CELEX: 62002TJ0034
State aid
Concept of interested party
Formal notice to submit comments
Decision to open the procedure provided for in Article 88(2) EC
Tax deduction measure for certain overseas investments
Development aid for shipbuilding
Assessment in the light of Article 87(1) EC
Obligation to state reasons

Legal context

The ‘Loi Pons’ and the Commission’s decision not to raise objections under Articles 87 EC and 88 EC
The aid in question in this case relates to tax deduction measures for certain overseas investments, introduced initially
by the French Law of 11 July 1986 (rectifying Finance Law No 86-824 for 1986, published in JORF (
Official Journal of the French Republic
) of 12 July 1986, p. 8688), known as the ‘Loi Pons’.
On 13 August 1992, the French authorities notified those measures to the Commission for a decision on their compatibility
with the rules applicable to State aid.
By letter of 27 January 1993, the Commission informed the French Government of its decision not to raise objections under
Article 92 of the EC Treaty (now, after amendment, Article 87 EC) and Article 93 of the EC Treaty (now Article 88 EC) to the
tax measures provided for in the Loi Pons.

Council Directive 90/684/EEC on aid to shipbuilding
Council Directive 90/684/EEC of 21 December 1990 on aid to shipbuilding (OJ 1990 L 380, p. 27; ‘the Seventh Directive’) lays
down specific rules applicable to aid to that sector, which are an exception to the general prohibition in Article 92(1) of
the EC Treaty (now, after amendment, Article 87(1) EC). The application of the relevant provisions of the Seventh Directive
was extended by Council Regulation (EC) No 3094/95 of 22 December 1995 (OJ 1995 L 332, p. 1) and Council Regulation No 1904/96
of 27 September 1996 (OJ 1996 L 251, p. 5), both on aid to shipbuilding.
In Chapter II, entitled ‘Operating aid’, Article 4(1) of the Seventh Directive provides that ‘[p]roduction aid in favour of
shipbuilding and ship conversion may be considered compatible with the common market provided that the total amount of aid
granted in support of any individual contract does not exceed, in grant equivalent, a common maximum ceiling expressed as
a percentage of the contract value before aid, hereinafter referred to as the ceiling’.
Article 4(7) of the Seventh Directive provides:
‘Aid related to shipbuilding and ship conversion granted as development assistance to a developing country shall not be subject
to the ceiling. It may be deemed compatible with the common market if it complies with the terms laid down for that purpose
by OECD Working Party No 6 in its Agreement concerning the interpretation of Articles 6 to 8 of the Understanding [on Export
Credits for Ships of 3 August 1981] or with any later addendum or corrigendum to the said Agreement.
The Commission must be given prior notification of any such individual aid proposal. It shall verify the particular development
content of the proposed aid and satisfy itself that it falls within the scope of the Agreement referred to in the first subparagraph.’

Provisions relating to the administrative procedure
Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88] of the
EC Treaty (OJ 1999 L 83, p. 1) entered into force on 16 April 1999.
Article 1(h) of that regulation defines ‘interested party’ as ‘any Member State and any person, undertaking or association
of undertakings whose interests might be affected by the granting of aid, in particular the beneficiary of the aid, competing
undertakings and trade associations’.
Article 4(4) of Regulation No 659/1999 provides that where, after a preliminary examination, the Commission finds that doubts
are raised as to the compatibility of a notified measure with the common market, it is obliged to initiate the formal investigation
procedure. According to Article 26(2) of that regulation, ‘[t]he Commission shall publish in the Official Journal
…
the decisions which it takes pursuant to Article 4(4) in their authentic language version’.
Article 6(1) of Regulation No 659/1999 provides as follows with respect to the formal investigation procedure:
‘The decision to initiate the formal investigation procedure shall summarise the relevant issues of fact and law, shall include
a preliminary assessment of the Commission as to the aid character of the proposed measure and shall set out the doubts as
to its compatibility with the common market. The decision shall call upon the Member State concerned and upon other interested
parties to submit comments within a prescribed period which shall normally not exceed one month. In duly justified cases,
the Commission may extend the prescribed period.’
Article 14(1), concerning recovery of aid, provides:
‘Where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned
shall take all necessary measures to recover the aid from the beneficiary … The Commission shall not require recovery of the
aid if this would be contrary to a general principle of Community law.’

Facts and procedures

Description of the
Le Levant
operation
According to the description provided by the French authorities to the Commission during the administrative procedure, the
operation in question (‘the
Le Levant
operation’) consisted of ensuring under the Loi Pons the financing and operation of the cruise vessel
Le Levant
, for a period of approximately seven years, by investors who were natural persons through one-person limited liability undertakings
(EURLs), constituted solely for that purpose and brought together in a maritime co-ownership.
The investors’ interest in joining that operation lay in the opportunity they were given under the Loi Pons system of deducting
from their taxable income the cost of their investment and the expenses related to its purchase (financial interest) and to
its possession (depreciation) and also any losses incurred in operating the vessel.
The legal and financial outline of the
Le Levant
operation has been summarised as follows by the French authorities. On 9 December 1996, a major French bank (‘the Bank’)
set up the co-ownership of the vessel
Le Levant
, divided into 740 co-ownership shares, or ‘quirats’. The management of the co-ownership was entrusted to Compagnie des îles
du Levant (‘CIL’), which was given authority inter alia to sign a shipbuilding contract with the shipyard Alstom Leroux Naval
and to manage the operation of the vessel. In 1997, natural persons each set up an EURL to which the quirats were sold by
the Bank by means of a public offer. CIL was to take care of the operation, maintenance and technical and commercial management
of the vessel on behalf of the maritime joint ownership for a period of seven years. CIL also undertook to ensure the investors
a minimum gross operating result and to make good any losses which exceeded the estimates. As payment for its services, CIL
was to receive annually a percentage of the joint ownership’s gross income in return for the management of the vessel, a percentage
of the positive gross operating results in return for the operating guarantee, and a lump sum in return for the management
of the co-ownership.
The Bank undertook to acquire the shares in the EURLs from the investors before 15 December 2003. Each EURL, moreover, undertook
to transfer its quirats to the Bank before 29 February 2004. At the same time, CIL undertook to repurchase all of the quirats
from the Bank before 31 January 2004, and the Bank undertook to transfer them to it before 29 February 2004.

Administrative procedure
At the end of 1998, the Commission learned through the media that the cruise vessel
Le Levant
, built in France by Alstom Leroux Naval for the contract price of FRF 228.55 million, had been financed through tax concessions
granted for investments in the French overseas territories.
Following a preliminary investigation, during which the Commission received comments from the French authorities given, inter
alia, by letter of 12 May 1999, the Commission, by letter of 2 December 1999, informed them of its intention to open the procedure
provided for in Article 88(2) EC in respect of unnotified State aid C 74/99 (ex NN 65/99) relating to development aid granted
by France to Saint-Pierre-et-Miquelon (shipbuilding). That decision was published in the
Official Journal of the European Communities
of 5 February 2000 (OJ 2000 C 33, p. 6; ‘the decision to open the procedure’). The Commission stated that, in the light of
Article 4(7) of the Seventh Directive, it had doubts as to the significance of the development component of the project in
question. The decision to open the procedure also called on the interested parties to submit their comments within one month
of the date of publication.
The French authorities submitted their comments by letters of 12 January and 14 June 2000 and 27 April and 11 June 2001. CIL
also submitted its comments during the administrative procedure by letters of 18 November 1999 and 3 March 2000.
By letter of 13 July 2001, EURL
Le Levant
114, one of the EURLs involved in the
Le Levant
operation, asked the Commission for clarification on its position concerning the identification of the beneficiaries of the
aid under investigation. It asked the Commission, inter alia, to confirm that it was not an interested party for the purposes
of the administrative procedure under way.
When it did not receive a written reply from the Commission, EURL
Le Levant
114 repeated its request by letter of 19 July 2001. In that letter, it also stated that it had been informed that the Commission
was preparing to examine the file on 25 July 2001 and asked the Commission to grant it a reasonable time in which to submit
its comments on the procedure. It put forward several reasons in support of its request, referring to the last sentence of
Article 6(1) of Regulation No 659/1999, and stated inter alia that it had been justified in considering that it was not concerned
by that procedure in the light of the statements contained in the decision to open the procedure.
By letter of 24 July 2001, the Commission replied to the two letters from EURL
Le Levant
114, stating merely that the time-limit allowed for the interested parties to submit comments had long since lapsed.

