{"attribution":{"source":"legal.exploreworldai.com","canonical":"https://legal.exploreworldai.com/api/public/v1/judgment-text?id=eu:c-186-25","cite_as":"NovaCopilot, legal.exploreworldai.com (https://legal.exploreworldai.com/api/public/v1/judgment-text?id=eu:c-186-25)","license":"https://legal.exploreworldai.com/revision","version":"legal-2026-10-23","fingerprint":"ewai:eu:b67bfc","proof":"sha256:36fef513eec70a201439ac4e6a52a9e13a2794f9d01254ba40885b26c438358d","jurisdiction":"eu","lang":"en","publisher":"NovaCopilot by ExploreWorld Legal","terms":"https://legal.exploreworldai.com/om"},"brand_source":"Source: NovaCopilot","item":{"schema_version":"1.0.0","id":"eu:c-186-25","jurisdiction":"eu","lang":"en","brand_source":"Source: NovaCopilot","brand":{"product":"NovaCopilot","platform":"ExploreWorldAI","infrastructure":"ExploreWorld Legal","infrastructure_url":"legal.exploreworldai.com","legal_entity":"Valkiv Ventures AB","permanent_url":"https://legal.exploreworldai.com/novacopilot","source":"Source: NovaCopilot","powered_by":"Powered by NovaCopilot","license":"https://legal.exploreworldai.com/licensvillkor"},"sections":[{"title":"Provisional text","paragraphs":[]},{"title":"JUDGMENT OF THE COURT (Seventh Chamber)","paragraphs":[]},{"title":"9 July 2026 ( * )","paragraphs":["para_4","para_5","para_6"]},{"title":"Institut po ribni resursi Varna","paragraphs":["para_8","para_9","para_10","para_11","para_12","para_13","para_14","para_15","para_16","para_17","para_18","para_19"]},{"title":"Judgment","paragraphs":["para_21","para_22"]},{"title":"Legal context","paragraphs":[]},{"title":"European Union law","paragraphs":[]},{"title":"Regulation No 2988/95","paragraphs":[]},{"title":"3         Article 2 of Regulation No 2988/95 provides as follows:","paragraphs":["para_27","para_28","para_29","para_30"]},{"title":"4         Article 4(1), (2) and (4) of that regulation provides:","paragraphs":["para_32","para_33","para_34","para_35","para_36"]},{"title":"4.      The measures provided for in this Article shall not be regarded as penalties.’","paragraphs":[]},{"title":"5         Article 5(1) of the regulation provides as follows:","paragraphs":["para_39","para_40"]},{"title":"Regulation No 1303/2013","paragraphs":[]},{"title":"6         Article 2 of Directive 1303/2013, headed ‘Definitions’, provides:","paragraphs":["para_43","para_44","para_45"]},{"title":"Regulation (EU) No 232/2014","paragraphs":["para_47","para_48","para_49","para_50","para_51","para_52","para_53","para_54"]},{"title":"Regulation (EU) No 236/2014","paragraphs":["para_56","para_57"]},{"title":"Implementing Regulation No 897/2014","paragraphs":[]},{"title":"11       Recital 12 of Implementing Regulation No 897/2014 states:","paragraphs":["para_60"]},{"title":"12       Article 2 of the same implementing regulation, entitled ‘Definitions’, provides:","paragraphs":["para_62","para_63","para_64","para_65","para_66","para_67","para_68","para_69","para_70","para_71","para_72","para_73"]},{"title":"2.      In all other cases the following obligations shall be complied with:","paragraphs":["para_75","para_76","para_77","para_78","para_79","para_80","para_81","para_82","para_83"]},{"title":"Directive 2014/24/EU","paragraphs":["para_85","para_86","para_87","para_88","para_89"]},{"title":"(c)      where all of the following conditions are fulfilled:","paragraphs":["para_91"]},{"title":"(ii)      the modification does not alter the overall nature of the contract;","paragraphs":["para_93","para_94","para_95"]},{"title":"(i)      the thresholds set out in Article 4; and","paragraphs":["para_97","para_98","para_99","para_100","para_101","para_102"]},{"title":"Regulation 2018/1046","paragraphs":["para_104","para_105","para_106","para_107","para_108","para_109","para_110","para_111","para_112","para_113"]},{"title":"(c)      preventing, detecting and correcting irregularities and fraud;","paragraphs":["para_115","para_116","para_117"]},{"title":"Bulgarian law","paragraphs":[]},{"title":"The ZUSEFSU","paragraphs":["para_120","para_121","para_122","para_123","para_124","para_125","para_126","para_127"]},{"title":"22       Article 73 of the ZUSEFSU provides:","paragraphs":["para_129","para_130","para_131"]},{"title":"The ZOP","paragraphs":["para_133","para_134","para_135","para_136"]},{"title":"24       The ZOP contains supplementary provisions, including paragraph 3, which provides:","paragraphs":["para_138"]},{"title":"1.      