# EUR-Lex - 61985J0304 - EN

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# 61985J0304

**Judgment of the Court (Sixth Chamber) of 24 February 1987. - Acciaierie e Ferriere Lombarde Falck v Commission of the European Communities. - Communty rules for aids to the steel industry. - Case 304/85. **

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European Court reports 1987 Page 00871 *

Summary
Parties
Grounds
Decision on costs
Operative part

## Keywords

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1 . ECSC - AIDS TO THE STEEL INDUSTRY - APPROVAL BY THE COMMISSION - CONDITIONS - NOTIFICATION OF AID PROPOSALS IN GOOD TIME - DEFINITION OF "PROPOSALS" - AUTHORIZATION OF AID DIFFERENT IN NATURE FROM THAT NOTIFIED WITHIN THE TIME-LIMIT - NOT PERMISSIBLE

( DECISION NO 2320/81, ART . 8, AS AMENDED BY DECISION NO 1018/85 )

2 . ECSC - AIDS TO THE STEEL INDUSTRY - APPROVAL BY THE COMMISSION - CONDITIONS - NO MANIFEST DISCRIMINATION BETWEEN THE PUBLIC AND PRIVATE SECTORS

( DECISION NO 2320/81, ART . 2 )

Summary

1 . THE AID PROPOSALS, WHICH, PURSUANT TO ARTICLE 8 ( 1 ) OF DECISION NO 2320/81, AS AMENDED BY DECISION NO 1018/85, WERE TO BE NOTIFIED TO THE COMMISSION BEFORE 31 MAY 1985, WERE PROGRAMMES WHICH, WITHIN THE FRAMEWORK OF A RESTRUCTURING PLAN, IDENTIFIED THE TYPE, THE AIM AND THE PROPOSED USE OF THE AID, BUT IT WAS NOT NECESSARY THAT THE EXACT AMOUNT OF THE AID REQUIRING AUTHORIZATION SHOULD ALREADY HAVE BEEN DETERMINED . HOWEVER, THE COMMISSION MAY NOT AFTER THAT DATE ACCEPT PARTICULARS WHICH WOULD HAVE THE EFFECT OF CHANGING THE NATURE OF THE PROPOSED AID SO THAT THE PLAN IMPLEMENTED WOULD NO LONGER BE THAT WHICH HAD BEEN NOTIFIED .

## Summary

2 . ALTHOUGH ANY AID MEASURE IS LIKELY TO FAVOUR ONE UNDERTAKING IN RELATION TO ANOTHER, THE COMMISSION CANNOT APPROVE AID THE GRANT OF WHICH MAY RESULT IN MANIFEST DISCRIMINATION BETWEEN THE PUBLIC AND PRIVATE SECTORS . IN SUCH A CASE THE GRANT OF AID WOULD INVOLVE DISTORTION OF COMPETITION TO AN EXTENT CONTRARY TO THE COMMON INTEREST WITHIN THE MEANING OF ARTICLE 2 ( 1 ) OF DECISION NO 2320/81 .

Parties

IN CASE 304/85

## Parties

ACCIAIERIE E FERRIERE LOMBARDE FALCK, A COMPANY INCORPORATED UNDER THE LAW OF ITALY WHOSE REGISTERED OFFICE IS IN MILAN, REPRESENTED BY M . WAELBROECK AND A . VANDENCASTEELE, OF THE BRUSSELS BAR, AND BY G . GUARINO, OF THE ROME BAR, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE CHAMBERS OF E . ARENDT, 34 B RUE PHILIPPE-II

APPLICANT,

V

COMMISSION OF THE EUROPEAN COMMUNITIES, REPRESENTED BY C . DURAND, A MEMBER OF ITS LEGAL DEPARTMENT, ACTING AS AGENT, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF G . KREMLIS, JEAN MONNET BUILDING, KIRCHBERG,

DEFENDANT,

APPLICATION FOR A DECLARATION THAT THE COMMISSION DECISION OF 1 AUGUST 1985 AUTHORIZING THE ITALIAN GOVERNMENT TO GRANT ADDITIONAL AID TO THE ITALIAN STEEL INDUSTRY IS VOID .

