Introduction

A recent ruling by the Italian administrative court of first instance provides a valuable opportunity to reflect on a classic, yet unresolved issue: the implications of complex (or mixed) administrative procedure on the effective judicial protection of individuals (Regional Administrative Court of Campania/Naples, judgment of 26 July 2023, No. 4478 – hereinafter as ‘RAC’; for a more in-depth analysis on the topic, see the numerous contributions by H. C. H. Hofmann, including Decision-making in EU Administrative Law – The Problem of Composite Procedures, in Administrative Law Review, Vol. 61, 2009, p. 199 ff.).

The judgment holds particular significance because neither the Court of Justice (ECJ) nor the Italian administrative judge had ever prior to this judgement dealt with a case in which an EU intermediate act does not conclude the composite proceeding but defines it and, consequently, cannot be categorized as a preparatory act. In particular, the RAC declared as inadmissible the appeal lodged against the internal administrative act concluding the proceeding – a withdrawal order of ERDF funding (‘European Regional Development Fund’) – on the reasoning that the jurisdiction actually belonged to the ECJ. Indeed, according to the court, the ‘preliminary’ act issued by the EU institution – a European Commission report – had already exhausted the discretionary power reserved for the national authority, essentially reducing the internal act to a mere executive action of the former.

Facts

In order to carry out a project of European interest, specifically a digital platform for multimodal transport services according to modern Mobility-as-a-Service models (MaaS), the claimant companies obtained a grant intended for small and medium-sized enterprises (SMEs) for a total amount of 1 million euros, financed by the ERDF under the Regional Operational Programme (ROP) 2014-2020 in the Italian Region of Campania.

However, following an inspection by the European Commission, the aid granted to the company Metoda, acting as the lead partner of the purpose association with the other involved companies, was deemed irregular, as the company in question did not meet the conditions to be considered as a SME, as strictly provided by the ROP. With the final audit report No. ARES/2022/6485966, dated September 20, 2022, the Commission therefore concluded that the project was not eligible for funding. The decision was not notified to the aid beneficiary but only to the Campania Region, to which the Commission granted a three-month period to proceed with the recovery of the disbursed amounts.

Based on the description in the report, the Campania Region issued a decree (No. 5, dated January 13, 2023), highlighting the beneficiary’s unsuitability to participate in the financing program and ordering the repayment of the amounts improperly received. The group of companies then brought the matter before the RAC for the annulment of the decree and, as usual, of all the connected and consequential acts. However, following the analysis of the relevant issues, the TAR Naples declared the appeal inadmissible, motivating it as noted in the introduction.

The reasoning

In order to support its conclusions, the RAC has highlighted how, in such proceedings, the classification of administrative acts produced cannot necessarily follow the classic pattern (i.e., the administrative act that closes the proceeding is also the one that produces effects and, therefore, is the one challengeable before courts); this is because they possess unique characteristics, such as the alteration of procedural order and, above all, the lesser importance of the final decision compared to the other acts in terms of legal consequences for the interested parties.

Specifically, in cases where proceedings are formally concluded with an act adopted by a national authority (so-called ‘top-down proceeding’), but where the EU administrative act has external relevance, justiciability cannot be determined according to the traditional distinction between preparatory measures and definitive acts but must be assessed in light of its actual impact on the final outcome. On this basis, the RAC has identified, in the EC’s report, the act that produces effects on the funding beneficiary, emphasizing that, regardless of its temporal position in the procedural line, the report is entirely binding on the national authority and cannot be considered a preparatory act.

In the absence of previous case-law on the same issue, the Italian judge has referred, mutatis mutandis, to several ECJ judgments concerning mixed procedures but developed along different dynamics: on the one hand, those in which the decision of the EU body is bound by the act issued by the national administration (Case C-97/91, Oleificio Borelli SpA v Commission, paras 10 and 11); on the other hand, those in which national authorities are involved in the preparatory phase, but the decision-making power is reserved for EU institutions (Case C-64/05 P, Sweden v Commission, paras 93 and 94).

With particular reference to the latter – the most similar to the present case because EU bodies are the ones exercising the actual power – the RAC has repeatedly cited the Berlusconi and Fininvest judgment (Case C-219/17), where, in response to a request for a preliminary ruling by the Italian Supreme Administrative Court (the ‘Council of State’), the ECJ had established that Article 263 TFEU precludes national judges from reviewing the legality of preparatory acts adopted by national authorities if they ‘constitute a stage of a procedure in which an EU institution exercises, alone, the final decision-making power’ (para 43).

Critical remarks

Although the reasoning proposed by the RAC may seem coherent and convincing, a closer examination of the ruling raises many doubts which, even before delving into the content of the judgment, related to the composite administrative procedure itself.

One initial element of inconsistency pertains to the non-notification to the beneficiary of the EU act. Given that the Commission’s audit report should be regarded as a definitive measure in all respects, one might well wonder why an act of such an importance is not communicated to the addressee – which was nominally identified within it – but only gains external relevance at a later stage, i.e. when the dispute has been brought before the national court.

