individual or systemic infringement does not justify a higher amount’.
The dispute in the main proceedings and the questions referred for a preliminary ruling
30 The ‘Black Sea Basin 2014-2020’ Joint Operational Programme for Cross-Border Cooperation receives funding from the ENI, the ERDF and the Instrument for Pre-accession Assistance.
31 That joint operational programme finances the project ‘Promotion of technological innovations in environmental monitoring and modelling for the assessment of fishery and non-fishery resources’ (‘the Timmod project’), the partner of which is the Institute. That institute concluded, first, a co-financing contract with the Romanian Ministry of Development, Public Works and Administration and, second, a co-financing contract, signed on 26 January 2021 with the national authority. Paragraph 1(2) of the additional clauses of the latter contract reproduced the definition of the concept of ‘irregularity’ in Article 2(m) of Implementing Regulation No 897/2014.
32 In carrying out the Timmod project, the Institute awarded a public service contract with a value of approximately 10 500 leva (BGN) excluding VAT (approximately EUR 5 000) (‘the service contract’). That contract was awarded to Mezhdunaroden chernomorski klub EOOD (‘the contractor’). Under Article 2 of the service contract, the contractor undertook to produce and supply a film within the time limits laid down in the contract specifications, that is to say, by 1 May 2022 at the latest. Article 5 of that contract stipulated that a final acceptance report had to be drawn up in order to certify the proper performance of that contract. Article 6 of the service contract provided for a penalty clause with the effect that, in the event of wrongful failure to comply with the obligations arising from that contract, the contractor was required to pay the contracting authority, namely the Institute, a penalty of 0.1% per day of delay, without that penalty exceeding 20% of the value of that contract.
33 Following an administrative review, the national authority identified two irregularities in the award and performance of the contract, which led it to adopt a decision on 5 September 2023 imposing two financial corrections on the Institute (‘the decision at issue’).
34 In the first place, the national authority found that the documentary traceability (audit trail) of the conditions to which the award of the service contract was subject was insufficient (‘the first irregularity’). While the procurement documents required each tenderer to prove its experience by providing a list containing at least one contract performed during the three years preceding the date of submission of the tender which was linked to the production of video films (with an indication of the amounts, dates and recipients of the services performed during the last three years), the national authority pointed out that the contractor had not provided evidence to show that its application complied with those selection requirements. That authority was, accordingly, of the view that the contractor did not meet the minimum requirements set out in the procurement documents, which vitiated the award of the service contract because of a lack of transparency and constituted an infringement of Article 2(1)(2) and (4) and Article 112(1)(2) of the ZOP. According to that authority, the infringement of those provisions constituted an ‘irregularity’ within the meaning of point 16 of Annex No 1 to the Naredba, to which Article 2(1) thereof refers, for which that authority applied, in accordance with that provision, a financial correction of 25% of the expenditure eligible for EU financing.
35 In the second place, the national authority found that the final acceptance report of the video film had been drawn up on 9 May 2022, that is to say, with a delay of eight days in respect of the final date for performance set out in Article 2 of the service contract. In the absence of any information in that report relating to responsibility for that delay, that authority considered that that delay constituted a breach of contract and that the Institute should have implemented the penalty clause provided for in Article 6 of that contract. By having refrained from applying that clause, the Institute thus incurred expenditure which was not consistent with the budget provided for and was in breach of the principle of sound financial management, within the meaning of Article 33(1) of Regulation 2018/1046, which had to be complied with under Article 1(1)(5) of the co-financing contract signed on 26 January 2021 between the Institute and that authority. Accordingly, that authority concluded that that infringement constituted an ‘irregularity’ within the meaning of point 2 of Annex No 2 to the Naredba, to which Article 2(3) thereof refers, read in conjunction with Article 70(1)(3) of the ZUSEFSU (‘the second irregularity’), for which it applied a financial correction, calculated in accordance with the differential method provided for in the service contract and amounting to BGN 84 (approximately EUR 40) on the expenditure eligible for EU financing.
36 The Institute challenges the decision at issue before the Administrativen sad Varna (Administrative Court, Varna, Bulgaria), the referring court. That court has five doubts.
37 First, it questions the legal framework applicable to the dispute before it, asking whether Implementing Regulation No 897/2014, which contains provisions on public procurement, or the ZOP, which is the national legislation on public procurement transposing Directive 2014/24, is applicable, since those two pieces of legislation contain such provisions.
38 Second, the referring court raises the question of the concept of ‘irregularity’, which appears in similar but not identical terms, first, in Article 2(36) of Regulation No 1303/2013 and, second, in Article 2(m) of Implementing Regulation No 897/2014. While the decision at issue refers to the first of those provisions, the referring court considers that it is also conceivable to apply the second of those provisions, referred to in the co-financing contract signed on 26 January 2021 by the Institute with the national authority. Furthermore, it asks whether a delay of eight days in the performance of the service due under the service contract is liable to constitute a ‘breach … of national law’ within the meaning of Article 2(36) of Regulation No 1303/2013, while it is not disputed that the service was indeed provided by the contractor to the Institute, that the Institute forwarded it to the Timmod lead partner in Romania and that the video film produced is used by the programme.