Directive [2014/24];","paragraphs":["para_140","para_141","para_142","para_143","para_144","para_145"]},{"title":"26       Article 2 of the Naredba provides:","paragraphs":["para_147","para_148","para_149","para_150","para_151","para_152","para_153","para_154","para_155","para_156"]},{"title":"The dispute in the main proceedings and the questions referred for a preliminary ruling","paragraphs":["para_158","para_159","para_160","para_161","para_162","para_163","para_164","para_165","para_166","para_167","para_168","para_169","para_170","para_171","para_172","para_173","para_174","para_175","para_176"]},{"title":"Consideration of the questions referred","paragraphs":[]},{"title":"The first question","paragraphs":["para_179","para_180","para_181","para_182","para_183","para_184","para_185","para_186","para_187","para_188","para_189"]},{"title":"The second question","paragraphs":["para_191","para_192","para_193","para_194","para_195","para_196","para_197","para_198","para_199","para_200","para_201","para_202","para_203","para_204","para_205","para_206","para_207","para_208"]},{"title":"The third question","paragraphs":["para_210","para_211","para_212","para_213","para_214","para_215","para_216","para_217","para_218","para_219","para_220","para_221","para_222"]},{"title":"The fourth question","paragraphs":["para_224","para_225","para_226","para_227","para_228","para_229","para_230","para_231","para_232","para_233"]},{"title":"The fifth question","paragraphs":["para_235","para_236","para_237","para_238","para_239","para_240","para_241","para_242","para_243"]},{"title":"Costs","paragraphs":["para_245"]},{"title":"On those grounds, the Court (Seventh Chamber) hereby rules:","paragraphs":["para_247","para_248"]},{"title":"2.       Article 2(m) of Implementing Regulation No 897/2014","paragraphs":["para_250","para_251","para_252"]},{"title":"4.       Article 31(3) and Article 74 of Implementing Regulation No 897/2014","paragraphs":["para_254","para_255","para_256","para_257","para_258"]}],"paragraphs":[{"text":"Provisional text","paragraph_id":"para_1"},{"text":"JUDGMENT OF THE COURT (Seventh Chamber)","paragraph_id":"para_2"},{"text":"9 July 2026 ( * )","paragraph_id":"para_3"},{"text":"( 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 …","paragraph_id":"para_4"},{"text":"In Case C‑186/25,","paragraph_id":"para_5"},{"text":"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","paragraph_id":"para_6"},{"text":"Institut po ribni resursi Varna","paragraph_id":"para_7"},{"text":"v","paragraph_id":"para_8"},{"text":"Rakovoditel na Natsionalnia organ po Savmestna operativna programa za transgranichno satrudnichestvo ‘Chernomorski baseyn 2014-2020’ i direktor na direktsia ‘Upravlenie na teritorialnoto satrudnichestvo’,","paragraph_id":"para_9"},{"text":"THE COURT (Seventh Chamber),","paragraph_id":"para_10"},{"text":"composed of F. Schalin, President of the Chamber, M. Gavalec (Rapporteur) and Z. Csehi, Judges,","paragraph_id":"para_11"},{"text":"Advocate General: T. Ćapeta,","paragraph_id":"para_12"},{"text":"Registrar: A. Calot Escobar,","paragraph_id":"para_13"},{"text":"having regard to the written procedure,","paragraph_id":"para_14"},{"text":"after considering the observations submitted on behalf of:","paragraph_id":"para_15"},{"text":"–        the Bulgarian Government, by T. Mitova and R. Stoyanov, acting as Agents,","paragraph_id":"para_16"},{"text":"–        the European Commission, by J. Aquilina, D. Drambozova and C. Ehrbar, acting as Agents,","paragraph_id":"para_17"},{"text":"having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,","paragraph_id":"para_18"},{"text":"gives the following","paragraph_id":"para_19"},{"text":"Judgment","paragraph_id":"para_20"},{"text":"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 …","paragraph_id":"para_21"},{"text":"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 ‘C …","paragraph_id":"para_22"},{"text":"Legal context","paragraph_id":"para_23"},{"text":"European Union law","paragraph_id":"para_24"},{"text":"Regulation No 2988/95","paragraph_id":"para_25"},{"text":"3         Article 2 of Regulation No 2988/95 provides as follows:","paragraph_id":"para_26"},{"text":"‘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.","paragraph_id":"para_27"},{"text":"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.","paragraph_id":"para_28"},{"text":"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.","paragraph_id":"para_29"},{"text":"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.’","paragraph_id":"para_30"},{"text":"4         Article 4(1), (2) and (4) of that regulation provides:","paragraph_id":"para_31"},{"text":"‘1.      