THE COURT ( SIXTH CHAMBER ),

COMPOSED OF : C . KAKOURIS, PRESIDENT OF THE CHAMBER, T . KOOPMANS, O . DUE, K . BAHLMANN AND G . C . RODRIGUEZ IGLESIAS, JUDGES,

ADVOCATE GENERAL : SIR GORDON SLYNN

REGISTRAR : D . LOUTERMAN, ADMINISTRATOR

HAVING REGARD TO THE REPORT FOR THE HEARING AND FURTHER TO THE HEARING ON 7 OCTOBER 1986,

AFTER HEARING THE OPINION OF THE ADVOCATE GENERAL DELIVERED AT THE SITTING ON 27 NOVEMBER 1986,

GIVES THE FOLLOWING

JUDGMENT

Grounds

1 BY APPLICATION LODGED AT THE COURT REGISTRY ON 11 OCTOBER 1985 ACCIAIERIE E FERRIERE LOMBARDE FALCK ( HEREINAFTER REFERRED TO AS "FALCK "), A PUBLIC LIMITED COMPANY WHOSE REGISTERED OFFICE IS IN MILAN, BROUGHT AN ACTION UNDER THE SECOND PARAGRAPH OF ARTICLE 33 OF THE ECSC TREATY SEEKING A DECLARATION THAT THE COMMISSION DECISION OF 1 AUGUST 1985 AUTHORIZING THE ITALIAN GOVERNMENT TO GRANT ADDITIONAL AID TO THE STEEL INDUSTRY WAS VOID .

## Grounds

2 THE DECISION AT ISSUE IS IN THE FORM OF A LETTER SENT BY THE COMMISSION ON 1 AUGUST 1985 TO THE ITALIAN GOVERNMENT . THE LETTER WAS THE COMMISSION' S REPLY TO A LETTER SENT TO IT ON 28 MAY 1985 BY THE ITALIAN GOVERNMENT TO NOTIFY IT OF FINANCIAL AID WHICH THE ITALIAN GOVERNMENT INTENDED TO GRANT TO THE ITALIAN STEEL INDUSTRY PURSUANT TO COMMISSION DECISION 1018/85 OF 19 APRIL 1985 ( A GENERAL DECISION ) AMENDING DECISION 2320/81/ECSC ESTABLISHING COMMUNITY RULES FOR AIDS TO THE STEEL INDUSTRY ( OFFICIAL JOURNAL 1985, L*110, P.*5 ).

A - BACKGROUND TO THE CASE

3 DECISION 2320/81, KNOWN AS THE SECOND AIDS CODE, LAID DOWN RULES ALLOWING THE GRANT OF AID FOR THE RESTRUCTURING OF THE COMMUNITY STEEL INDUSTRY . FOR THAT PURPOSE ARTICLES 2 AND 8 OF THE DECISION SPECIFY PERIODS FOR THE NOTIFICATION, APPROVAL AND PAYMENT OF AID . LEAVING ASIDE THE RULES APPLICABLE TO CERTAIN KINDS OF AID SUCH AS EMERGENCY AID AND AID FOR CONTINUED OPERATION, THOSE PROVISIONS SPECIFY THAT PROPOSED AID MUST BE NOTIFIED TO THE COMMISSION BY THE MEMBER STATE CONCERNED NO LATER THAN 30 SEPTEMBER 1982 AND THAT AID MAY BE REGARDED AS COMPATIBLE WITH THE ORDERLY FUNCTIONING OF THE COMMON MARKET PROVIDED THAT IT IS APPROVED NO LATER THAN 1 JULY 1983 AND DOES NOT LEAD TO ANY PAYMENT AFTER 31 DECEMBER 1985 .