39 Third, the referring court is uncertain whether the national authority has complied with Article 41(2)(c) of the Charter, according to which everyone has the ‘right to good administration’. First of all, it is apparent from the content of the decision at issue that that authority found an irregularity committed by the Institute by merely invoking the infringement of Article 33(1) of Regulation 2018/1046, without setting out more specifically the facts constituting that infringement or explaining why that infringement undermined each of the principles of economy, efficiency and effectiveness set out in that provision and its impact on the EU budget. Next, that authority did not set out why it examined the constituent elements of such an irregularity in the light of the definition of that concept set out in Article 2(36) of Regulation No 1303/2013, not in the light of the definition resulting from Implementing Regulation No 897/2014. Last, that authority also failed to set out the specific considerations on the basis of which it applied the rate of financial correction of 25% used to calculate the ‘penalty’ corresponding to the first irregularity.
40 Fourth, the referring court observes that it is not apparent from Article 2 of Regulation No 2988/95, Regulation No 232/2014, Implementing Regulation No 897/2014 or Regulation 2018/1046 that the EU legislature adopted specific provisions delegating to the Member States the power to set the level of penalties applicable to irregularities found in the implementation of ENI projects. In the absence of such a delegation to the Member States, that court doubts whether a Member State may lay down, in its national legislation, provisions setting the level of penalties that may be imposed on the beneficiaries of such projects.
41 Fifth and lastly, that court has doubts as to the proportionality of the two ‘penalties’ imposed, in the light of the third subparagraph of Article 63(2) of Regulation 2018/1046 and of the judgments of 22 March 2017, Euro-Team and Spirál-Gép (C‑497/15 and C‑498/15, EU:C:2017:229), and of 4 October 2018, Link Logistik N & N (C‑384/17, EU:C:2018:810). More specifically, in order to determine the amount of the penalties, the national court states that the national authority had failed to take due account, first, of the fact that it had not challenged either the performance of the service contract or the delivery of the video film to the Timmod lead partner and, second, of the latter’s lack of comments on defective performance or performance outside the time limits set out in the service contract.
42 In those circumstances, the Administrativen sad Varna (Administrative Court, Varna) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) In the light of recital 12 and Section 1 (“Procurement”) of [Implementing Regulation No 897/2014], is a practice by the national authority, such as that at issue in the main proceedings – whereby the beneficiary is required in the course of the examination to furnish evidence of the contractor’s ability to perform the public contract, in accordance with the national rules, more specifically in accordance with Article 121 of the [Law on the award of public contracts], and the national authority does not apply the procurement provisions of the aforementioned Implementing Regulation – permissible?
(2) Is a practice by the national authority, such as that at issue in the main proceedings – whereby, even though Article 2(m) of Implementing Regulation [No 897/2014], applicable to the “Black Sea Basin 2014-2020” Joint Operational Programme for Cross-Border Cooperation under the [ENI], contains a legal definition of the concept of “irregularity” and that is also referred to in the contract between the contracting authority and the partner as the legislation which defines the concept of “irregularity”, the national authority examines by reference to the legal definition of the concept of “irregularity” in point 36 of Article 2 of Regulation [No 1303/2013] and not by reference to the characteristics of the legal concept of “irregularity” as defined in Article 2(m) of Implementing Regulation [No 897/2014], whether there is an “irregularity” as provided for in the public procurement contract which the contracting authority (the applicant) has concluded for the purposes of implementing the managing authority’s contract with the beneficiary (the contracting authority) – permissible?
If the answer to that question is that such a practice is permissible, how is the concept of “irregularity” within the meaning of … point 36 of Article 2 of Regulation [No 1303/2013] to be interpreted; in particular, is a delay of eight days in the performance of providing the service under the contract for the “production of a video film as part of the Timmod Project” to be regarded as an infringement of national rules in the situation where the beneficiary has handed over the subject matter of the contract, after that was provided to it by the contractor, to the lead partner in … Romania and the product made, the video film, is used in the programme; in other words, does the delay in the performance of the contract between the beneficiary and the contractor constitute an infringement which can be classified as a breach of national law pursuant to point 36 of Article 2 of Regulation [No 1303/2013], and is the expenditure which the beneficiary has incurred in making the contractual payment to the contractor without applying a deduction in the amount of [BGN 84] ( …; BGN 10 500 х 0.1% = BGN 10.5 per day х 8 days = BGN 84) to that payment, therefore, an unjustified item of expenditure in the Union budget?
(3) In the light of Article 41 of the [Charter], is a practice by the national authority, such as that at issue in the main proceedings – whereby, in the reasons given for the decision imposing penalties for the irregularity committed by the beneficiary: (1) reference is made only to the provision of EU law infringed, [Article 33(1) of Regulation 2018/1046], but no information is given regarding what the specific infringement of that provision consists of and how the principles of economy, efficiency and effectiveness mentioned in that provision have been breached by that infringement or how the breach of those principles has the effect of damaging the Union budget; (2) the national authority provides no explanation for why it is examining the defining elements of the irregularity by reference to the legal definition of that concept given in point 36 of Article 2 of Regulation [No 1303/2013] and not by reference to Article 2(m) of the applicable Implementing Regulation [No 897/2014]; and (3) the national authority provides no specific explanation for the amount of the penalty, expressed as a percentage [namely 25% of the value of the contract] – permissible?