As a general rule, any irregularity shall involve withdrawal of the wrongly obtained advantage:","paragraph_id":"para_32"},{"text":"–        by an obligation to pay or repay the amounts due or wrongly received,","paragraph_id":"para_33"},{"text":"–        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.","paragraph_id":"para_34"},{"text":"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.","paragraph_id":"para_35"},{"text":"…","paragraph_id":"para_36"},{"text":"4.      The measures provided for in this Article shall not be regarded as penalties.’","paragraph_id":"para_37"},{"text":"5         Article 5(1) of the regulation provides as follows:","paragraph_id":"para_38"},{"text":"‘Intentional irregularities or those caused by negligence may lead to the following administrative penalties:","paragraph_id":"para_39"},{"text":"…’","paragraph_id":"para_40"},{"text":"Regulation No 1303/2013","paragraph_id":"para_41"},{"text":"6         Article 2 of Directive 1303/2013, headed ‘Definitions’, provides:","paragraph_id":"para_42"},{"text":"‘For the purposes of this Regulation, the following definitions apply;","paragraph_id":"para_43"},{"text":"…","paragraph_id":"para_44"},{"text":"(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.’","paragraph_id":"para_45"},{"text":"Regulation (EU) No 232/2014","paragraph_id":"para_46"},{"text":"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:","paragraph_id":"para_47"},{"text":"‘(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 …","paragraph_id":"para_48"},{"text":"…","paragraph_id":"para_49"},{"text":"(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 [E …","paragraph_id":"para_50"},{"text":"8         Article 7 of that regulation, entitled ‘Programming and indicative allocation of funds for country and multi-country indicative programmes’, provided, in paragraph 7:","paragraph_id":"para_51"},{"text":"‘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.’","paragraph_id":"para_52"},{"text":"9         Article 9 of that regulation, entitled ‘Programming and allocation of funds for cross-border cooperation’, provided, in paragraph 2:","paragraph_id":"para_53"},{"text":"‘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 …","paragraph_id":"para_54"},{"text":"Regulation (EU) No 236/2014","paragraph_id":"para_55"},{"text":"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:","paragraph_id":"para_56"},{"text":"‘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 …","paragraph_id":"para_57"},{"text":"Implementing Regulation No 897/2014","paragraph_id":"para_58"},{"text":"11       Recital 12 of Implementing Regulation No 897/2014 states:","paragraph_id":"para_59"},{"text":"‘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 …","paragraph_id":"para_60"},{"text":"12       Article 2 of the same implementing regulation, entitled ‘Definitions’, provides:","paragraph_id":"para_61"},{"text":"‘For the purposes of this Regulation[,] the following definitions apply:","paragraph_id":"para_62"},{"text":"…","paragraph_id":"para_63"},{"text":"(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’.","paragraph_id":"para_64"},{"text":"13       Article 31 of that implementing regulation, entitled ‘National authorities and responsibilities of participating countries’, provides, in paragraphs 1 and 3:","paragraph_id":"para_65"},{"text":"‘1.      The national authority which has been appointed pursuant to point (a) of Article 20(6) shall inter alia:","paragraph_id":"para_66"},{"text":"(a)      be responsible for the set up and effective functioning of management and control systems at national level;","paragraph_id":"para_67"},{"text":"…","paragraph_id":"para_68"},{"text":"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.’","paragraph_id":"para_69"},{"text":"14       Title VII of that implementing regulation contains Chapter 4 in which Section 1, entitled ‘Procurement’, includes Article 52, entitled ‘Applicable rules’, which provides:","paragraph_id":"para_70"},{"text":"‘1.      If the implementation of a project requires procurement of goods, works or services by a beneficiary, the following rules shall apply:","paragraph_id":"para_71"},{"text":"(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;","paragraph_id":"para_72"},{"text":"…","paragraph_id":"para_73"},{"text":"2.      In all other cases the following obligations shall be complied with:","paragraph_id":"para_74"},{"text":"(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;","paragraph_id":"para_75"},{"text":"(b)      for contracts with a value of more than EUR 60 000, the following rules shall also apply:","paragraph_id":"para_76"},{"text":"…","paragraph_id":"para_77"},{"text":"3.      