CELEX: 61995CJ0353
Competition
State aid
Levy on bets taken on horse-races
Transfer of resources to an undertaking established in another Member State

Grounds
1 By application lodged at the Court Registry on 17 November 1995, Tiercé Ladbroke SA (`Ladbroke') brought an appeal under Article 49 of the EC Statute of the Court of Justice against the judgment of the Court of First Instance of 18 September 1995 in Case T-471/93 Ladbroke v Commission ([1995] ECR II-2537, `the contested judgment') dismissing Ladbroke's action for the annulment of the decision of the Commission contained in its letter of 18 January 1993 rejecting a complaint (IV/34.013) lodged by Ladbroke under Articles 92 and 93 of the EEC Treaty (`the contested decision').
2 It appears from the contested judgment that, on 18 March 1991, the French Pari Mutuel Urbain (`the PMU'), an economic interest grouping set up by the main sociétés de courses (racecourse undertakings) in France with exclusive rights to organize off-course betting in France and to take bets abroad on races run in France or bets in France on horse-races run abroad, together with the Pari Mutuel Unifié Belge, a non-profit-making association, and the SC Auxiliaire PMU Belge, a cooperative company associated with it (hereinafter together referred to as `the Belgian PMU'), which were set up by the 11 Belgian racecourse operators, entered into an agreement under which the PMU was authorized to take, on the Belgian PMU's behalf, bets in France on Belgian horse-races (`the contested agreement') (paragraphs 1 to 3 of the contested judgment).
3 The contested agreement was made against the background of the French legislation, in particular Finance Law No 64-1279 of 23 December 1964 for 1965 (`Law No 64-1279'), Article 15(3) of which provides that the sociétés de courses authorized to organize off-course totalizator betting may be empowered to collect bets placed in France on foreign races provided that the bets taken are centralized and incorporated in the pool to be distributed in direct liaison with the body or bodies responsible for operating totalizator betting in the country concerned. That article further provides that the bets thus collected are to be subject to the statutory and fiscal levies in force in the country where the race is organized and that the proceeds of those levies are to be apportioned between the country where the bets are collected and the country where the race takes place. Such apportionment may include a special portion to cover administrative costs (paragraph 4 of the contested judgment).
4 In addition, Decree No 91-118 of 31 January 1991, on the collection of bets by the PMU on horse-races organized in Belgium (`Decree No 91-118'), provides that on the first FF 50 million of stakes collected annually on races organized in Belgium the PMU is to pay each month the stamp duty proceeds to the general budget and 0.876% of the total stakes to the Fonds National des Haras et des Activités Hippiques (National Fund for Stud-farms and Equestrian Activities). On the tranche between FF 50 million and FF 75 million of stakes collected annually, the payments referred to above and one third of the proceeds of the progressive additional levy on winnings (hereinafter `the PAL') are to be paid to the general budget and 0.181% of the total stakes to the Fonds National des Haras et des Activités Hippiques. On the tranche between FF 75 million and FF 100 million of stakes collected annually, the first-mentioned payments and two-thirds of the proceeds of the PAL are to be paid to the general budget and 0.362% of the total stakes to the Fonds National des Haras et des Activités Hippiques. Finally, on amounts over FF 100 million collected annually, those payments and the total proceeds of the PAL are to be paid to the general budget and 0.543% of the total stakes to the Fonds National des Haras et des Activités Hippiques (paragraph 5 of the contested judgment).
5 In France, the aggregate rates of the various statutory and fiscal levies which may be imposed on amounts staked on horse-races may not exceed 30%, whereas in Belgium, such levies may amount to a maximum of 35% according to Article 44(2)(d) of the Royal Decree of 8 July 1970 laying down general rules for charges treated as taxes on income (paragraphs 6 and 7 of the contested judgment).