The contested decision
On 25 July 2001, the Commission adopted Commission Decision 2001/882/EC on the State aid implemented by France in the form
of development assistance for the cruise vessel
Le Levant
, built by Alstom Leroux Naval for operation in Saint-Pierre-et-Miquelon (‘the contested decision’). That decision was published
in the Official Journal on 12 December 2001 (OJ 2001 L 327, p. 37).
According to the contested decision, the aid was granted in 1996 when the cruise vessel
Le Levant
was acquired by a group of private investors who had set up a maritime joint ownership structure on the Bank’s initiative.
The vessel was subsequently leased to CIL, a subsidiary of a French company registered in Wallis-et-Futuna, a French overseas
territory. The investors were allowed to deduct their investment from their taxable income pursuant to the Loi Pons, which
introduced a tax scheme that was approved by the Commission in 1992. Those tax concessions enabled CIL to operate the vessel
on favourable terms (recitals 5 and 6). The aid derived from the tax concessions amounted to FRF 78 million (EUR 11.9 million)
(recital 7). The investors had the right and obligation to resell their shares after five years, that is, at the beginning
of 2004. CIL also had the right and obligation to repurchase those shares at a price which allowed the value of the aid to
be passed on to it. As a condition of the aid, CIL was required to operate the vessel for a minimum of five years, mostly
to and from Saint-Pierre-et-Miquelon, for 160 days a year (recital 5).
The contested decision assesses the aid in question in the light of Article 4(7) of the Seventh Directive, ‘given that it
concerns aid for shipbuilding granted as development assistance in 1996 under an aid scheme (the Loi Pons) approved in 1992’
(recital 16).
According to that decision, that assessment showed that the
Le Levant
operation met the OECD development criteria, as communicated to the Member States by the Commission’s letter of 3 January
1989 (recitals 18, 19 and 21).
However, under the principle laid down by the Court of Justice in Case C-400/92
Germany
v
Commission
[1994] ECR I‑4701, according to which the Commission is obliged to verify the development content of the project separately
from the OECD criteria, the contested decision finds that the
Le Levant
operation did not have a genuine development component as contemplated in that judgment, given the insufficient economic
and social benefits for Saint-Pierre-et-Miquelon (recitals 20 and 22 to 33).
Consequently, Article 1 of the contested decision declares that ‘[t]he State aid which France has implemented in the form
of tax concessions and as development assistance for the cruise vessel
Le Levant
… cannot be regarded as genuine development assistance within the meaning of Article 4(7) of [the Seventh Directive] and
is therefore incompatible with the common market’.
At the stage of determining the beneficiary from whom the incompatible aid must be recovered, the contested decision reviews
one by one the situations of the investors, the operator of the vessel (CIL) and the shipyard.
According to the contested decision, the immediate beneficiaries of the aid are the investors, who benefited from the tax
concessions (recital 35). On that point, the decision reproduces the arguments put forward by the French authorities, which
indicate that the investors obtained advantages from the tax concessions and were the owners of the vessel under the terms
of the joint ownership (recital 36). Thus, ‘there is no doubt that it is the investors, as the direct beneficiaries and current
owners of the vessel, which should repay the aid’.
Regarding the operator of the vessel (CIL), the contested decision notes that the investors will continue to enjoy the advantages
of the tax concessions until the vessel is sold to CIL, that is, until the beginning of 2004, and that, according to the information
available, the price of that sale will transfer the aid to the operator CIL. Thus CIL will be the principal beneficiary of
the aid once the vessel has been sold to it at an advantageous price (recital 36). The contested decision also states that
‘[i]f the ship had been sold to CIL at below the market price and if the aid had thus been transferred to it, it would be
CIL that would have to repay the aid’ and that ‘[s]ince this transfer will not take place before mid-2003, the operator CIL
cannot be considered liable to repay the aid at this stage’ (recital 40).
As to the shipyard, the contested decision observes that it benefited indirectly from the aid in that the aid enabled it to
obtain an order that it might not otherwise have won (recital 37). However, the decision finds that the aid should not be
recovered from the shipyard, since it cannot be held responsible for the operation of the ship after delivery and the rules
applied in the present case are not directed at the shipyard (recital 41).
Accordingly, Article 2 of the contested decision requests the French Republic to take all necessary measures to ‘discontinue
and recover from the investors, as the direct beneficiaries and current owners of the cruise vessel, the aid referred to in
Article 1 and unlawfully made available to the beneficiary’.

Legal proceedings
On 8 October 2001, France brought an action before the Court of Justice for annulment of the contested decision, by which
it contested the Commission’s assessment that the disputed aid was not development aid.
On 20 February 2002, EURL
Le Levant
001 and the other applicants, natural and legal persons whose names are listed in the annex, brought the present action before
the Court of First Instance.
By separate document lodged on 23 April 2002, B and 255 other applicants submitted an application for interim measures, asking
for suspension of operation of the contested decision until a ruling was given on the substance of the action for annulment
and suspension of operation of the contested decision until the Court of First Instance had given a ruling on the application
for interim measures.
By order of the President of the Court of First Instance of 25 June 2002 in Case T-34/02 R
B
v
Commission
[2002] ECR II‑2803, the application for interim measures was dismissed.
By order of the President of the Fifth Chamber (Extended Composition) of the Court of First Instance of 30 April 2002, the
proceedings in Case T-34/02 were suspended pending final judgment of the Court of Justice in Case C-394/01.
By judgment of 3 October 2002 in Case C‑394/01
France
v
Commission
[2002] ECR I‑8245, the Court of Justice dismissed the action, stating that the various arguments put forward by the French
Republic criticising the Commission’s assessments of job creation and economic benefits were not well founded or had not been
put forward during the administrative procedure. The suspension of proceedings in the present case was lifted as a result
of that judgment.
By way of measures of organisation of procedure, on 22 October 2004 the Court of First Instance called upon the parties to
submit their comments on two questions, to which the applicants replied by letter of 19 November 2004 and the Commission by
letter of 18 November 2004.
By its first question, the Court of First Instance asked the parties to state whether the sale of the cruise vessel to CIL
had taken place, at what price, and whether the price had enabled the value of the aid to be passed on.
In reply, the applicants stated that the cruise vessel
Le Levant
had been sold to CIL on 2 January 2004. On that date, CIL purchased the 738 quirats of the vessel which were not in its possession
for the amount of EUR 17 731 821. According to the applicants, that amount was determined in accordance with the promises
of purchase and sale made at the beginning of the operation and corresponds to approximately 50% of the initial value of the
shares in the joint ownership, which had been purchased for a total amount of EUR 35 789 508. As of 2 January 2004,  then,
CIL was the sole owner of the 740 quirats which made up the joint ownership of the cruise vessel
Le Levant
examined in the contested decision, and the joint ownership was dissolved.
The Commission, for its part, stated that it did not have any information on the sale price and whether it had enabled the
value of the aid to be passed on.
By its second question, the Court of First Instance asked the parties, if it emerged that the investors were no longer the
current owners of the cruise vessel
Le Levant
and the sale price of the cruise vessel had passed the value of the aid on to CIL, to state whether the aid in question could
be recovered from the investors.
In reply, the applicants stated that they were of the view that the aid in question could no longer be recovered from them,
since CIL had been the owner of the vessel
Le Levant
since 2 January 2004 and CIL was the real beneficiary of the aid in question here because it had benefited, in its capacity
as owner of the vessel and active undertaking on the market, from an economic advantage obtained outside normal market conditions
because of the intervention of the French authorities. Consequently, the applicants queried whether Article 2 of the contested
decision, according to which France was to take all necessary measures to recover the aid from the investors, had become devoid
of purpose. As suggested by the contested decision itself in recitals 36 and 40, the applicants stated that Article 2 would
become devoid of purpose on the day on which the value of the aid was transferred to CIL, the operator of the vessel. The
applicants then stated that, if they maintained their action for annulment, the Court of First Instance could in any event
find that, regardless of the grounds for annulment, the aid in question could not be recovered from the private investors
according to the contested decision itself.
The Commission submitted that the Court’s second question is not related to the present case, which concerns the lawfulness
of the contested decision and must therefore be considered solely on the basis of the information it had during the administrative
procedure. The Court of First Instance’s second question in fact relates to the implementation of the contested decision,
under which it is for the Member State concerned to communicate with the Commission, by way of administrative cooperation,
to inform it of any questions or difficulties to which the implementation might give rise.
On 16 December 2004, the parties were called upon by the Court to attend an informal meeting before the President of the First
Chamber (Extended Composition) and the Judge-Rapporteur. That meeting was held at the Court on 24 January 2005.
On hearing the report of the Judge-Rapporteur, the Court of First Instance (First Chamber, Extended Composition) decided to
open the oral procedure and, by way of measures of organisation of procedure, asked the applicants and the Commission to produce
certain documents.
By letter from the applicants of 9 August 2005 and by letter from the Commission of 28 July 2005, the parties produced the
documents requested by the Court.
The parties presented oral argument and answered the questions put by the Court at the hearing on 27 September 2005.