In all cases, the rules of nationality and origin set forth in Articles 8 and 9 of Regulation … No 236/2014 shall apply.’","paragraph_id":"para_78"},{"text":"15       Article 71 of Implementing Regulation No 897/2014, entitled ‘Financial corrections by the Managing Authority’, provides, in paragraph 1:","paragraph_id":"para_79"},{"text":"‘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.","paragraph_id":"para_80"},{"text":"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 tec …","paragraph_id":"para_81"},{"text":"16       Article 74 of that implementing regulation, entitled ‘Financial responsibilities and Recoveries’, is worded as follows, in paragraph 1:","paragraph_id":"para_82"},{"text":"‘The Managing Authority shall be responsible for pursuing the recovery of amounts unduly paid.’","paragraph_id":"para_83"},{"text":"Directive 2014/24/EU","paragraph_id":"para_84"},{"text":"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:","paragraph_id":"para_85"},{"text":"‘1.      Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Directive in any of the following cases:","paragraph_id":"para_86"},{"text":"(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 modifi …","paragraph_id":"para_87"},{"text":"(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:","paragraph_id":"para_88"},{"text":"…","paragraph_id":"para_89"},{"text":"(c)      where all of the following conditions are fulfilled:","paragraph_id":"para_90"},{"text":"…","paragraph_id":"para_91"},{"text":"(ii)      the modification does not alter the overall nature of the contract;","paragraph_id":"para_92"},{"text":"(iii)      any increase in price is not higher than 50% of the value of the original contract or framework agreement. …","paragraph_id":"para_93"},{"text":"…","paragraph_id":"para_94"},{"text":"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:","paragraph_id":"para_95"},{"text":"(i)      the thresholds set out in Article 4; and","paragraph_id":"para_96"},{"text":"(ii)      10% of the initial contract value for service and supply contracts and below 15% of the initial contract value for works contracts.","paragraph_id":"para_97"},{"text":"However, the modification may not alter the overall nature of the contract or framework agreement. …","paragraph_id":"para_98"},{"text":"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:","paragraph_id":"para_99"},{"text":"(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;","paragraph_id":"para_100"},{"text":"(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;","paragraph_id":"para_101"},{"text":"…’","paragraph_id":"para_102"},{"text":"Regulation 2018/1046","paragraph_id":"para_103"},{"text":"18       Article 33 of Regulation 2018/1046, entitled ‘Performance and principles of economy, efficiency and effectiveness’, provided, in paragraph 1:","paragraph_id":"para_104"},{"text":"‘Appropriations shall be used in accordance with the principle of sound financial management, and thus be implemented respecting the following principles:","paragraph_id":"para_105"},{"text":"(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;","paragraph_id":"para_106"},{"text":"(b)      the principle of efficiency which concerns the best relationship between the resources employed, the activities undertaken and the achievement of objectives;","paragraph_id":"para_107"},{"text":"(c)      the principle of effectiveness which concerns the extent to which the objectives pursued are achieved through the activities undertaken.’","paragraph_id":"para_108"},{"text":"19       Article 36 of that regulation, entitled ‘Internal control of budget implementation’, provided, in paragraph 1:","paragraph_id":"para_109"},{"text":"‘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.’","paragraph_id":"para_110"},{"text":"20       Article 63 of that regulation, entitled ‘Shared management with Member States’, provided, in paragraph 2:","paragraph_id":"para_111"},{"text":"‘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:","paragraph_id":"para_112"},{"text":"…","paragraph_id":"para_113"},{"text":"(c)      preventing, detecting and correcting irregularities and fraud;","paragraph_id":"para_114"},{"text":"…","paragraph_id":"para_115"},{"text":"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.","paragraph_id":"para_116"},{"text":"…’","paragraph_id":"para_117"},{"text":"Bulgarian law","paragraph_id":"para_118"},{"text":"The