6 Against that legislative background, the contested agreement provides that the levy on the proceeds of bets taken in France on Belgian horse-races, at the rate of 35% as a result of the combined provisions of the abovementioned French and Belgian legislation, was to be apportioned according to a system which takes account of turnover. For that purpose, the agreement provides for four tranches. The first tranche comprises turnover under FF 50 million, in respect of which the French public beneficiaries receive 6.386% of the levy and the Belgian party 23.114%. The second tranche comprises turnover between FF 50 and 75 million, in respect of which the French share rises to 10.817% and the Belgian share falls to 16.183%. The third tranche comprises turnover between FF 75 and 100 million, in respect of which the French share reaches 15.238% and the Belgian share 9.762%. Finally, for turnover above FF 100 million the Belgian share falls to 5.602% and that of the French authorities rises to 19.169% (paragraph 8 of the contested judgment).
7 On 12 July 1991, Ladbroke, which carries on business as a bookmaker, taking bets at fixed odds in Belgium on horse-races run abroad, lodged a complaint with the Commission against the PMU, the Belgian PMU and the French Republic pursuant, in particular, to Articles 92 and 93 of the Treaty. In that complaint Ladbroke requested the Commission to find that the contested agreement entailed the provision by France of unlawful and unnotified State aid to the Belgian PMU (paragraph 9 of the contested judgment).
8 Ladbroke stated in its complaint that bets taken in France under the contested agreement are collected and administered in the same way as bets on French races, being part of the French system and centralized in the PMU's totalizator system using the PMU's resources and technology. Subsequently transferred from the French to the Belgian totalizator system, the total staked in bets on Belgian races taken in France is subject to a 35% levy in line with the Belgian legislation. Of that 35% levy, an amount equivalent to 26% goes to the Belgian PMU and the remaining 9% is returned to the French system, with approximately 4% going to the French State and 5% to the French sociétés de courses. In contrast, as regards amounts staked in bets on French races taken in France, the levy of approximately 30% is allocated as to 18% to the French State and as to 10% to the sociétés de courses (paragraph 10 of the contested judgment).
9 Ladbroke accordingly claimed that the fact that the French Republic, the PMU and the French sociétés de courses retain only 9% of the levy on amounts staked on Belgian races and not 28%, as is the case for the levy on amounts staked on French races, is a form of fiscal treatment which, since it involves a charge on the French Republic and a profit for its recipient, the Belgian PMU, constitutes unlawful State aid for the Belgian PMU (paragraph 11 of the contested judgment).
10 By the contested decision the Commission rejected Ladbroke's complaint concerning the alleged grant of unlawful State aid, on the following grounds:
- the levy on the proceeds of betting on Belgian races cannot be termed a tax because it is itself subject to public deductions of a fiscal nature and in France, as in Belgium, it varies in accordance with a number of factors (paragraph 14 of the contested judgment);
- after deduction of the `exclusively French' contributions, which come to some 5%, the French public retention of 18%, which applies to the 30% levy on bets on French races, falls to less than 13% and approaches the French public retention of 6.4% currently imposed on the 35% levy applied to the proceeds of bets taken in France on Belgian races (paragraph 15 of the contested judgment);
- the share of the levy which accrues to the Belgian PMU is almost identical whether the bet is collected in France or in Belgium (paragraph 16 of the contested judgment);
- the contested agreement considered as a whole appears to be advantageous to the Belgian PMU only during its initial phase, because of the decrease in its share of the levy on higher tranches of turnover (paragraph 17 of the contested judgment).
11 However, in order to take account of any new facts that might emerge and of the possibility that in the years ahead the agreement might not be implemented beyond its initial phase, the Commission reserved the right to review the agreement after a period of four years and requested the French authorities to submit an annual report on how the terms of the agreement were being implemented in practice (paragraph 18 of the contested judgment).
12 In paragraphs 58 to 63 of the contested judgment, the Court of First Instance dismissed the action against the contested decision, holding, essentially, that in concluding that there was no advantage constituting State aid in favour of the Belgian PMU, the Commission was entitled to base itself on a comparison between the rates of revenue realized by the Belgian PMU in France and in Belgium.
13 The Court of First Instance nevertheless considered, in paragraph 68, that the reasoning of the contested decision was not such as to dispel all doubt which Ladbroke might have had as to the justification for the Commission's refusal to accept that the Belgian PMU gained a financial advantage and for the rejection of its complaint, so that the Commission was to be regarded as having contributed in part to the bringing of the action at first instance. Consequently, the parties, including the French Republic which intervened, were ordered to bear their own costs.