4 COMMISSION DECISION 1018/85 AMENDED THOSE DATES TO MAKE THE LAST DATE FOR NOTIFICATION OF PROPOSED AID 31 MAY 1985 AND REQUIRE APPROVAL OF AID NO LATER THAN 1 AUGUST 1985 . THE PREAMBLE TO THE DECISION STATES THAT AMENDMENT OF THE DEADLINES WAS NECESSARY TO ALLOW APPROVAL OF ADDITIONAL AID, THE NEED FOR WHICH AROSE MAINLY FROM THE GENERALLY DEPRESSED ECONOMIC SITUATION OF THE COMMUNITY FROM 1982 TO 1984, THE CRISIS IN THE STEEL MARKET AND THE RESULTING DETERIORATION IN THE FINANCIAL POSITION OF UNDERTAKINGS .

5 BY A LETTER DATED 28 MAY 1985 THE ITALIAN GOVERNMENT INFORMED THE COMMISSION THAT PURSUANT TO COMMISSION DECISION 1018/85 IT WISHED TO GRANT ADDITIONAL AID WHICH WAS NEEDED "TO RESTRUCTURE THE ITALIAN STEEL INDUSTRY IN ORDER TO ENSURE ITS VIABILITY WITHOUT AID FROM THE END OF 1985 AND TO HELP IMPROVE THE BALANCE BETWEEN SUPPLY AND DEMAND IN THE COMMUNITY ". THE REQUEST COVERED AID FOR CLOSURE IN THE PRIVATE SECTOR AMOUNTING TO LIT*150*000 MILLION, AID TO FINSIDER AMOUNTING TO LIT*2*985*000 MILLION AND A FINANCIAL CONTRIBUTION OF LIT*550*000 MILLION TOWARDS PROPOSALS FOR COOPERATION (" SYNERGY ") BETWEEN VARIOUS ITALIAN STEEL PRODUCERS, INCLUDING FALCK AND FINSIDER, WHICH WOULD LEAD TO FURTHER REDUCTIONS IN PRODUCTION CAPACITY .

6 IT APPEARS FROM THE DOCUMENTS BEFORE THE COURT THAT THE INITIATIVE FOR THE PROPOSED SYNERGY IN THE OPERATIONS OF FINSIDER AND FALCK CAME FROM THE ITALIAN MINISTRY FOR INDUSTRY . FALCK APPLIED TO THE MINISTRY FOR AID IN THE AMOUNT OF LIT*300*000 MILLION AND COMPLAINED TO THE COMMISSION OF DISCRIMINATION BETWEEN THE PUBLIC AND PRIVATE SECTOR IN ITALY; SUBSEQUENTLY, IN EARLY 1985 A PROPOSAL WAS MADE TO IT REGARDING SYNERGY WITH FINSIDER' S OPERATIONS .

7 THE SYNERGY PROPOSAL INVOLVED THE TRANSFER OF PRODUCTION QUOTAS BETWEEN FINSIDER AND FALCK AND THE CLOSURE OF CERTAIN PLANTS . THE PLAN WAS THAT FALCK' S PRODUCTION AT ITS COIL AND STRIP MILL AT SESTO SAN GIOVANNI WOULD BE TRANSFERRED TO FINSIDER' S HOT ROLLED WIDE STRIP MILL AT BAGNOLI . THE PLANT AT SESTO SAN GIOVANNI WOULD BE CLOSED WHILE THE NEW PLANT AT BAGNOLI COULD BE USED TO FULL CAPACITY . IN CONSIDERATION FALCK WOULD BE ALLOWED A SHARE IN THE MANUFACTURE OF HEAVY PLATE AT CAMPI, WHERE FINSIDER HAS A ROLLING MILL .