(4) In the light of Article 2(2) and (3) of Regulation [No 2988/95], must the nature and scope of the administrative penalty and the nature and seriousness of the irregularity in respect of which it is imposed already be provided for in EU law in order for the administrative penalty to be capable of being prescribed at national level, and are the Member States required, when prescribing measures and penalties in national law, to take into account or to specify the [EU] legal act providing for those measures and penalties? Are the provisions of Article 31(3) [read in conjunction with] Article 74 of Implementing Regulation … No 897/2014 to be interpreted as conferring on the Member States the competence to adopt rules on the level of penalties which may be imposed on the beneficiaries of projects forming part of programmes under the European Neighbourhood Instrument?
(5) In the light of [the third subparagraph of] Article 63(2) of Regulation … 2018/1046 (“Member States shall impose effective, dissuasive and proportionate penalties on recipients where provided for in sector-specific rules or in specific provisions in national law”), are penalties permissible at levels such as those at issue in the main proceedings, namely a penalty in the amount of BGN 84 (because the beneficiary did not apply a deduction in that amount to the sum paid to the contractor on account of the eight-day delay in performance) and a penalty in the amount of 25% of BGN 10 500.00, that is to say of the value of the eligible funds under the contract between the beneficiary and the contractor (on account of a breach of the principles of sound financial management laid down in the requirements under Article 33, Article 36(1) and Article 61 of Regulation … 2018/1046)?’
Consideration of the questions referred
The first question
43 As a preliminary point, it should be noted that, according to settled case-law, in the procedure laid down by Article 267 TFEU providing for cooperation between national courts and the Court of Justice, it is for the latter to provide the national court with an answer which will be of use to it and enable it to determine the case before it. To that end, the Court may have to reformulate the questions referred to it (judgments of 29 November 1978, Redmond, 83/78, EU:C:1978:214, paragraph 26, and of 29 April 2021, Granarolo, C‑617/19, EU:C:2021:338, paragraph 32).
44 The fact that a national court has, formally speaking, worded its request for a preliminary ruling by referring to certain provisions of EU law does not preclude the Court of Justice from providing to the national court all the elements of interpretation which may be of assistance in adjudicating on the case pending before it, whether or not that court has referred to them in its questions. It is for the Court to extract from all the information provided by the national court, in particular from the grounds of the order for reference, the points of EU law which require interpretation, having regard to the subject matter of the dispute (judgments of 29 November 1978, Redmond, 83/78, EU:C:1978:214, paragraph 26, and of 29 April 2021, Granarolo, C‑617/19, EU:C:2021:338, paragraph 33).
45 In the present case, the dispute in the main proceedings concerns, in essence, the legality of a decision adopted by the national authority imposing two financial corrections on the beneficiary of a project financed by the Joint Operational Programme for Cross-Border Cooperation ‘Black Sea Basin 2014-2020’ under the ENI, on account of irregularities found by that authority in the award of a public service contract and its implementation. In that regard, although, by its first question, the referring court refers to recital 12 and Section 1, entitled ‘Procurement’, of Chapter 4 of Title VII, itself entitled ‘Projects’, of Implementing Regulation No 897/2014, it must be held that that court is uncertain more specifically about the rules applicable to procurement set out in Article 52 of that implementing regulation.
46 In the light of the foregoing, the Court finds that, by its first question, the referring court is asking, in essence, whether Article 52 of Implementing Regulation No 897/2014 must be interpreted as precluding national legislation transposing Directive 2014/24 from providing that, in the context of a review of a project financed by a joint operational programme under the ENI, the authority responsible for that review may require the beneficiary of that project to provide evidence of the competence and experience of the successful tenderer to which it has awarded a public service contract.
47 In that regard, it is apparent from Article 52(1)(a) of Implementing Regulation No 897/2014 that where the beneficiary of a grant contract concluded in the context of a joint operational programme is a contracting authority, it may apply national laws, regulations and administrative provisions adopted in conjunction with EU legislation or the rules set out in Article 52(2).
48 In that connection, it must first of all be noted that Article 52(2)(b) of that implementing regulation lists a set of rules to be complied with for contracts with a value of more than EUR 60 000. However, in the present case, that provision is not applicable, since the service contract in the main proceedings has a value of BGN 10 500 (approximately EUR 5 000).
49 Next, it should be noted that Article 52(2)(a) of that implementing regulation merely requires that, in cases other than those referred to in Article 52(1), the contract is to be awarded to the tender offering the best value for money or, as appropriate, to the tender offering the lowest price, while avoiding any conflict of interests.
50 Last, Article 52(3) of Implementing Regulation No 897/2014 merely refers to the rules of nationality and origin set out in Articles 8 and 9 of Regulation No 236/2014.
51 It follows that that implementing regulation does not contain any provision capable of precluding an authority responsible for monitoring a project financed by a joint operational programme under the ENI from requiring the beneficiary of that project to provide evidence of the competence and experience of the successful tenderer, as required by the ZOP, which transposes Directive 2014/24.