14 At the hearing, the French Government informed the Court that the contested agreement had ceased to be implemented on 1 October 1996, principally because insufficient bets were being placed.
15 For a more detailed account of the facts which gave rise to the dispute, reference is made to paragraphs 1 to 18 of the contested judgment.
16 In its appeal Ladbroke requests the Court to:
(1) allow the appeal and set the contested judgment aside;
(2) annul the contested decision, and
(3) order the Commission to pay its costs in the proceedings before both the Court of First Instance and the Court of Justice.
17 The Commission contends that the Court should dismiss the appeal and order Ladbroke to pay the costs.
18 The French Republic submits that the Court should dismiss the appeal.
19 In support of its appeal Ladbroke claims that the Court of First Instance erred in law in failing to deal expressly with its submission as to why the contested agreement involved State aid within the meaning of Article 92 of the Treaty, having wrongly considered that the contested agreement granted no advantage to the Belgian PMU.
20 The four limbs of that plea relate to the reasoning of the Court of First Instance contained, successively, in paragraphs 58, 59, 60 and 62 of the contested judgment.
21 Ladbroke criticizes, first, the reasoning in paragraph 58 of the contested judgment, in which the Court of First Instance considered, in substance, that the opening of the French market in horse-race betting, enabling the Belgian PMU to gain access, through the French PMU, to French punters, was a choice made by the French legislature which could not in itself be impugned as contrary to Article 92(1) of the Treaty solely because application of the contested agreement could have the effect of increasing the revenue of the Belgian PMU.
22 While accepting that, where a Member State allows an undertaking from another Member State to have access to its domestic market, that does not of itself involve State aid, Ladbroke considers that it is a different matter if revenue received by that undertaking from the opening of the market comes either directly from that Member State or as a result of a State-directed transfer of funds. In such cases, there must be a presumption that that revenue constitutes aid granted by the State or through State resources within the meaning of Article 92(1) of the Treaty, unless it is shown to be normal payment for services rendered by the foreign undertaking to either the State or the transferor of the funds.
23 According to Ladbroke, the Court of First Instance should therefore have analysed whether the French revenue obtained by the Belgian PMU came, as it maintained, from the State or State resources by way of a compulsory levy provided for under rules of French public law and by a transfer payment system ordered by the French Republic. If so, it should then have examined what part, if any, of that revenue could be said to be normal payment for services rendered by the Belgian PMU to the PMU.
24 Article 92 of the Treaty states: `Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.'
25 So, in order for there to be State aid within the meaning of that provision it is necessary, first, for there to be aid favouring certain undertakings or the production of certain goods and, second, for that advantage to come from the State or State resources.
26 It follows that if the reasoning in the contested decision to the effect that there was no advantage for the Belgian PMU was correct, the Court of First Instance was right to hold that that was enough in itself to justify the rejection of the complaint, and that it did not need to examine Ladbroke's argument that the Belgian PMU's French revenue came from a compulsory levy provided for under rules of French public law.
27 Consequently, it has to be considered whether the Court of First Instance was right to accept the reasoning in the contested decision to the effect that there was no treatment favouring the Belgian PMU.
28 Ladbroke challenges the reasoning in paragraphs 59 to 63 of the contested judgment, in which the Court of First Instance did not find fault with the finding in the contested decision that the Belgian PMU was not favoured because its revenue from bets taken in France under the contested agreement was obtained at a rate equivalent to that which it would have received if the bets on Belgian races were taken directly by it in Belgium.