8 ON 30 MAY 1985, TWO DAYS AFTER NOTIFICATION OF THE PROPOSALS FOR ADDITIONAL AID BY THE ITALIAN GOVERNMENT, FALCK APPROACHED THE COMMISSION AND INSISTED THAT IT WAS THE COMMISSION' S RESPONSIBILITY TO JUDGE WHETHER THE PROPOSED AID WAS COMPATIBLE WITH THE PROVISIONS OF THE ECSC TREATY . CONSEQUENTLY THE COMMISSION WAS OBLIGED TO CONSIDER NOT ONLY THE POSITION OF UNDERTAKINGS WHICH WOULD BENEFIT FROM AID BUT ALSO THAT OF UNDERTAKINGS WHICH WOULD NOT BENEFIT FROM IT . AFTER POINTING OUT THAT THE GRANT OF ADDITIONAL AID TO FINSIDER AND NONE TO FALCK WOULD PROBABLY LEAD TO THE DISAPPEARANCE OF THE SOLE ITALIAN COMPETITOR OF FINSIDER, FALCK STATED THAT IN ITS OPINION THE COMMISSION COULD NOT APPROVE ADDITIONAL AID SOLELY FOR FINSIDER WITHOUT INFRINGING ITS OBLIGATIONS UNDER THE ECSC TREATY .

9 AFTER THE PERIOD LAID DOWN IN DECISION 1018/85 FOR THE NOTIFICATION OF PROPOSALS FOR ADDITIONAL AID HAD EXPIRED, THE COMMISSION ON SEVERAL OCCASIONS REQUESTED FURTHER INFORMATION FROM THE ITALIAN GOVERNMENT IN RELATION TO THE AID NOTIFIED . BY A TELEX MESSAGE OF 22 JULY 1985 THE ITALIAN GOVERNMENT STATED THAT THE PROPOSED SYNERGY CONSISTED IN A CONCENTRATION OF FINSIDER' S PRODUCTION AND THAT OF FALCK . THE COMMISSION WAS REQUESTED TO REACH A DECISION ON THE APPROVAL OF THE AID BY 1 AUGUST 1985 AT THE LATEST ON THE BASIS OF TWO ALTERNATIVE HYPOTHESES : SYNERGY AND NO SYNERGY . HOWEVER, SINCE IT WAS STILL UNCLEAR WHETHER ANY SYNERGY WOULD BE ACHIEVED THE ITALIAN GOVERNMENT REQUESTED THE COMMISSION TO ALLOCATE PART OF THE AMOUNT OF AID NOTIFIED, NOT TO EXCEED THE LIT*550*000 MILLION ATTRIBUTED TO THE SYNERGY PROJECT, TO FINANCIAL RESTRUCTURING IN THE PRIVATE SECTOR .

10 AT A MEETING ON 24 JULY 1985 BETWEEN THE ITALIAN MINISTER FOR INDUSTRY AND THE MEMBER OF THE COMMISSION RESPONSIBLE FOR COMPETITION POLICY AND STATE AIDS THE LATTER INDICATED THAT THE COMMISSION COULD NOT CONSIDER THE REQUEST FOR AID FOR FINANCIAL RESTRUCTURING SINCE IT HAD BEEN MADE AFTER THE DEADLINE OF 31 MAY 1985 . IN THE CONTESTED DECISION, WHICH WAS ADOPTED ON THE LAST POSSIBLE DATE, 1 AUGUST 1985, THE COMMISSION MAINTAINED THAT POSITION .