52 Moreover, that interpretation is supported by the fact that, as the Bulgarian Government and the Commission have pointed out, the ZOP applies to all public procurement procedures subsidised by European funds, irrespective of the value of the contracts (see, to that effect, judgment of 31 March 2022, Smetna palata na Republika Bulgaria, C‑195/21, EU:C:2022:239, paragraphs 44 and 45).
53 It follows from the foregoing considerations that Article 52 of Implementing Regulation No 897/2014 must be interpreted as not precluding national legislation transposing Directive 2014/24 from providing that, in the context of a review of a project financed by a joint operational programme under the ENI, the authority responsible for that review may require the beneficiary of that project to provide evidence of the competence and experience of the successful tenderer to which it has awarded a public service contract.
The second question
54 By its second question, the referring court asks, in essence, whether Article 2(m) of Implementing Regulation No 897/2014 and Article 2(36) of Regulation No 1303/2013 must be interpreted as meaning that, first, the late performance of a service in relation to the date provided for in a contract concluded between a contracting authority, a beneficiary of a project financed by a joint operational programme under the ENI, and a successful tenderer selected at the end of a public procurement procedure, and, second, the failure by that beneficiary to implement a penalty clause of a contractual nature in response to that late performance, are capable of constituting irregularities within the meaning of those provisions.
55 It is necessary, first, to determine whether the applicable concept of ‘irregularity’ is that defined in Article 2(m) of Implementing Regulation No 897/2014 or that set out in Article 2(36) of Regulation No 1303/2013, before going on to examine whether a delay in the performance of a contract and the failure to implement a penalty clause in response to that delay are conduct capable of falling within that concept.
56 In the first place, in order to determine the applicable concept of ‘irregularity’, it is appropriate to refer to the context of the provisions referred to in the preceding paragraph of the present judgment.
57 In that regard, Article 7(7) of Regulation No 232/2014 provides that the funding under that regulation may be pooled together with funding under other relevant EU regulations, in which case the Commission is to decide which single set of rules is to apply to implementation.
58 Article 9(2) of that regulation provides that joint operational programmes are to be co-financed by the ERDF and that that regulation is to apply to the use of the ERDF contribution.
59 It follows that, where a joint operational programme is co-financed by the ERDF, the reference provisions are those set out in Regulation No 232/2014 and Implementing Regulation No 897/2014. It follows that, in such a case, the concept of ‘irregularity’ in Article 2(m) of that implementing regulation is applicable.
60 That interpretation is, moreover, confirmed by the objective stated by the EU legislature in recitals 9 and 14 of Regulation No 232/2014, recital 8 of Regulation No 236/2014 and recital 12 of Implementing Regulation No 897/2014, which is to allocate EU resources as effectively as possible, while ensuring consistency and complementarity between EU instruments for external action and creating synergies between the ENI, other EU instruments and other EU policies.
61 In any event, since Regulation No 1303/2013 and Implementing Regulation No 897/2014 form part of the same mechanism designed to ensure the proper management of EU funds and to safeguard the financial interests of the European Union, the concept of ‘irregularity’ calls for a uniform interpretation (see, to that effect, judgment of 26 May 2016, Județul Neamț and Județul Bacău, C‑260/14 and C‑261/14, EU:C:2016:360, paragraphs 34 and 37).
62 In the present case, it follows from the foregoing that the national authority was required to assess the irregularities which it had detected during the review of a project financed by the Joint Operational Programme for Cross-Border Cooperation ‘Black Sea Basin 2014-2020’ under the ENI, in the light of the concept of ‘irregularity’ set out in Article 2(m) of Implementing Regulation No 897/2014.
63 In the second place, as regards whether the late performance of a service and the failure to implement a penalty clause in response to that delay are capable of falling within the concept of ‘irregularity’, within the meaning of Article 2(m) of Implementing Regulation No 897/2014, it must be borne in mind that, in accordance with that provision, the infringement of a financing agreement, a contract or of applicable law must result from an act or omission by an economic operator involved in the implementation of the programme, which has, or would have, the effect of prejudicing the budget of the European Union by charging an unjustified item of expenditure to the budget of the European Union. The existence of such an irregularity presupposes the combination of three cumulative conditions, namely an infringement of the applicable law, an act or omission by an economic operator which caused that infringement, and actual or potential prejudice to the budget of the European Union (see, to that effect, judgment of 4 October 2024, Obshtina Svishtov, C‑175/23, EU:C:2024:853, paragraph 23 and the case-law cited).
64 The referring court is uncertain as to whether the first and third conditions are satisfied in the present case.
65 As regards the first condition, which concerns an infringement of a financing agreement, a contract or of applicable law, it is sufficient to note that that wording is particularly broad to the point that that expression is capable of covering both the late performance of a service due under a contract concluded at the end of a public procurement procedure and the failure to implement a penalty clause in response to that delay.
66 In that latter regard, it is apparent from the file submitted to the Court that the national authority considered that the failure to implement the penalty clause included in the service contract entailed a breach of the principle of sound financial management, within the meaning of Article 33(1) of Regulation 2018/1046, and, therefore, an infringement of Article 1 of the co-financing contract, signed on 26 January 2021 with that authority, which laid down the obligation to comply with that principle, in that the beneficiary had granted more favourable conditions to the contractor to perform the service than those that had been agreed on in that contract.