Forms of order sought
The applicants claim that the Court should:
–        annul the contested decision;
–        in the alternative, rule that the aid in question cannot be recovered from the private investors on the basis of Article 2
of the contested decision;
–        order the Commission to pay the costs.
The Commission contends that the Court should:
–        dismiss the action as unfounded;
–        order the applicants to pay the costs, including those relating to the interim proceedings.

Law

The admissibility of the action with respect to certain applicants
1. The authorities granted on behalf of certain EURLs
–       Arguments of the parties
The Commission observes that the lawyer for the applicants is acting in the present case under the authorities conferred on
him, first, by the managers of the various applicant EURLs and, second, by the sole shareholders of each of those EURLs. In
that context, it states that the authorities granted to the lawyer by the managers of the various EURLs are ‘signed’ by a
stamp and are not dated. The Commission further notes that the authorities given by the sole shareholders of 10 of the EURLs
–
Le Levant
3,
Le Levant
4,
Le Levant
73,
Le Levant
96,
Le Levant
150,
Le Levant
153,
Le Levant
182,
Le Levant
209,
Le Levant
272 and
Le Levant
273 – are not dated. It also notes that no authority was given to the lawyer by the sole shareholders of eight of the EURLs
–
Le Levant
15,
Le Levant
20,
Le Levant
46,
Le Levant
144,
Le Levant
203,
Le Levant
250,
Le Levant
251 and
Le Levant
269. The Commission leaves it to the Court to rule on the validity of the authorities.
The applicants submit that Article 44 of the Rules of Procedure of the Court of First Instance requires only that proof be
provided that the authority to act has been conferred on the lawyer by someone authorised for that purpose, without imposing
any specific formal conditions. In the present case, moreover, the Commission does not deny that the manager of an EURL is
fully empowered to bring legal proceedings on behalf of the company he or she manages. The applicants add that, if the Court
were to find it necessary, they could always be called upon to put the application in order pursuant to Article 44(6) of the
Rules of Procedure.
–       Findings of the Court
Article 44(5) of the Rules of Procedure provides:
‘An application made by a legal person governed by private law shall be accompanied by:
(a)      the instrument or instruments constituting and regulating that legal person or a recent extract from the register of companies,
firms or associations or any other proof of its existence in law;
(b)      proof that the authority granted to the applicant’s lawyer has been properly conferred on him by someone authorised for the
purpose.’
First, as to the fact that the documents conferring authority on the lawyer by the managers of the various EURLs are not dated,
the Court notes that they were necessarily drawn up before the action was brought, because they are one of the annexes thereto.
Accordingly, the fact that there is no date on them does not make the EURLs’ action inadmissible. The same holds true for
the argument that the authorities conferred on the lawyer by the sole shareholders of 10 of the EURLs –
Le Levant
3,
Le Levant
4,
Le Levant
73,
Le Levant
96,
Le Levant
150,
Le Levant
153,
Le Levant
182,
Le Levant
209,
Le Levant
272 and
Le Levant
273 – are not dated.
Second, regarding the fact that the authorities conferred on the lawyer by the managers of the various EURLs were signed using
a stamp of the signature, name and title of the manager, the Court notes that the use of such a stamp can be explained by
the fact that the various EURLs all have the same manager as signatory who, rather than having to sign each application by
hand, showed his consent through the use of a stamp. Accordingly, the signature of those authority documents through the use
of a stamp does not lead to the EURLs’ action being inadmissible, in the absence of other factors which cast doubt on the
manager’s consent.
Third, regarding the fact that no authority was conferred on the lawyer by the sole shareholders of eight of the EURLs –
Le Levant
15,
Le Levant
20,
Le Levant
46,
Le Levant
144,
Le Levant
203,
Le Levant
250,
Le Levant
251 and
Le Levant
269 – it suffices to state that the authority conferred on the lawyer by the manager is sufficient to allow that lawyer to
represent the interests of those companies, all the more so as the Commission’s observations do not call into question the
authority conferred by the manager, but merely criticise certain formal aspects of the conferral of that authority, namely
the lack of a date and the use of a stamp for the signature.
It follows from the foregoing that none of the arguments put forward by the Commission affects the admissibility of the action
in respect of the various EURLs.
2. The authorities granted by certain natural persons on their own behalf
–       Arguments of the parties
The Commission states that the authorities signed by 4 of the 256 natural persons who brought the action do not contain the
place and date of their signature. It leaves it to the Court to rule on the validity of those authorities.
The applicants maintain that the Rules of Procedure do not provide that the lodging of a document attesting to the authority
conferred on a lawyer is a condition of admissibility of the action. The lawyer acting for a party is required only to establish
his professional status and is not required to produce a duly executed authority to act, subject to proof, if challenged,
that he is so authorised (Case 14/64
Gualco
v
High Authority
[1965] ECR 51 and Case T‑139/89
Virgili-Schettini
v
Parliament
[1990] ECR II‑535).
–       Findings of the Court
The investors, private individuals, are involved in the present case in a dual capacity. The first is that of sole shareholder
in the applicant EURLs and it is in that capacity that the investors provided the authorities to act examined above in order
to enable the lawyer designated therein to represent those EURLs before the Court. The investors are also involved as natural
persons and it is in that capacity that they conferred authority on the lawyer to represent them in the present case.
Article 44(3) of the Rules of Procedure provides:
‘The lawyer acting for a party must lodge at the Registry a certificate that he is authorised to practise before a Court of
a Member State or of another State which is a party to the EEA Agreement.’
It follows from that provision that the lawyer acting for a party is not required to produce a duly executed authority to
act in the lodging of an application, subject to proof if challenged that he is so authorised (
Gualco
v
High Authority
, at p. 57).
Thus the Rules of Procedure allow natural persons to be represented by a lawyer without that lawyer having to produce a document
of authority to act, whereas that is a requirement for representing a legal person. It is, in principle, sufficient that the
lawyer produce a document attesting to his professional status as a lawyer in a Member State. That formality is sufficient
and was complied with in the present case.
The Commission’s observations in any event relate to the fact that the documents conferring authority to act lodged by 4 of
the 256 natural persons who brought the action do not contain the place and date of their signature. Those documents were,
however, prepared before the action was brought, since they make up one of the annexes to the application; the question of
the place and date of their signature is irrelevant for the purposes of this case. It follows that the lack of date and place
on the documents conferring authority to act does not give rise to an issue which calls for the application to be put in order.
It follows from the foregoing that none of the arguments put forward by the Commission affects the admissibility of the action
with respect to the applicant natural persons.
Consequently, the pleas of inadmissibility put forward by the Commission must be rejected.