ZUSEFSU","paragraph_id":"para_119"},{"text":"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:","paragraph_id":"para_120"},{"text":"‘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:","paragraph_id":"para_121"},{"text":"…","paragraph_id":"para_122"},{"text":"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];","paragraph_id":"para_123"},{"text":"…","paragraph_id":"para_124"},{"text":"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;","paragraph_id":"para_125"},{"text":"…","paragraph_id":"para_126"},{"text":"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.’","paragraph_id":"para_127"},{"text":"22       Article 73 of the ZUSEFSU provides:","paragraph_id":"para_128"},{"text":"‘(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.’","paragraph_id":"para_129"},{"text":"(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.’","paragraph_id":"para_130"},{"text":"(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.’","paragraph_id":"para_131"},{"text":"The ZOP","paragraph_id":"para_132"},{"text":"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:","paragraph_id":"para_133"},{"text":"‘(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.","paragraph_id":"para_134"},{"text":"(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 …","paragraph_id":"para_135"},{"text":"(3)      Contracting authorities shall preserve information relating to contracts when applying exceptions to the law.’","paragraph_id":"para_136"},{"text":"24       The ZOP contains supplementary provisions, including paragraph 3, which provides:","paragraph_id":"para_137"},{"text":"‘§ 3.      The present law transposes the requirements of:","paragraph_id":"para_138"},{"text":"1.      Directive [2014/24];","paragraph_id":"para_139"},{"text":"…’","paragraph_id":"para_140"},{"text":"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 …","paragraph_id":"para_141"},{"text":"‘This decree states:","paragraph_id":"para_142"},{"text":"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;","paragraph_id":"para_143"},{"text":"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.","paragraph_id":"para_144"},{"text":"…’","paragraph_id":"para_145"},{"text":"26       Article 2 of the Naredba provides:","paragraph_id":"para_146"},{"text":"‘(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.","paragraph_id":"para_147"},{"text":"…","paragraph_id":"para_148"},{"text":"(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.","paragraph_id":"para_149"},{"text":"(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.’","paragraph_id":"para_150"},{"text":"27       The Naredba contains supplementary provisions which are worded, inter alia, as follows:","paragraph_id":"para_151"},{"text":"‘§ 1.      The Naredba also applies to:","paragraph_id":"para_152"},{"text":"…","paragraph_id":"para_153"},{"text":"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”).’","paragraph_id":"para_154"},{"text":"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%’.","paragraph_id":"para_155"},{"text":"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 c …","paragraph_id":"para_156"},{"text":"The dispute in the main proceedings and the questions referred for a preliminary ruling","paragraph_id":"para_157"},{"text":"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.","paragraph_id":"para_158"},{"text":"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 …","paragraph_id":"para_159"},{"text":"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 A …","paragraph_id":"para_160"},{"text":"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’).","paragraph_id":"para_161"},{"text":"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 experien …","paragraph_id":"para_162"},{"text":"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 i …","paragraph_id":"para_163"},{"text":"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.","paragraph_id":"para_164"},{"text":"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.","paragraph_id":"para_165"},{"text":"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 t …","paragraph_id":"para_166"},{"text":"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 i …","paragraph_id":"para_167"},{"text":"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 …","paragraph_id":"para_168"},{"text":"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 …","paragraph_id":"para_169"},{"text":"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:","paragraph_id":"para_170"},{"text":"‘(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 contra …","paragraph_id":"para_171"},{"text":"(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], contai …","paragraph_id":"para_172"},{"text":"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 cont …","paragraph_id":"para_173"},{"text":"(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 