While it is true that, in the absence of its notification, EU law allows plaintiffs to institute an action for annulment within two months of the day on which the alleged unlawful act came to their knowledge (Joined Cases C-337/16 P, C-338/16 P and C-339/16 P, Portugal v. Commission, para 34), it is equally true that both EU and national authorities are bound to respect the principles of sound administration and sincere cooperation in the implementation of EU law (Case C-159/21, Országos Idegenrendeszeti Főigazgatóság, paras 34 and 35). The obligations arising from these principles should have compelled the Commission and the national administration to promptly inform the addressee of a decision as significant as the one in question. More specifically, the Commission should have simultaneously notified it to the beneficiary alongside its communication to the national authority. In the absence of such an notification, the latter should have made the report available to the beneficiary at the time of adopting the conclusive act of the proceeding (instead of rejecting, as it happened, the request for access to the decision submitted by the beneficiary).

Further doubts are raised by a specific passage of the judgment, which states that ‘ultimately […] it is for the EU judge, by virtue of its exclusive jurisdiction to review the legitimacy of EU acts within the meaning of Article 263 TFEU, to rule on the legality of the decisions adopted by EU institution and to examine […] any defects in the subsequent acts of the national authority adopted in implementation’.

To be fair, the RAC seems to have simply copied and pasted this sentence from paragraph 44 of the Berlusconi and Fininvest judgment, where it is affirmed that the Court is responsible for the examination of ‘any defects vitiating the preparatory acts or the proposals of the national authorities that would be such as to affect the validity of that final decision’. However, this case-law seems to openly contrast with the long-standing and established doctrine, according to which ‘the European Union Court has no jurisdiction to rule on the lawfulness of a measure adopted by a national authority’ (Case C‑562/12, Liivimaa Lihaveis, para 48). Moreover, this would give the ECJ jurisdiction to assess the lawfulness of national acts (even if they are executive, preparatory, or consequential to those of the EU bodies), whereas, on the contrary, national courts do not have the power to declare acts of the EU institutions invalid (Case 314/85, Foto-Frost, para 15).

The ruling and its (overt and latent) contradictions give a measure of the difficulties that composite administrative proceedings continue to create not only for national courts but also for the ECJ. The EU court’s approach to the subject seems to ‘lack a unified design’ and to focus solely on the resolution of the individual cases submitted from time to time, rather than providing general solutions that appear consistent with the system as a whole (F. Spitaleri, L’incidenza del diritto comunitario sugli atti nazionali definitivi, in Id. (ed.), L’incidenza del diritto comunitario e della CEDU sugli atti nazionali definitivi, Milan, 2009, p. 11).

In short, the commented case raises more doubts than it helps to ‘sweep away’. For these reasons, it would have seemed more appropriate if the Italian judge had made a request for a preliminary ruling to the ECJ, as the Council of State did in similar circumstances in the aforementioned Berlusconi and Fininvest case. A preliminary reference, based on the interpretation of Article 263 TFEU, would have allowed the RAC to guarantee greater certainty with respect to questions to which it itself recognises the character of ‘novelty’; likewise, the preliminary ruling would have benefited the entire EU legal system, creating a useful precedent in the matter that could have guided both Italian judges and those of the other 26 Member States in resolving similar future disputes.

Conclusions

The RAC ruling is only the latest episode in a jurisprudential saga that has been pointing out, for some time now, considerable technalities in the framing of the phenomenon of composite administrative proceedings within the relationship between EU and national legal systems.

In order to avoid similar scenarios, that put a strain on the effective judicial protection of individuals, scholars have proposed to abandon the criterion of the effectiveness of the decision-making power in the identification of the competent jurisdiction and to allow the plaintiff to challenge before both ECJ and national courts the relevant acts of the proceedings (H. C. H. Hofmann, Multi-Jurisdictional Composite Procedures – The Backbone to the EU’s Single Regulatory Space, in University of Luxembourg Law Working Papers, No. 3, 2019, pp. 25 and 26). Such choices seem, however, to carry with them equally irreducible risks, such as possible conflicts of jurisdiction between national and ECJ judgments, a significant slowing down of proceedings and a considerable increase in costs for the parties.

It seems more helpful, instead, to intervene upstream, at the procedural level, through the adoption of guidelines instructing individuals on the course of mixed proceedings. Such guidelines, albeit of a non-binding nature, could ensure greater certainty with regard to, for example, the criteria of imputability of the acts adopted at the two levels (through the mapping out of the Court’s case-law and by drawing up a list of practical cases); the procedural obligations incumbent on the various national and EU bodies; the rights of the individuals concerned with regard to the progress and the results of the proceedings, both in the pre-litigation and in the litigation phase. Clearer and more precise rules on the identification of the body actually competent within the composite procedure would have allowed the applicant, for example, to submit a request for access to the documents directly to the Commission, instead of to the national authority, so as to be able to challenge the audit report in a timely way.

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Posted by Andrea Circolo (Assistant Professor in EU Law, University of Naples Federico II).

The work takes up some considerations already expressed in ‘L’impugnabilità di atti “preparatori” dell’Unione nel contesto di procedimenti amministrativi compositi. Note a margine di TAR Napoli, sent. 26 luglio 2023, n. 4478’, BlogDUE, 20 September 2023.