11 AS REGARDS THE PROPOSED SYNERGY BETWEEN FINSIDER AND FALCK, THE CONTESTED DECISION ADOPTS THE TWO ALTERNATIVE HYPOTHESES PUT FORWARD BY THE ITALIAN GOVERNMENT WHILE NOTING THE NEED TO ALLOW THE PARTIES CONCERNED THE TIME NEEDED TO COMPLETE THEIR PROPOSAL . THE COMMISSION CONSIDERED THAT SHOULD THE PROPOSED SYNERGY BE ACHIEVED IT WOULD CONSTITUTE RESTRUCTURING COVERING BOTH THE PRIVATE AND PUBLIC SECTORS, AND STATED THAT IT COULD AGREE TO TREAT AS A SINGLE UNIT ALL THE AID GRANTED TO THE ITALIAN STEEL INDUSTRY AND ALL THE REDUCTIONS IN CAPACITY REQUIRED IN RETURN . IN THE EVENT THAT THERE SHOULD BE NO SYNERGY THE COMMISSION AUTHORIZED AID AMOUNTING TO LIT*3*141*9000 MILLION FOR FINSIDER PROVIDED THAT IT CLOSED ITS HEAVY SECTION AND STRIP MILLS AT BAGNOLI, RESULTING IN A REDUCTION IN PRODUCTION CAPACITY OF 800*000 TONNES . IN THE LATTER CASE THE COMMISSION ALSO AUTHORIZED LIT*50*000 MILLION FOR CLOSURES IN THE PRIVATE SECTOR AND ADDED THAT "THE AMOUNT MAY BE INCREASED BY LIT*275*000 MILLION, EQUAL TO HALF THE AID INTENDED IN PRINCIPLE FOR THE REDUCTIONS TO BE MADE AS A RESULT OF THE SYNERGY IN THE OPERATIONS OF FALCK AND FINSIDER ".

12 ACCORDING TO THE APPLICATION, THE SYNERGY PROPOSAL OFFERED NO REAL BENEFIT TO FALCK IN RETURN FOR THE SACRIFICE INVOLVED IN CLOSING ITS STRIP MILL AT SESTO SAN GIOVANNI . FALCK HAD MADE ALTERNATIVE PROPOSALS WHICH HAD BEEN REFUSED BY FINSIDER . IT WAS ALREADY CLEAR DURING THE SUMMER OF 1985 THAT THERE COULD BE NO SYNERGY .

13 THE ITALIAN GOVERNMENT ULTIMATELY IMPLEMENTED THE DECISION OF 1 AUGUST 1985 ON THE BASIS OF THE SECOND HYPOTHESIS, NAMELY THAT THERE WAS NO SYNERGY .

B - FAILURE TO OBSERVE THE TIME-LIMITS

14 THE APPLICANT' S FIRST SUBMISSION CHALLENGES THE CONTESTED DECISION INASMUCH AS IT REFUSES TO AUTHORIZE AID FOR THE FINANCIAL RESTRUCTURING OF PRIVATE UNDERTAKINGS ON THE GROUND THAT THE PROPOSED AID WAS NOTIFIED AFTER THE TIME-LIMIT LAID DOWN IN DECISION 1018/85 HAD EXPIRED . ALTHOUGH IT HAD REFUSED TO TAKE INTO ACCOUNT THE NEED FOR THE FINANCIAL RESTRUCTURING OF PRIVATE UNDERTAKINGS THE COMMISSION DID TAKE INTO ACCOUNT OTHER CONSIDERATIONS PUT FORWARD BY THE ITALIAN GOVERNMENT RELATING INTER ALIA TO WHETHER OR NOT SYNERGY WOULD BE ACHIEVED AND TO AID TO THE PRIVATE SECTOR IN THE EVENT THAT THERE WAS NO SYNERGY . IN DOING SO THE COMMISSION DISCRIMINATED BETWEEN THE UNDERTAKINGS CONCERNED IN A MEASURE IMPLEMENTING ARTICLE 8 ( 1 ) OF DECISION 2320/81 AS AMENDED BY DECISION 1018/85 .