67 Since the principle of effectiveness, which is one of the components of the principle of sound financial management referred to in Article 33(1) of Regulation 2018/1046, requires that the objectives pursued be achieved by means of the activities undertaken, it is for the referring court to ascertain whether the failure to implement the penalty clause could have undermined the achievement of the objectives pursued by the project. It must carry out such an assessment in the light of all the factual circumstances of the dispute in the main proceedings, such as, in particular, the slight delay in supplying the video film and the option for the parties, provided for in the service contract, to extend the period for performance of that contract on the basis of a mutual agreement, until the time limit for performance of that co-financing contract. In so doing, it cannot be ruled out that the failure to implement the penalty clause constitutes an infringement of a financing agreement, a contract or of applicable law, within the meaning of Article 2(m) of Implementing Regulation No 897/2014.
68 The third condition requires that the infringement of the financing agreement, contract or applicable law by an economic operator ‘has, or would have, the effect’ of prejudicing the budget of the European Union by charging an unjustified item of expenditure to the budget of the European Union. In that regard, it follows from the wording of Article 2(m) of Implementing Regulation No 897/2014, in particular from the words ‘would have … the effect of’, that, if the irregularity, within the meaning of that provision, does not require a specific financial impact on the budget of the European Union to be demonstrated, a failure to comply with the applicable rules constitutes an ‘irregularity’, in so far the possibility cannot be excluded that that failure had an impact on the budget of the Fund concerned (see, to that effect, judgment of 4 October 2024, Obshtina Svishtov, C‑175/23, EU:C:2024:853, paragraph 26 and the case-law cited). Accordingly, that provision precludes the consideration of any infringement of a financing agreement, a contract or of law by an economic operator as automatically prejudicing the budget of the European Union or as always being likely to prejudice that budget, irrespective of the effects of such an infringement on that budget (see, to that effect, judgment of 4 October 2024, Obshtina Svishtov, C‑175/23, EU:C:2024:853, paragraph 27).
69 In the present case, in order to determine whether the late performance of the service at issue in the main proceedings had or could have had an impact on the budget of the fund concerned, it should be noted that it cannot be ruled out that such conduct had an impact on the EU budget, since that late implementation deprived the beneficiary of the use of the video film from the due date provided for in the contract, which it is for the referring court to ascertain.
70 As regards the beneficiary’s failure to implement a penalty clause for a delay in the performance of the service contract, it should be noted, as the Commission did in its written observations, that it cannot be ruled out that such conduct had a financial impact on the EU budget. In that regard, it is for the referring court to examine whether that conduct entails an amendment of the public contract in relation to the initial conditions set out in the contract notice or in the tender specifications, in a manner inconsistent with Article 72(1), (2) and (4) of Directive 2014/24, to such an extent that that conduct changes the overall nature of the contract. If that is the case, the possibility that that conduct had an impact on the budget of the fund concerned cannot be ruled out.
71 Having regard to the foregoing, the answer to the second question referred is that Article 2(m) of Implementing Regulation No 897/2014 must be interpreted as meaning that, first, the late performance of a service in relation to the date provided for in a contract concluded between a contracting authority, a beneficiary of a project financed by a joint operational programme under the ENI, and a successful tenderer designated at the end of a public procurement procedure, and, second, the failure by that beneficiary to implement a penalty clause of a contractual nature in response to that late performance, are capable of constituting irregularities within the meaning of that provision.
The third question
72 By its third question, the referring court asks, in essence, whether Article 41 of the Charter must be interpreted as precluding the adoption, by an authority responsible for monitoring a project financed by a joint operational programme under the ENI, of a decision imposing financial corrections on the beneficiary of that project, on account of irregularities, within the meaning of Article 2(36) of Regulation No 1303/2013, committed by that beneficiary and consisting in the infringement of Article 33(1) of Regulation 2018/1046, without any evidence showing infringement of that provision being adduced and without any specific statement of reasons justifying the application of a flat-rate financial correction corresponding to a rate of 25% of the value of the contract being provided.
73 As a preliminary point, as is apparent from the case-law referred to in paragraph 44 above, it is for the Court, in the context of the cooperation established by Article 267 TFEU, to provide the national court with an answer which will be of use to it, which may lead the Court to reformulate the questions referred.
74 In the present case, although the national court refers to Article 41 of the Charter in its third question, it is apparent from the Court’s case-law that that provision is not addressed to the Member States, but solely to the institutions, bodies, offices and agencies of the European Union, with the result that that provision is not relevant (see, to that effect, judgment of 8 May 2019, PI, C‑230/18, EU:C:2019:383, paragraph 56 and the case-law cited).
75 However, where a Member State implements EU law, the requirements of the principle of good administration, as a general principle of EU law, are applicable in a procedure conducted by the competent national authority (see, to that effect, judgment of 6 March 2025, Obshtina Veliko Tarnovo and Obshtina Belovo, C‑471/23 and C‑477/23, EU:C:2025:155, paragraph 73).
76 The right to good administration includes the obligation of the administration to state reasons for its decisions which are sufficiently specific and concrete to allow the person concerned to understand the grounds of the individual measure adversely affecting him or her; that obligation is thus a corollary of the principle of respect for the rights of the defence, which is a general principle of EU law (see, to that effect, judgment of 8 May 2019, PI, C‑230/18, EU:C:2019:383, paragraph 57 and the case-law cited).