Substance
The applicants put forward 11 pleas in law in support of their action. The first plea alleges lack of competence on the part
of the Commission and infringement of Article 3(1)(g) EC, Article 5 EC, Article 87 EC and Article 211 EC and also violation
of Article 1 of Protocol No 1 to the European Convention on Human Rights and Fundamental Freedoms (‘the ECHR’). The second
plea alleges violation of the procedural guarantees provided for in Article 88(2) EC, Article 6 of Regulation No 659/1999
and Article 6 of the ECHR. The third plea alleges infringement of Article 87(1) EC. The fourth plea alleges infringement of
Article 4(7) of the Seventh Directive. The fifth plea alleges violation of the principle of the protection of legitimate expectations.
The sixth plea alleges violation of the principle of legal certainty. The seventh plea alleges infringement of Article 14
of Regulation No 659/1999. The eighth plea alleges material inaccuracies and manifest errors of assessment of fact. The ninth
plea alleges violation of the obligation to state reasons. The tenth plea alleges infringement of Article 153(2) EC. The eleventh
plea alleges infringement of Commission Regulation (EC) No 69/2001 of 12 January 2001 on the application of Articles 87 and
88 of the EC Treaty to de minimis aid (OJ 2001 L 10, p. 30).
It is appropriate to begin by considering the second plea, before considering the arguments put forward under the third and
ninth pleas.
1. The second plea
–       Arguments of the parties
The applicants criticise the Commission for infringing the right to be heard provided for in Article 88(2) EC and in Article
6 of Regulation No 659/1999, taken for the application of that provision, and also the principles laid down in Article 6 of
the ECHR. They maintain that the contested decision is injurious to them in designating them as direct beneficiaries of illegal
State aid which they are required to reimburse, and submit that at no time have they been properly called upon or allowed
to present their observations on the matter.
The applicants maintain, first, that the decision to open the procedure did not enable them to consider the possibility that
they might be named as beneficiaries of the aid, because it implied that that aid had been granted to the shipyard or to CIL,
the operator of the vessel. Accordingly, once it had changed its assessment of the beneficiaries following publication of
the decision to open the procedure, the Commission should have published a fresh decision to open the procedure, given the
applicants a period in which to enable them to submit their comments, or taken any appropriate measures in order to draw their
attention to the hitherto unknown status which was to be conferred on them in the final decision, which differed significantly
from the status contemplated in the decision to open the procedure. Such comments were all the more necessary in the light
of the fact that the contested decision modifies previous Commission practice relating to the concept of ‘beneficiary undertaking’
by applying it to private investors involved in a financial investment, that that decision does not take account of the earlier
approval of the Loi Pons by the Commission and that it does not take account, either, of the conduct of the French authorities,
which did not communicate the decision to open the procedure to the applicants – taken as beneficiaries of the aid – as it
was asked to do in the decision to open the procedure.
The Commission states that, according to the case-law, Article 88(2) EC does not require individual notice to be served but
only that all persons who may be concerned be made aware that a procedure has been initiated and given an opportunity to submit
their comments in this regard. That being so, the publication of a notice in the Official Journal is an adequate and sufficient
means of informing all the parties concerned that a formal procedure has been initiated (Case 323/82
Intermills
v
Commission
[1984] ECR 3809, paragraph 17, and Joined Cases T‑129/95, T‑2/96 and T‑97/96
Neue Maxhütte Stahlwerke and Lech-Stahlwerke
v
Commission
[1999] ECR II‑17, paragraph 232). In the present case, the decision to open the procedure, published in the Official Journal
on 5 February 2000, meets those requirements because that publication provided the parties concerned with general information
on the essential aspects of the aid project and set out the points of the case about which the Commission had doubts.
The Commission adds that, although the applicants may have believed that they were not beneficiaries of the aid measure, they
cannot maintain that they were not concerned by that procedure, because it is settled case-law that ‘parties concerned’ within
the meaning of Article 88(2) EC include not only the undertaking or undertakings benefiting from the aid, but those persons,
undertakings or associations whose interests might be affected by the grant of the aid, in particular competing undertakings
(
Intermills
v
Commission
, paragraph 16, and Case T‑69/96
Hamburger Hafen- und Lagerhaus and Others
v
Commission
[2001] ECR II‑1037, paragraph 40).
Moreover, in response to the applicants’ argument that it changed its assessment of the beneficiaries of the aid after publication
of the decision to open the procedure, which should have led to the publication of a fresh decision to open the procedure
in order to ensure that their procedural guarantees were upheld, the Commission maintains that its complaints against the
French Republic were not changed during the formal investigation procedure. Thus, the decision to open the procedure sets
out the Commission’s doubts as to the compatibility of the aid in the light of the Seventh Directive and the final decision
assesses the aid in relation to the conditions laid down in Article 4(7) of that directive and finds that the aid is incompatible
with the common market.
Second, the applicants maintain that the Commission infringed the third sentence of Article 6(1) of Regulation No 659/1999
by refusing to grant the extension of the one-month time-limit for submitting comments requested by EURL
Le Levant
114 in its letter of 19 July 2001. That request for an extension was duly justified, given that the investors could legitimately
consider that they were not concerned by the decision to open the procedure and that the Commission is not required to take
a decision on State aid within any specific time period.
The Commission states that it is apparent from the letter of 13 July 2001 from EURL
Le Levant
114 that it had learned too late of the decision to open the procedure, published on 5 February 2000. That belated discovery
also affects the other EURL
Le Levant
undertakings, because they are all managed by an employee of the Bank and it was the manager of EURL
Le Levant
114 who gave the legal representative of that company the authority to intervene before the Commission in the administrative
procedure. Accordingly, the failure of EURL
Le Levant
114 to intervene in the procedure which led to the adoption of the contested decision was not attributable to the content
of the decision to open the procedure but only to that company’s learning too late of the decision to open the procedure and
of the existence of the formal investigation procedure. The applicants cannot therefore allege that the content of the decision
to open the procedure led them to believe that they were not concerned by that procedure and that they thereby suffered an
infringement of their procedural guarantees. Moreover, the Commission states that the usual period of one month allowed following
publication of the decision to open the procedure had been largely exceeded, as it stated in its letter of 24 July 2001 in
reply to the two letters from EURL
Le Levant
114.
–       Findings of the Court
The first subparagraph of Article 88(2) EC provides:
‘If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State
or through State resources is not compatible with the common market having regard to Article 87, or that such aid is being
misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined
by the Commission.’
It follows from that provision that, before finding that a State aid measure is incompatible with the common market, the Commission
must have called on the interested parties to submit their comments.
The scope of that obligation is specified by Article 1(h) of Regulation No 659/1999, which defines ‘interested party’ as ‘any
Member State and any person, undertaking or association of undertakings whose interests might be affected by the granting
of aid, in particular the beneficiary of the aid, competing undertakings and trade associations’.
Where, as in the present case, the formal investigation procedure concerns illegal aid which has been implemented, the question
of identifying the beneficiary takes on major importance, since Article 14(1) of Regulation No 659/1999 provides that, in
the event of a ‘negative decision’, finding that such aid is incompatible with the common market, ‘the Commission shall decide
that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary’.
Accordingly, the applicants in the present case, that is, the investors who were allowed to deduct their investment from their
taxable income, had to be called on to submit their comments in the administrative procedure, because they are named in the
contested decision as direct beneficiaries of the aid (recital 35) and they are ‘interested parties’ within the meaning of
the above definition.
The identification of the beneficiary of the aid is necessarily one of the ‘relevant issues of fact and law’ within the meaning
of the first sentence of Article 6(1) of Regulation No 659/1999 which must, under that provision, be contained in the decision
to open the procedure if that is possible at that stage of the procedure, since it is on the basis of that identification
that the Commission will be able to adopt the recovery decision.
In the absence of an indication that a party is a beneficiary of the aid in dispute, either in the decision to open the procedure
or at a later stage in the formal investigation procedure prior to adoption of the final decision finding that the aid is
incompatible with the common market, that type of interested party cannot be regarded as having been duly called on to submit
his comments, because he may legitimately believe that such comments are not necessary, since he is not named as the beneficiary
of the aid to be recovered.
In that context, that is, with a view to determining whether the beneficiaries of the aid to be recovered could in fact be
considered as having been called on to submit their comments in the administrative procedure, the decision to open the procedure
published in the Official Journal on 5 February 2000 should be examined first.
In that decision, the Commission expressed doubts as to whether the conditions laid down in Article 4(7) of the Seventh Directive
had been complied with. It also invited the interested parties to submit their comments within one month of the date of publication.
The Court finds, however, that the decision to open the procedure made no reference to the investors as potential beneficiaries
of the alleged aid but, on the contrary, gave the impression that that beneficiary was CIL, which was referred to as the operator
and ultimate owner of the vessel.
Thus, with respect to the private investors, the decision to open the procedure stated in the third paragraph of the part
entitled ‘Summary’:
‘The vessel was financed by private investors who subsequently leased the vessel to CIL. The investors were entitled to deduct
their investment costs from their taxable income in accordance with a fiscal scheme approved by the Commission …’
With respect to CIL, however, that decision stated at the same place:
‘The tax breaks had an estimated aid intensity equivalent to 34% net and enabled CIL to hire the vessel at a very low price.
CIL is the operator (and eventual owner) of the vessel. … It is obliged to exploit the vessel for a minimum of five years
mainly to and from Saint-Pierre-et-Miquelon. Furthermore, after the five years CIL is obliged to buy the vessel from the investors.’
The investors were thus legitimately able to believe that they were not targeted by the decision to open the procedure, given
that it stated that the tax scheme under which they had been allowed to deduct their investment from their taxable income
– the Loi Pons – had been approved by the Commission.
Moreover, it is apparent from the content of the discussions which took place between the French authorities and the Commission
during the preliminary investigation procedure that the only beneficiary of the aid mentioned at that stage of the procedure
was CIL, ‘the owner-operator’ of the vessel, and not the private investors (see the letter of 12 May 1999 from the French
authorities to the Commission). It is, moreover, in that context that CIL − and not the private investors − was able to participate
in the administrative procedure (see recitals 10 and 11 of the contested decision).
The initial designation of CIL as the beneficiary of the alleged aid is, moreover, supported by the fact that the decision
to open the procedure refers to the beneficiary of the aid in the singular, not in the plural as in the contested decision.