provis …","paragraph_id":"para_174"},{"text":"(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 capab …","paragraph_id":"para_175"},{"text":"(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 …","paragraph_id":"para_176"},{"text":"Consideration of the questions referred","paragraph_id":"para_177"},{"text":"The first question","paragraph_id":"para_178"},{"text":"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 t …","paragraph_id":"para_179"},{"text":"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 adjudi …","paragraph_id":"para_180"},{"text":"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 …","paragraph_id":"para_181"},{"text":"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 c …","paragraph_id":"para_182"},{"text":"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).","paragraph_id":"para_183"},{"text":"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).","paragraph_id":"para_184"},{"text":"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.","paragraph_id":"para_185"},{"text":"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.","paragraph_id":"para_186"},{"text":"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.","paragraph_id":"para_187"},{"text":"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).","paragraph_id":"para_188"},{"text":"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 …","paragraph_id":"para_189"},{"text":"The second question","paragraph_id":"para_190"},{"text":"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 cont …","paragraph_id":"para_191"},{"text":"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.","paragraph_id":"para_192"},{"text":"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.","paragraph_id":"para_193"},{"text":"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.","paragraph_id":"para_194"},{"text":"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.","paragraph_id":"para_195"},{"text":"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.","paragraph_id":"para_196"},{"text":"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.","paragraph_id":"para_197"},{"text":"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).","paragraph_id":"para_198"},{"text":"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.","paragraph_id":"para_199"},{"text":"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 b …","paragraph_id":"para_200"},{"text":"64       The referring court is uncertain as to whether the first and third conditions are satisfied in the present case.","paragraph_id":"para_201"},{"text":"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.","paragraph_id":"para_202"},{"text":"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 …","paragraph_id":"para_203"},{"text":"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 …","paragraph_id":"para_204"},{"text":"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 Uni …","paragraph_id":"para_205"},{"text":"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.","paragraph_id":"para_206"},{"text":"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 re …","paragraph_id":"para_207"},{"text":"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 contrac …","paragraph_id":"para_208"},{"text":"The third question","paragraph_id":"para_209"},{"text":"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 corre …","paragraph_id":"para_210"},{"text":"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.","paragraph_id":"para_211"},{"text":"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).","paragraph_id":"para_212"},{"text":"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).","paragraph_id":"para_213"},{"text":"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 …","paragraph_id":"para_214"},{"text":"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 opera …","paragraph_id":"para_215"},{"text":"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 i …","paragraph_id":"para_216"},{"text":"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 …","paragraph_id":"para_217"},{"text":"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 it …","paragraph_id":"para_218"},{"text":"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 …","paragraph_id":"para_219"},{"text":"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 …","paragraph_id":"para_220"},{"text":"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 …","paragraph_id":"para_221"},{"text":"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 …","paragraph_id":"para_222"},{"text":"The fourth