77 It is in the light of those considerations that the third question referred must be understood as regarding whether the general principle of good administration must be interpreted as not precluding the adoption, by an authority responsible for monitoring a project financed by a joint operational programme under the ENI, of a decision imposing financial corrections on the beneficiary of that project, on account of irregularities, within the meaning of Article 2(36) of Regulation No 1303/2013, committed by that beneficiary and consisting in the infringement of Article 33(1) of Regulation 2018/1046, without any evidence showing infringement of that provision being adduced and without a specific statement of reasons justifying the application of a flat-rate financial correction corresponding to a rate of 25% of the value of the contract being provided.
78 In the first place, as regards the impact of the reference, in the decision at issue, to the concept of ‘irregularity’, within the meaning of Article 2(36) of Regulation No 1303/2013, rather than to the same concept as referred to in Article 2(m) of Implementing Regulation No 897/2014, it is sufficient to note that, as has been recalled in paragraph 62 of the present judgment, those two concepts must be interpreted uniformly, with the result that that fact is not such as to deprive the beneficiary of the opportunity to understand the reasons underlying the financial corrections imposed by that decision.
79 In the second place, as regards whether the statement of reasons for the decision at issue is sufficient, in so far as it refers to the infringement of the principle of sound financial management referred to in Article 33(1) of Regulation 2018/1046, without evidence showing infringement of that provision being adduced, it must be observed that the referring court expresses such doubts in connection with the second irregularity, relating to the failure to implement the penalty clause in the service contract.
80 In that regard, as is apparent from the order for reference, the decision at issue was adopted pursuant to Article 73 of the ZUSEFSU, which provides that a financial correction is to be imposed by means of a reasoned decision, following a procedure which enables the beneficiary to submit its written objections regarding the basis for and amount of the financial correction envisaged and to submit evidence in support of its objections. Paragraph 3 of that article adds that, in that decision, the evidence submitted and objections raised by the beneficiary must be examined.
81 In that context, although it is for the referring court to assess specifically whether sufficient reasons were given in the decision at issue, it is apparent from the order for reference that, during the administrative procedure at the end of which that decision was adopted, the beneficiary raised objections and submitted evidence to challenge the existence of the second irregularity, with the result that the statement of reasons for the decision at issue appears to be sufficiently precise and specific to enable the beneficiary to understand the reasons for the correction adversely affecting it. Moreover, it is apparent from that decision, which was annexed to the Bulgarian Government’s observations, that the national authority considered that that irregularity arose from the unlawful extension of the time limit for receipt of the video by the beneficiary, with the result that the results expected from the contract had not been achieved and that, by its action, the beneficiary had committed an overall infringement of the principle of sound financial management.
82 In the third place, as regards the alleged insufficiency of the statement of reasons relating to the application of a flat-rate financial correction of 25% on account of the first irregularity, it should be noted that the Court has already held that Member States may rely on a scale of flat-rate correction rates where it is not possible to determine precisely the amount of irregular expenditure charged to the EU funds (see, to that effect, judgment of 4 October 2024, Obshtina Svishtov, C‑175/23, EU:C:2024:853, paragraphs 28 to 34).
83 The fact remains, however, that the actual determination of the amount of the correction to be applied requires the authorities responsible for monitoring the use of EU funds to carry out an individualised and detailed examination, taking account of all the circumstances of the irregularity found and which are liable to justify the application of an increased or reduced correction (see, to that effect, judgment of 14 July 2016, Wrocław – Miasto na prawach powiatu, C‑406/14, EU:C:2016:562, paragraph 49). That assessment is a matter for the referring court.
84 Having regard to the foregoing considerations, the answer to the third question referred is that the general principle of good administration must be interpreted as precluding the adoption, by an authority responsible for monitoring a project financed by a joint operational programme under the ENI, of a decision imposing financial corrections on the beneficiary of that project, on account of irregularities, within the meaning of Article 2(36) of Regulation No 1303/2013, committed by that beneficiary and consisting in the infringement of Article 33(1) of Regulation 2018/1046, without any evidence showing infringement of that provision being adduced and without a specific statement of reasons justifying the application of a flat-rate financial correction corresponding to a rate of 25% of the value of the contract being provided.
The fourth question
85 By its fourth question, the referring court asks, in essence, whether Article 2(2) and (3) of Regulation No 2988/95, read in conjunction with Article 31(3) and Article 74 of Implementing Regulation No 897/2014, must be interpreted as meaning that it is for the Member States to establish a system of penalties which may be applied to beneficiaries of projects financed by the ENI.
86 As a preliminary point, it should be noted that the referring court proceeds from the premiss that financial corrections such as those at issue in the main proceedings are administrative penalties within the meaning of Article 2(2) and Article 5 of Regulation No 2988/95. Under the first of those provisions, no administrative penalty may be imposed unless an EU act prior to the irregularity has made provision for it. The second of those provisions lists, for its part, intentional irregularities or those caused by negligence which may lead to administrative penalties.