In the decision to open the procedure, the Commission asked the French authorities (penultimate paragraph in the part entitled
‘Letter’) to send promptly a copy of that decision to ‘the beneficiary of the aid’.
Accordingly, as they were not identified as beneficiaries of the aid in the decision to open the procedure, the private investors
were not, at that stage, given notice to submit their comments pursuant to Article 88(2) EC or called upon to submit comments
within a prescribed period within the meaning of Article 6(1) of Regulation No 659/1999.
In those circumstances, it is also appropriate to examine the Commission’s reply to the request from EURL
Le Levant
114 by letter of 19 July 2001, by which it extended the one-month period granted to the interested parties to submit their
comments on the decision to open the procedure. The last sentence of Article 6(1) of Regulation No 659/1999 provides that
‘[i]n duly justified cases, the Commission may extend the prescribed period’ normally consisting of one month allowed to the
parties to submit their comments on the decision to open the procedure.
However, by letter of 24 July 2001, the Commission replied to the letter from EURL
Le Levant
114 by noting that the one-month period from the date of publication of the decision to open the procedure allowed for the
lodging of comments by the interested parties had ‘long since lapsed’, without adopting a position on the request for an extension
of that period made by EURL
Le Levant
114. That refusal is all the more deplorable because the decision to open the procedure did not identify the private investors
as beneficiaries of the aid to be recovered but, on the contrary, gave the impression that the beneficiary was CIL, which
had been named as the operator and ultimate owner of the vessel.
Accordingly, by refusing to allow an extension of the period as requested and thereby failing to give EURL
Le Levant
114 an opportunity to submit its comments on the decision to open the procedure, without even giving reasons why the request
of 19 July 2001 was not ‘duly justified’, the Commission infringed the third sentence of Article 6(1) of Regulation No 659/1999.
If there had not been such a procedural failure, that is, if the applicants or EURL
Le Levant
114 had actually had an opportunity during the formal investigation procedure to submit their comments on having been named
as beneficiaries of the aid to be recovered, the possibility cannot be excluded that the procedure might have led to a different
result, in particular with respect to the assessment of the incompatibility of the aid with the common market in accordance
with the criteria laid down in Article 87(1) EC.
Furthermore, the Commission cannot entrench itself behind a formalist interpretation of its State aid obligations, given that
the main issue here is the fact that an individual against whom the Commission is preparing to adopt an adverse decision designating
that party as a beneficiary of incompatible aid from whom that aid is to be recovered must be given the opportunity to submit
comments prior to the adoption of such a decision.
In the present case, it is clear that the contested decision was adopted without such an opportunity having been given to
the private investors. By refusing to hear EURL
Le Levant
114 and by not identifying the investors as beneficiaries of the potentially incompatible aid to be recovered in the decision
to open the procedure, the Commission violated a general principle of Community law. That principle requires that any person
against whom an adverse decision may be taken must be given the opportunity to make his views known effectively regarding
the facts held against him by the Commission as a basis for the disputed decision. Thus, in a procedure based on Article 86(3)
EC (ex Article 90(3) of the EC Treaty), where, as in State aid cases, the Member State is the addressee of the Commission’s
decision, the Court has held that the undertakings which are the beneficiaries of the State aid in question have the right
to be heard, stating that those undertakings were the direct beneficiaries of the State measure at issue, that they were expressly
named in that measure and explicitly targeted by the contested decision and that the economic consequences of that decision
directly affect them (Joined Cases C‑48/90 and C‑66/90
Netherlands and Others
v
Commission
[1992] ECR I‑565, paragraphs 50 and 51).
It follows from the foregoing that the Commission infringed Article 88(2) EC and Article 6(1) of Regulation No 659/1999.
Accordingly, the Court finds that the second plea is well founded, without it being necessary to consider the plea alleging
violation of the principles on which Article 6 of the ECHR is based.
2. The third plea: infringement of Article 87(1) EC, and the ninth plea: infringement of the obligation to state reasons
–       Arguments of the parties
The applicants state, first, that the contested decision infringes Article 87(1) EC in classifying the private investors as
beneficiaries of the aid when the measure in question does not confer any competitive advantage on them and does not affect
trade between Member States. Only an economic operator on whom an advantage is conferred and is thereby in a favourable position
compared to his competitors could be classified as a beneficiary undertaking within the meaning of that provision. The search
for the actual beneficiary of aid, who may or may not be the formal addressee of the measure, thus entails identifying the
undertaking which actually enjoys an economic benefit in its commercial dealings which is likely to distort competition (Case
C‑303/88
Italy
v
Commission
[1991] ECR I‑1433, paragraph 57).
In the present case, the applicants maintain that there is a fundamental difference between the private investors, who are
the direct addressees of the tax advantages granted, and the undertaking concerned, namely the operator CIL, which is the
indirect beneficiary of the economic advantage in the market in question and, consequently, the beneficiary of the State aid
(for an example of the distinction between the beneficiary of a tax benefit and the beneficiary of an economic advantage,
see Case C‑156/98
Germany
v
Commission
[2000] ECR I‑6857, paragraphs 26 and 27). The tax benefit is only a means in the aid mechanism and not a benefit which actually
distorts competition at the level of the private investors. The contested decision thus confuses the tax benefit received
directly by the private investors, as indicated in recital 35, with the competitive advantage which is likely to flow indirectly
from that benefit, which benefits only CIL. The fact that the investors receive a tax benefit does not necessarily mean that
they receive a competitive advantage on a given market which affects trade between Member States.
Likewise, the applicants maintain that the contested decision breaches the obligation to state reasons by failing to specify
exactly what the advantage received by the private investors was (Joined Cases C‑329/93, C‑62/95 and C‑63/95
Germany and Others
v
Commission
[1996] ECR I‑5151, paragraph 56). On that point, they complain that the contested decision, without seeking to determine
what economic advantage they could receive when they had no operational responsibility for the vessel, nevertheless finds
that they were beneficiaries of the aid simply because they received income tax concessions in stating in recital 39 that,
although it is doubtful whether any of the private individual investors can be held responsible for the misuse of the aid,
they have nevertheless benefited and continue to benefit from the tax concessions as owners of a vessel which was bought on
attractive terms.
The contested decision also contains contradictory reasoning in attempting to assign the effects of an economic advantage
to the private investors, whereas it was in reality granted either to the shipyard as shipbuilding aid or to CIL for the management
and operation of the vessel. Thus, as regards the shipyard, recital 41 of the contested decision states that no recovery should
take place from it since it cannot be held responsible for the operation of the vessel after delivery. By contrast, a few
paragraphs earlier, recital 37 states that the shipyard can be said to have benefited indirectly in that the aid enabled it
to obtain an order that it might not otherwise have won. Likewise, with respect to CIL, the Commission should have found that
it was responsible for the alleged non-compliance with the substantive OECD rules because it is in charge of the use of the
vessel. Considered from this angle, the contested decision does not explain how recovery from the private investors will deprive
the operator and manager of the joint ownership of the ultimate benefit of the economic advantage once the vessel has been
sold to it at a favourable price.
Second, the applicants maintain that the contested decision infringes Article 87(1) EC and the obligation to state reasons
by failing to state how the aid in question is likely to affect competition and trade within the Community (
Intermills
v
Commission
, paragraph 38; Joined Cases 296/82 and 318/82
Netherlands and Leeuwarder Papierwarenfabriek
v
Commission
[1985] ECR 809, paragraphs 22 to 24; and
Germany and Others
v
Commission
, paragraphs 52 and 53). The applicants state in particular that the contested decision does not identify the market on which
competition was allegedly distorted and on which the private investors allegedly enjoyed an advantage. Thus, the contested
decision does not clarify whether the relevant market is the cruise services market or the market for products relating to
cruise vessels, or what the geographical dimensions of such a market might be: global, regional or local to Saint-Pierre-et-Miquelon.
Likewise, the contested decision does not identify the distortion of competition at issue, which is all the more difficult
to do because the Loi Pons is applicable to all taxpayers and a tax measure which benefits all taxpayers equally does not
distort competition (see Commission Notice (EC) 96/C 266/14 pursuant to Article [88](2) of the EC Treaty to the other Member
States and other interested parties concerning aids granted by Spain for the purchase of commercial vehicles – the Plan Renove
Industrial (OJ 1996 C 266, p. 10)). The Loi Pons is selective only as regards the ultimate beneficiaries in that it confers
full advantages only on certain undertakings established in the French overseas territories. Lastly, the private investors’
tax situation has no effect on trade between Member States.
Third, the applicants observe that Commission Decision 1999/719/EC of 30 March 1999 on State aid which France is planning
to grant as development aid in the sale of two cruise vessels to be built by Chantiers de l’Atlantique and operated by Renaissance
Financial in French Polynesia (OJ 1999 L 292, p. 23; ‘the Renaissance decision’), which found that aid which the French Republic
intended to grant in the form of tax concessions granted to private investors under the Loi Pons was compatible with the common
market, adopts this distinction between investor and operator, because it states that Renaissance Financial, and not the individual
investors (natural persons), had to be regarded as the effective beneficiary of the aid. The Renaissance decision also states
that the effective beneficiary of the aid would be the shipyard if the conditions laid down in the decision were not complied
with, in particular if the aid proved to be contrary to Article 4(7) of the Seventh Directive. Regarding the application of
the OECD criteria, in particular the condition of residency of the actual owner and the condition that the undertaking which
is the beneficiary of the aid must not be a non-operational subsidiary of a foreign company, neither the Renaissance decision,
nor Commission Decision 92/569/EEC of 31 July 1992 concerning proposed aid by Germany to the Chinese shipping company Cosco
for the construction of container vessels (OJ 1992 L 367, p. 29; ‘the Cosco decision’), nor the decision to open the procedure
in the present case identifies the investors concerned as actual owners of the vessel or as beneficiaries of the aid.
The Commission submits, first, that the
Le Levant
operation was set up in order to enable the private investors to take advantage of a tax benefit. The fact that that package
was legal under French law does not in itself make it lawful from the point of view of the rules governing State aid. After
noting that cases of application of the Loi Pons in shipbuilding were to be notified to it, the Commission argues that, because
of the fiscal transparency of the EURLs, each private investor received an income tax benefit from the deduction allowed under
the Loi Pons in favour of certain undertakings investing overseas. Consequently, the effect of the State aid resulting from
the benefit under the Loi Pons in the form of tax concessions was to provide operating aid in favour of the supply of cruises
by the owners and operators of the vessel.
The Commission submits, second, that the contested decision states clearly, from the title onwards, that the aid in question
concerns the operation of a cruise vessel intended for operation in Saint-Pierre-et-Miquelon. The Commission’s analysis with