question","paragraph_id":"para_223"},{"text":"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.","paragraph_id":"para_224"},{"text":"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 …","paragraph_id":"para_225"},{"text":"87       However, as Article 4(4) of that regulation provides, an administrative measure is not to be regarded as a penalty.","paragraph_id":"para_226"},{"text":"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 constitut …","paragraph_id":"para_227"},{"text":"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.","paragraph_id":"para_228"},{"text":"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 …","paragraph_id":"para_229"},{"text":"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.","paragraph_id":"para_230"},{"text":"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 responsibi …","paragraph_id":"para_231"},{"text":"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).","paragraph_id":"para_232"},{"text":"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 relatin …","paragraph_id":"para_233"},{"text":"The fifth question","paragraph_id":"para_234"},{"text":"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 …","paragraph_id":"para_235"},{"text":"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-spec …","paragraph_id":"para_236"},{"text":"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 in …","paragraph_id":"para_237"},{"text":"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 …","paragraph_id":"para_238"},{"text":"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, pro …","paragraph_id":"para_239"},{"text":"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 finan …","paragraph_id":"para_240"},{"text":"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.","paragraph_id":"para_241"},{"text":"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.","paragraph_id":"para_242"},{"text":"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, firs …","paragraph_id":"para_243"},{"text":"Costs","paragraph_id":"para_244"},{"text":"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.","paragraph_id":"para_245"},{"text":"On those grounds, the Court (Seventh Chamber) hereby rules:","paragraph_id":"para_246"},{"text":"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","paragraph_id":"para_247"},{"text":"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 oper …","paragraph_id":"para_248"},{"text":"2.       Article 2(m) of Implementing Regulation No 897/2014","paragraph_id":"para_249"},{"text":"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 successf …","paragraph_id":"para_250"},{"text":"3.       The general principle of good administration,","paragraph_id":"para_251"},{"text":"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 …","paragraph_id":"para_252"},{"text":"4.       Article 31(3) and Article 74 of Implementing Regulation No 897/2014","paragraph_id":"para_253"},{"text":"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.","paragraph_id":"para_254"},{"text":"5.       Point (c) of the first subparagraph of Article 63(2) of Regulation 2018/1046, read in conjunction with the principle of proportionality,","paragraph_id":"para_255"},{"text":"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.","paragraph_id":"para_256"},{"text":"[Signatures]","paragraph_id":"para_257"},{"text":"*       Language of the case: Bulgarian.","paragraph_id":"para_258"}],"word_count":12930,"cites":["C-497/15","C-498/15","C-384/17","C-617/19","C-195/21","C-260/14","C-261/14","C-175/23","C-230/18","C-471/23","C-477/23","C-406/14","C-670/11","C-599/13"],"cited_by":[],"sha256":"a49d8fe21b49999031d0ad9b41c6a9a650f55f2a8c6d7ee39e0b4cafb814fb5c","source_url":"https://publications.europa.eu/resource/celex/62025CJ0186","fetched_at":"2026-09-28T06:29:14.184+00:00","canonical":"https://legal.exploreworldai.com/ai/judgments/eu/c-186-25","risk_graph":"https://legal.exploreworldai.com/api/public/v1/risk?id=eu:c-186-25","relations_graph":"https://legal.exploreworldai.com/api/public/v1/relations?id=eu:c-186-25","changes":"https://legal.exploreworldai.com/api/public/v1/eu-praxis/changes","agent":"https://legal.exploreworldai.com/api/public/v1/eu-praxis/agent?id=eu:c-186-25"},"hash":"sha256:36fef513eec70a201439ac4e6a52a9e13a2794f9d01254ba40885b26c438358d","version":"legal-2026-10-23","expires":"2026-10-25T00:00:00.000Z","dependency":{"index_version":"legal-2026-10-23+legal-2026-10-23+2026-10-23T14:34:08","content_hash":"sha256:36fef513eec70a201439ac4e6a52a9e13a2794f9d01254ba40885b26c438358d","revalidate_after":"2026-10-24T11:16:53.421Z","max_copy_age_seconds":3600,"policy":"revalidate-required; 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