87 However, as Article 4(4) of that regulation provides, an administrative measure is not to be regarded as a penalty.
88 It is apparent from well established case-law that a financial correction, in so far as it seeks the withdrawal of an advantage wrongly obtained, does not constitute an ‘administrative penalty’ requiring a clear and unambiguous legal basis, distinct from Regulation No 2988/95, but constitutes an ‘administrative measure’, within the meaning of Article 4 of that regulation, by means of which consequences are drawn from the finding that the conditions required for obtaining that advantage derived from EU rules are not fulfilled. The obligation to give back the undue advantage is therefore not a penalty, but a consequence of failure to fulfil the conditions laid down by law and is not subject to the principle that infringements and penalties must already be provided for in EU law (see, to that effect, judgment of 13 December 2012, FranceAgriMer, C‑670/11, EU:C:2012:807, paragraphs 64 and 65 and the case-law cited).
89 In the present case, it must be observed, as the Bulgarian Government and the Commission have done, that the financial corrections imposed on the beneficiary were adopted on the basis, inter alia, of Articles 70 and 73 of the ZUSEFSU and of Paragraph 1(2) of the supplementary provisions of the Naredba, which are provisions relating not to administrative penalties or fines but to financial corrections.
90 However, in order to give the most comprehensive answer to the referring court’s question as to whether a Member State may, on the basis of Article 31(3) and Article 74 of Implementing Regulation No 897/2014, adopt measures to apply financial corrections to beneficiaries of projects under a programme financed by the ENI, it should be added that Regulation No 2988/95 merely lays down general rules for supervision and penalties for the purpose of safeguarding the European Union’s financial interests. The Court has thus held that it is therefore on the basis of other provisions, namely, where appropriate, on the basis of sector-specific provisions, that the recovery of misused funds must be carried out (see, to that effect, judgment of 18 December 2014, Somvao, C‑599/13, EU:C:2014:2462, paragraph 37 and the case-law cited).
91 It is therefore necessary to ascertain whether a ‘financial correction’ may be adopted on the basis of Article 31(3) and Article 74 of Implementing Regulation No 897/2014.
92 In that regard, Article 31(3) of that implementing regulation provides that participating countries are to prevent, detect and correct irregularities and recover amounts unduly paid on their territory, while Article 74 of that implementing regulation lays down rules on ‘financial responsibilities and recoveries’. Furthermore, Article 71(1) of that implementing regulation entrusts the managing authority ‘in the first instance’ with the responsibility of preventing and investigating irregularities, making the financial corrections required in connection with individual or systemic irregularities identified in the projects and pursuing necessary recoveries. That authority is to make the financial corrections required by the individual or systemic irregularities identified in the projects, taking into account the nature and gravity of the irregularities and the resulting financial loss. That authority is to apply a proportionate financial correction.
93 Those general provisions mean that the Member States must lay down, in their national legislation, first, rules relating to the level of financial corrections which take account of the nature and gravity of the irregularities and the financial loss and, second, proportionate financial corrections, inter alia, in order to ensure legal certainty (see, to that effect, judgment of 4 October 2024, Obshtina Svishtov, C‑175/23, EU:C:2024:853, paragraphs 30 to 34).
94 In the light of the foregoing considerations, the answer to the fourth question referred is that Article 31(3) and Article 74 of Implementing Regulation No 897/2014 must be interpreted as meaning that it is for the Member States to establish, within their national legislation, rules relating to the level of financial corrections which take account of the nature and gravity of the irregularities, financial loss and proportionate financial corrections, which may be applied to beneficiaries of projects financed by the ENI.
The fifth question
95 As a preliminary point, it should be noted that, as in its fourth question, the referring court proceeds from the premiss, in its fifth question, that the decision at issue imposes penalties, within the meaning of Article 2(2) and Article 5 of Regulation No 2988/95. However, for the reasons set out in paragraphs 88 to 92 of the present judgment, the financial corrections set out in that decision are not penalties, but administrative measures, within the meaning of Article 4 of that regulation.
96 In that context, although, in its fifth question, the referring court refers to the third subparagraph of Article 63(2) of Regulation 2018/1046, which provides that Member States are to impose ‘effective, dissuasive and proportionate penalties on recipients where provided for in sector-specific rules or in specific provisions in national law’, that provision is not, however, relevant for the purpose of answering the question referred. By contrast, since that court seeks guidance regarding the proportionality of the financial corrections imposed by the decision at issue, it is necessary to refer to point (c) of the first subparagraph of Article 63(2) of that regulation, which provides that, when executing tasks relating to budget implementation, Member States are to take all the necessary measures, including legislative, regulatory and administrative measures, to protect the financial interests of the European Union, namely in particular, those necessary to prevent, detect and correct irregularities and fraud.
97 It follows that, by the fifth question referred for a preliminary ruling, the referring court must be understood as asking, in essence, whether point (c) of the first subparagraph of Article 63(2) of Regulation 2018/1046, read in conjunction with the principle of proportionality, must be interpreted as precluding the imposition, first, of a financial correction calculated at a flat-rate intended to correct an irregularity resulting from insufficient documentary traceability and, second, of a financial correction calculated by means of a differential method and intended to correct irregularities arising from the delay in the performance of a service and the failure to implement a penalty clause.