respect to the assessment of the development component and the economic spin-offs from the
Le Levant
operation also shows that it was indeed to the operation of a cruise vessel and the supply of cruises that the contested
decision refers. That is also readily apparent from the very nature of the Loi Pons and the features of the
Le Levant
operation. The Commission adds that the contested decision states clearly that the investors, the then owners of the vessel,
obtained tax benefits intended to offset specific difficulties associated with a productive investment intended to be utilised
overseas for a period of five years, at the end of which they were to sell the vessel to CIL at a price which would pass the
aid on to it, so that CIL would become the ultimate beneficiary of the aid once the vessel had been sold to it at a favourable
price (recitals 36, 39 and 40 of the contested decision). Lastly, the Commission states that recital 16 of the contested decision
specifies the framework for the assessment of the aid in question, namely Article 4(7) of the Seventh Directive, and that
recital 33 contains the conclusion of that assessment, namely that that aid did not meet the criteria laid down in that provision.
There is nothing in the analysis from which it might be inferred that the beneficiary of the aid was to be the shipyard.
The Commission submits, third, that the contested decision does not contradict its earlier decision-making practice. Regarding
the Renaissance decision, it observes that it was indeed a case of application of the Loi Pons and that the French authorities
had indicated to the Commission that the financing plan in question provided for the use of structures involving individuals
and that, when the investment was to be leased to the operating undertaking, the administrative authorities would check that
the tax benefit had been transferred to that undertaking through a markdown of the fees to be borne by it. However, that decision
had been adopted on the basis of the information provided by the Member State, according to which the investors in question
were metropolitan companies and the package used allowed for effective retrocession of the tax aid to the owner-operator,
which is a material configuration different from the one in this case. Regarding the Cosco decision, the Commission states
that the situation was fundamentally different from the present one, since the Chinese owner-operator Cosco had ordered container
vessels from German shipyards and the notified aid was intended to cover part of the contract price of the vessels in question.
–       Findings of the Court
Article 87(1) EC provides that ‘[s]ave 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’.
Classification as aid, in the sense of State aid incompatible with the common market, requires that all the conditions set
out in that provision are fulfilled (Case C‑142/87
Belgium
v
Commission
(‘Tubemeuse’)
[1990] ECR I‑959, paragraph 25; Case C‑482/99
France
v
Commission
[2002] ECR I‑4397, paragraph 68; and Case C‑280/00
Altmark Trans and Regierungspräsidium Magdeburg
[2003] ECR I‑7747, paragraph 74). It follows from Article 87(1) EC that those conditions are as follows. First, there must
be an intervention by the State or through State resources. Second, the intervention must be likely to affect trade between
Member States. Third, it must confer an advantage on the recipient by favouring certain undertakings or the production of
certain goods. Fourth, it must distort or threaten to distort competition.
The Court also notes that it is settled case-law that the statement of reasons in an adverse individual decision must disclose
in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such
a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent Community Court
to exercise its power of review (Case C‑367/95 P
Commission
v
Sytraval and Brink’s France
[1998] ECR I‑1719, paragraph 63).
In the assessment of the incompatibility of the aid, the contested decision merely indicates that the aid granted for the
vessel
Le Levant
must be assessed in the light of Article 4(7) of the Seventh Directive, ‘given that it concerns aid for shipbuilding granted
as development assistance in 1996 under an aid scheme (the Loi Pons) approved in 1992’ (recital 16). According to the decision,
although the aid meets the OECD development aid criteria, which were communicated in the letter of 3 January 1989 from the
Commission to the Member States (recitals 18, 19 and 21), it does not contain a genuine development component (recitals 20
and 22 to 33). Consequently, the contested decision finds the aid to be incompatible with the common market.
The contested decision does not, however, examine how the conditions laid down in Article 87(1) EC for a finding of incompatibility
with the common market are met in the present case.
The Court notes that the conditions provided for in Article 87(1) EC must be met for State aid to be found to be incompatible
with the common market. If the aid in question is compatible with the common market because the conditions laid down in Article
87(1) EC are not met, the Seventh Directive – which was adopted on the basis of Article 87(3)(e) EC – does not apply, because
that directive necessarily supposes that the aid in question is incompatible with the common market under Article 87(1) EC.
First, regarding the condition in Article 87(1) EC relating to trade between Member States being affected, it is apparent
from the contested decision that the aid in question concerns the operation of a vessel intended for operation in Saint-Pierre-et-Miquelon
(title and recital 5).
It must be borne in mind that the islands of Saint-Pierre-et-Miquelon constitute a French administrative area situated in
the north Atlantic off the coast of Newfoundland. It is one of the ‘overseas countries and territories’ (OCTs) which are not
part of the territory of the Community.
In not offering any explanation on this point, the contested decision does not explain how the aid granted in the context
of the
Le Levant
operation is likely to affect trade between Member States as contemplated in Article 87(1) EC.
Second, regarding the condition relating to the identification of the advantage conferred on the beneficiary of the aid and
the fact that it favours certain undertakings or the production of certain goods, it is apparent from the contested decision
that, although the direct beneficiaries of the aid were the private investors, the effects of the aid on competition related
to CIL’s ability to operate the vessel on favourable terms out of Saint-Pierre-et-Miquelon (Article 1 and recital 5).
However, given that the shipyard did not benefit directly from the aid (recital 37), that the private investors are identified
by the contested decision only as owners of a vessel which was then leased to CIL (recital 5) and that CIL, which operates
the vessel on favourable terms, is not the beneficiary of the aid at this stage and therefore cannot be considered liable
to repay the aid (recital 40), the question arises as to how, in those circumstances, the financing of the construction of
a vessel by those investors with the help of tax concessions conferred on them a benefit capable of favouring certain undertakings
or the production of certain goods.
In failing to examine how the private investors’ obtaining a tax benefit constitutes a competitive advantage as contemplated
in Article 87(1) EC when the contested decision attributes that competitive advantage to CIL, the contested decision does
not explain how the private investors were placed in an advantageous position by the aid in question.
Likewise, the contested decision does not provide any explanation as to how the private investors’ leasing of the vessel to
CIL was capable of transferring a potential competitive advantage from the private investors to the operator of the vessel.
The Court notes, moreover, on this point that the contested decision departs from the approach adopted by the Commission in
the Renaissance decision. In that case, the Commission found aid granted by France in the form of tax benefits granted pursuant
to the Loi Pons for the construction of two cruise vessels intended to be operated by Renaissance Financial in French Polynesia
to be compatible with the common market. The financial package in question was similar to that used in the present case, in
that it also provided for the acquisition of the ownership of the vessels by private investors, who subsequently leased the
vessels to Renaissance Financial so that that company could operate them for five years in French Polynesia. In the Renaissance
decision, the Commission found that the benefit of the aid had been transferred by the private investors to the operator of
the vessel, who was the effective beneficiary because that operator had leased the vessels and undertaken to purchase those
vessels at the end of a five-year period.
Third, regarding the condition relating to distortion or threat of distortion of competition, it is clear – as acknowledged
by the Commission at the hearing – that there is nothing in the contested decision explaining how and on what market competition
is affected or likely to be affected by the aid.
This absence of analysis is all the more striking because, in response to the comments submitted by the French authorities
to the Commission on 14 June 2000, in which the French authorities stated that Saint-Pierre-et-Miquelon had benefited from
the commercial spin-off effects of the vessel
Le Levant
because a number of shipping companies had indicated their intention to put in there, the contested decision states in recital
31 that it was not necessary to take account of those comments in order to assess the compatibility of the aid with the common
market, since that statement was not quantified and probably could not be so and that such a statement did not relate directly
to the development component of the
Le Levant
operation. In so doing, the Commission refused to consider the information relating to a possible cruise market on the islands,
or elsewhere, which might be affected by the distortion of competition.
Consequently, the contested decision does not explain how the aid in question here meets three of the four conditions laid
down in Article 87(1) EC for a finding that that aid is incompatible with the common market.
The Court also notes that the aid was granted under a tax scheme – the Loi Pons – which allowed for tax concessions for investments
made in the overseas departments and territories and that that scheme had been approved by the Commission in 1992 (recitals
5 and 16).
The press release published by the Commission on 23 December 1992 concerning the Loi Pons stated that it based its assessment
‘on the socioeconomic situation of the French overseas departments which justifies maintaining them as areas which can utilise
the derogation provided for in Article 92(3)(a) of the EC Treaty [now Article 87(3)(a) EC]’. That derogation covers cases
of aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious
underemployment.
Thus, the contested decision also fails to explain why the aid in question is not capable of benefiting from the Commission’s
earlier decision not to raise objections to the tax measures provided for by the Loi Pons, in particular with respect to productive
investments in the tourism sector in Saint-Pierre-et-Miquelon.
The Court also notes that the Commission’s earlier practice shows that, in other decisions relating to shipbuilding aid, it
considered whether the conditions in Article 87(1) EC were met (Cosco decision; Commission Decision 1999/657/EC of 3 March
1999 on the aid which Germany has granted by way of development assistance to Indonesia in connection with the construction
of two dredgers by Volkswerft Stralsund and the sale of the dredgers to Pengerukan (Rukindo) (OJ 1999 L 259, p. 19); and Commission
Decision 1999/675/EC of 8 July 1999 on the State aid implemented by Germany in favour of Kvaerner Warnow Werft GmbH (OJ 1999
L 274, p. 23)).
In the Cosco decision in particular, the Commission examined the aid not only in the light of Article 4(7) of the Seventh
Directive, but also on the basis of Article 87(1) EC. In that case, the aid in question was development aid which the German
Government intended to grant to the People’s Republic of China in the form of loans to finance container vessels. Those vessels
were to be operated by Cosco, a State-owned corporation established in Peking. The vessels were to be built in Germany by
German shipyards. In the Cosco decision, the Commission found that the aid in question distorted or threatened to distort
competition in the common market and affected trade between Member States both in the shipbuilding and in the shipping sectors
to an extent contrary to the common interest within the meaning of Article 87(1) EC.
It follows from all of the foregoing that the statement of reasons in the contested decision is flawed, such that the Court
is not able to exercise its power of judicial review.
Consequently, the Court finds that the ninth plea is also well founded and that, accordingly, the contested decision must
be annulled because the Commission failed to comply with its obligation to state reasons as required by Article 253 EC, without
it being necessary to consider the other complaints and pleas put forward by the applicants.