29 The Court of First Instance stated, in particular, in paragraphs 60 and 62 of the contested judgment, that a comparison between the rate of revenue realized by the Belgian PMU in France and in Belgium on bets on Belgian races was the appropriate criterion for determining whether the Belgian PMU benefited from an advantage for the purposes of Article 92, since Article 15(3) of Law No 64-1279 established as a general rule that bets on horse-races run abroad were to be subject to the statutory and fiscal levies in force in the country in which the races were organized. According to the Court of First Instance, the way in which the levy on bets on Belgian races is treated in France, whereby the Belgian PMU receives a share of the levy comparable to that which it would receive if the Belgian statutory and fiscal retentions were applied, does not therefore constitute a measure which derogates from the scheme of the general system but on the contrary accords with that general system.$
30 Ladbroke claims, however, that the comparison should have been between the levies on bets placed in France on non-French races and the levies on bets placed in France on French races. If a Member State claims to regulate a particular economic activity (by way of taxation or imposition of levies), it must treat all such economic activity equally. The general system for determining the statutory and fiscal retentions on betting in France should therefore, contrary to the finding of the Court of First Instance, be that established for bets placed in France and not that established by Article 15(3) of Law No 64-1279, of which, moreover, the Belgian PMU is the sole beneficiary
31 It is true that a comparison between the revenue of the Belgian PMU in France and that which it would have received if the same bets had been taken in Belgium cannot be regarded per se as sufficient to justify the conclusion that there was no treatment favouring the Belgian PMU.
32 In paragraphs 61 to 63 of the contested judgment, however, the Court of First Instance examined Ladbroke's argument that the levy on Belgian races should be treated in the same way as the levy on bets on French races accruing to the PMU.
33 Ladbroke's argument disregards the specific nature of bets on Belgian races and what differentiates them from bets on French races. Since the two categories of bet are not identical, the existence of an advantage for the purposes of Article 92(1) of the Treaty cannot be deduced automatically from the difference of treatment to which they are subject.
34 In totalizator betting the stakes constitute a common pool which, after various levies, is distributed amongst the winners equally, whatever the origin of the bets.  The share of the stakes paid out to the winners thus cannot vary according to the State in which the bets were placed. The proper functioning of such a system can therefore be ensured only if the rate at which any levies which may be imposed on the bets laid on a horse-race is that of the State in which the the race is run.
35 Furthermore, the system of statutory and fiscal retentions on bets on French horse-races was adopted in the light of the specific regulatory and economic conditions prevailing with regard to horse-racing and totalizator betting in France. There can be no requirement to transpose that system to totalizator betting on Belgian horse-races, which are organized under different regulatory and economic conditions. Moreover, since the levy rates in France and Belgium differ and the application of Belgian rates to bets placed in France is justified for reasons relating to the logic of the totalizator betting system referred to in paragraph 34 of this judgment, that levy  cannot, in any event, be shared out between the various recipients on exactly the same basis in the two cases.
36 The French legislature therefore cannot be criticised for having treated bets on French races differently from bets on foreign races by providing, in Article 15(3) of Law No 64-1279, that bets on horse-races abroad were to be subject to the statutory and fiscal retentions in force in the country where the races are organized.
37 Accordingly the Court of First Instance was entitled to hold, in paragraph 63 of the contested judgment, that it was not possible to accept Ladbroke's argument that the way in which stakes on Belgian races were treated, which allegedly produced the advantage to the Belgian PMU complained of, should be the same as the way in which the levy accruing to the PMU was treated.
38 Furthermore, that conclusion is not affected by the fact that the general system governing bets on horse-races abroad has hitherto been applied only to bets on horse-races organized in Belgium. Article 15(3) of Law No 64-1279, which provides that the sociétés de courses authorized to organize off-course totalizator betting may be empowered to collect bets placed in France on foreign races, existed well before Decree No 91-118 was adopted and the contested agreement entered into, and both the latter follow the general system established by that provision.
39 In the light of the foregoing, the appeal must be dismissed.
Decision on costs
Costs
40  Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since Ladbroke has been unsuccessful, it must be ordered to pay the costs.
41 Under Article 69(4) of the Rules of Procedure, Member States which intervene in the proceedings are to bear their own costs. The French Republic will therefore bear its own costs.
Operative part
On those grounds,
THE COURT
hereby:
1. Dismisses the appeal;
2. Orders Tiercé Ladbroke SA to pay the costs;
3. Orders the French Republic to bear its own costs.