98 In that regard, point (c) of the first subparagraph of Article 63(2) of that regulation must be read in conjunction with the second subparagraph of Article 71(1) of Implementing Regulation No 897/2014, which provides that the managing authority is to make the financial corrections required in connection with individual or systemic irregularities detected in projects, technical assistance or in the programme. That authority is to take into account the nature and gravity of the irregularities, and the financial loss, and ‘shall apply a proportionate financial correction’ consisting of cancelling all or part of the EU contribution to a project or to technical assistance.
99 As regards the proportionality of the amount of the financial correction, the Court has held that it is open to the Member States to rely on a scale of flat-rate correction rates where it is not possible to determine precisely the amount of irregular expenditure charged to the EU Funds, provided that the final amount of the correction to be applied be determined following an individualised and detailed examination, taking into account all of the characteristics of the nature and gravity of the established irregularity to be corrected and the resulting financial loss to the EU Fund concerned, so that the application of such a rate complies with the principle of proportionality. It follows that, as a rule, the amount of a financial correction must not be determined automatically on the sole basis of a pre-established scale of flat-rate correction rates (see, to that effect, judgment of 4 October 2024, Obshtina Svishtov, C‑175/23, EU:C:2024:853, paragraphs 29 to 34 and the case-law cited).
100 In the present case, as is apparent from the order for reference, by Articles 70 and 73 of the ZUSEFSU, read in conjunction with Articles 1 and 2 of the Naredba and Annex No 2 to the Naredba, to which Article 2(3) thereof refers, the Bulgarian legislature intended to adjust the rate of financial correction ‘in accordance with the principle of proportionality[;] a financial correction may be reduced to 25, 10, 5 or 2% where the nature and gravity of the individual or systemic infringement does not justify a higher amount’. It is therefore for the referring court to ascertain whether the financial correction of 25% of eligible expenditure under the service contract was indeed imposed following an individualised and detailed examination, taking account of all the characteristics of the irregularity found by the national authority in the decision at issue.
101 Thus, as regards the first irregularity, it is for the referring court to determine whether the financial correction of 25%, applied for insufficient documentary traceability, is proportionate in the light of all the characteristics of that irregularity.
102 Similarly, as regards the second irregularity, it is for the referring court to determine whether the financial correction, calculated according to the differential method and applied on account of the breach of the principle of sound financial management, is proportionate in the light of all the characteristics of that irregularity.
103 Having regard to the foregoing considerations, the answer to the fifth question referred is that point (c) of the first subparagraph of Article 63(2) of Regulation 2018/1046, read in conjunction with the principle of proportionality, must be interpreted as not precluding the imposition, first, of a financial correction calculated at a flat rate intended to correct an irregularity resulting from insufficient documentary traceability and, second, of a financial correction calculated by means of a differential method and intended to correct irregularities arising from the delay in the performance of a service and the failure to implement a penalty clause.
Costs
104 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring 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.
On those grounds, the Court (Seventh Chamber) hereby rules:
1. Article 52 of Commission Implementing Regulation (EU) No 897/2014 of 18 August 2014 laying down specific provisions for the implementation of cross-border cooperation programmes financed under Regulation (EU) No 232/2014 of the European Parliament and the Council establishing a European Neighbourhood Instrument
must be interpreted as not precluding national legislation transposing Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC from providing that, in the context of a review of a project financed by a joint operational programme under the European Neighbourhood Instrument (ENI), the authority responsible for that review may require the beneficiary of that project to provide evidence of the competence and experience of the successful tenderer to which it has awarded a public service contract.
2. Article 2(m) of Implementing Regulation No 897/2014
must be interpreted as meaning that, first, the late performance of a service in relation to the date provided for in a contract concluded between a contracting authority, a beneficiary of a project financed by a joint operational programme under the European Neighbourhood Instrument, and a successful tenderer designated at the end of a public procurement procedure, and, second, the failure by that beneficiary to implement a penalty clause of a contractual nature in response to that late performance, are capable of constituting irregularities within the meaning of that provision.
3. The general principle of good administration,
must be interpreted as precluding the adoption, by an authority responsible for monitoring a project financed by a joint operational programme under the ENI, of a decision imposing financial corrections on the beneficiary of that project, on account of irregularities, within the meaning of Article 2(36) of Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006, committed by that beneficiary and consisting in the infringement of Article 33(1) of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012, without any evidence showing infringement of that provision being adduced and without a specific statement of reasons justifying the application of a flat-rate financial correction corresponding to a rate of 25% of the value of the contract being provided.
4. Article 31(3) and Article 74 of Implementing Regulation No 897/2014
must be interpreted as meaning that it is for the Member States to establish, within their national legislation, rules relating to the level of financial corrections which take account of the nature and gravity of the irregularities, financial loss and proportionate financial corrections, which may be applied to beneficiaries of projects financed by the European Neighbourhood Instrument.
5. Point (c) of the first subparagraph of Article 63(2) of Regulation 2018/1046, read in conjunction with the principle of proportionality,
must be interpreted as not precluding the imposition, first, of a financial correction calculated at a flat rate intended to correct an irregularity resulting from insufficient documentary traceability and, second, of a financial correction calculated by means of a differential method and intended to correct irregularities arising from the delay in the performance of a service and the failure to implement a penalty clause.
[Signatures]
* Language of the case: Bulgarian.