The issue of whether the applicants and the Commission may rely on certain documents annexed to the application
–       Arguments of the parties
The Commission submits that the applicants may not rely before the Court on arguments of fact which were not part of the administrative
procedure (Case T‑110/97
Kneissl Dachstein
v
Commission
[1999] ECR II‑2881, paragraph 102), whilst observing that the question of the applicants’ participation in that procedure
falls to be discussed as part of the substance of the case. Those arguments are superfluous when they merely reiterate facts
put forward in documents which were part of the administrative procedure and are inadmissible when they raise facts which
were not part of the administrative procedure. On the latter point, the applicants may not rely on the following documents
in the judicial proceedings: the request for approval of the
Le Levant
operation submitted by the Bank and CIL on 19 August 1996, the approval of the operation by the French Budget Ministry on
26 November 1996, the prospectus approved by the French Commission des opérations de bourse on 3 December 1996, the record
of the agreement of 9 December 1996 between the Bank and CIL, the written authority for the management and operation of the
vessel by CIL, the cross-promises of purchase and sale between the Bank and CIL and the cross-promises of purchase and sale
between the EURLs and the Bank.
The Commission submits that it, on the other hand, is entitled to rely on those documents in order to demonstrate that the
allegations in the application are unfounded, and that the Court is empowered to take account of them.
The applicants argue that the Commission’s reasoning presupposes that the administrative procedure takes place in a transparent
and equitable manner, which was not the case here. Moreover, the documents referred to by the Commission must necessarily
be considered in this action because they relate to the grounds for annulment on which the applicants rely. Furthermore, those
documents and the assertions derived from them do not concern the administrative procedure but rather the
Le Levant
operation and serve to identify the methodological errors committed by the Commission.
–       Findings of the Court
According to settled case-law, in the context of an action for annulment under Article 230 EC, the lawfulness of a Community
measure falls to be assessed on the basis of the elements of fact existing at the time when the measure was adopted. In particular,
the assessments made by the Commission must be examined solely on the basis of the information available to the Commission
at the time when those assessments were made (Case C-394/01
France
v
Commission
, paragraph 34; Joined Cases T‑371/94 and T‑394/94
British Airways and Others
v
Commission
[1998] ECR II‑2405, paragraph 81;
Kneissl Dachstein
v
Commission
, paragraph 47; and Joined Cases T‑111/01 and T‑133/01
Saxonia Edelmetalle
and ZEMAG
v
Commission
[2005] ECR II-1579, paragraph 67).
In the present case, the question of whether the disputed documents may be used is now a moot point, as the Court has decided
to annul the contested decision on grounds of procedural irregularities and failure to state reasons.
In any event, under the second plea, the Court has found that the Commission disregarded its obligations and did not take
the necessary steps to enable the applicants to submit their comments in the course of the formal investigation procedure
provided for in Article 88(2) EC.
The applicants were therefore entitled to rely on the disputed documents in support of their action for annulment of the contested
decision and the Commission could contest those arguments in the judicial proceedings. In any event, however, the Court may
assess those documents only within the limits of the powers at its disposal. If those documents contain facts which are liable
to contradict the facts which the Commission had before it during the administrative procedure and on the basis of which the
contested decision was adopted, the Court may not substitute its assessment for that of the Commission of the economic or
legal implications which those facts might have on its analysis. As rightly pointed out by the Commission in its pleadings,
if the Court were to do so, it would be conducting its own analysis and drawing its own conclusions from the new facts alleged
rather than appraising the lawfulness of the contested decision. This is not the function of the Court of First Instance.
If the Community Courts may not substitute their own assessment of the facts, especially in the economic field, for that of
the originator of the decision (Case C‑225/91
Matra
v
Commission
[1993] ECR I‑3203, paragraph 23, and Joined Cases T‑298/97, T‑312/97, T‑313/97, T‑315/97, T‑600/97 to T‑607/97, T‑1/98, T‑3/98
to T‑6/98 and T‑23/98
Alzetta and Others
v
Commission
[2000] ECR II‑2319, paragraph 130), still less may they conduct a fresh assessment on the basis of facts which were not part
of the administrative procedure before the Commission.

Costs
Under Article 87(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 the Commission has been unsuccessful, it must be ordered to bear its
own costs and to pay the costs incurred by the applicants, including those relating to the interim proceedings.
On those grounds,
THE COURT OF FIRST INSTANCE (First Chamber, Extended Composition)
hereby:
1.
Annuls Commission Decision 2001/882/EC of 25 July 2001 on the State aid implemented by France in the form of development assistance
for the cruise vessel
Le Levant
, built by Alstom Leroux Naval for operation in Saint-Pierre-et-Miquelon;
2.
Orders the Commission to bear its own costs and to pay the costs incurred by the applicants, including those relating to the
interim proceedings.
Vesterdorf
Cooke
García-Valdecasas
Labucka

Trstenjak
Delivered in open court in Luxembourg on 22 February 2006.
E. Coulon

B. Vesterdorf
Registrar

President
Table of contents
Legal context
The ‘Loi Pons’ and the Commission’s decision not to raise objections under Articles 87 EC and 88 EC
Council Directive 90/684/EEC on aid to shipbuilding
Provisions relating to the administrative procedure
Facts and procedures
Description of the Le Levant operation
Administrative procedure
The contested decision
Legal proceedings
Forms of order sought
Law
The admissibility of the action with respect to certain applicants
1. The authorities granted on behalf of certain EURLs
– Arguments of the parties
– Findings of the Court
2. The authorities granted by certain natural persons on their own behalf
– Arguments of the parties
– Findings of the Court
Substance
1. The second plea
– Arguments of the parties
– Findings of the Court
2. The third plea: infringement of Article 87(1) EC, and the ninth plea: infringement of the obligation to state reasons
– Arguments of the parties
– Findings of the Court
The issue of whether the applicants and the Commission may rely on certain documents annexed to the application
– Arguments of the parties
– Findings of the Court
Costs
*
Language of the case: French.