15 THE COMMISSION ADMITS THAT THE NOTIFICATION OF PROPOSED AID BY THE ITALIAN GOVERNMENT ON 28 MAY 1985 DID NOT CONTAIN ALL THE DETAILS OF THE SCOPE OF THE PROPOSALS BUT SHOWED THE GOVERNMENT' S INTENTION TO GRANT AID THEN ESTIMATED AT LIT*550*000 MILLION FOR PLANS TO REDUCE CAPACITY INVOLVING VARIOUS ITALIAN PRODUCERS . WHEN THE PROPOSED SYNERGY DID NOT COME ABOUT THE COMMISSION RELIED ON THE PARTICULARS SUPPLIED BY THE ITALIAN GOVERNMENT IN ITS TELEX MESSAGE OF 22*JULY 1985 ACCORDING TO WHICH, IF NO SYNERGY WAS ACHIEVED, HALF THE AMOUNT OF LIT*550*000 MILLION COULD BE ALLOCATED TO CLOSURES IN THE PRIVATE SECTOR AND THE OTHER HALF FOR FINANCIAL RESTRUCTURING . HOWEVER, THE COMMISSION MAINTAINS THAT IT WAS OBLIGED TO CONFINE ITS AUTHORIZATION OF AID TO THE PROPOSALS SET OUT IN THE NOTIFICATION OF 28 MAY 1985, WHICH DID NOT CONCERN SIMPLE FINANCIAL RESTRUCTURING IN THE PRIVATE SECTOR .

16 AS THE COURT HAS ALREADY HELD IN ITS JUDGMENT OF 3 OCTOBER 1985 IN CASE 214/83 FEDERAL REPUBLIC OF GERMANY V COMMISSION (( 1985 )) ECR 3053, THE AID PROPOSALS WHICH HAD TO BE NOTIFIED TO THE COMMISSION BEFORE THE TIME-LIMIT LAID DOWN IN DECISION 2320/81 WERE PROGRAMMES WHICH, WITHIN THE FRAMEWORK OF A RESTRUCTURING PLAN, IDENTIFIED THE TYPE, THE AIM AND THE PROPOSED USE OF THE AID, BUT IT WAS NOT NECESSARY THAT THE EXACT AMOUNT OF AID REQUIRING AUTHORIZATION SHOULD ALREADY HAVE BEEN DETERMINED . ACCORDING TO THE SAME JUDGMENT, HOWEVER, THE COMMISSION MAY NOT AFTER THAT DATE ACCEPT PARTICULARS WHICH WOULD HAVE THE EFFECT OF CHANGING THE NATURE OF THE PROPOSED AID SO THAT THE PLAN IMPLEMENTED WOULD NO LONGER BE THAT WHICH HAD BEEN NOTIFIED .

17 IN THE PRESENT CASE EXAMINATION OF THE LETTER OF 28 MAY 1985 NOTIFYING THE AID CONTEMPLATED BY THE ITALIAN GOVERNMENT SHOWS THAT THE AID RELATED SOLELY TO REDUCTIONS IN CAPACITY AND PLANT CLOSURES . IT WAS EXPLAINED IN THE INTRODUCTORY PART OF THE LETTER THAT THE GOVERNMENT WAS PROPOSING AN "ADDITIONAL FINANCIAL PACKAGE REQUIRED FOR THE RESTRUCTURING OF THE ITALIAN STEEL INDUSTRY" AND THAT THE PACKAGE WOULD ALLOW UNDERTAKINGS IN THE PRIVATE AND PUBLIC SECTORS "TO CONTINUE TO IMPROVE THEIR PRODUCTIVE STRUCTURE" DURING THE FOLLOWING PERIOD .

18 CONSEQUENTLY, WHEN THE SYNERGY PROPOSAL CAME TO NOTHING THE COMMISSION WAS ABLE TO TAKE ACCOUNT OF THE INFORMATION SUBSEQUENTLY SUPPLIED BY THE ITALIAN GOVERNMENT SO THAT HALF THE AMOUNT OF LIT*550*000 MILLION ORIGINALLY ALLOCATED FOR CLOSURES ARISING FROM THE PROPOSED SYNERGY COULD BE APPROVED FOR RESTRUCTURING IN THE PRIVATE SECTOR INVOLVING REDUCTIONS IN PRODUCTION CAPACITY . ON THE OTHER HAND IT COULD NOT APPROVE AID OF LIT*275*000 MILLION, REPRESENTING THE OTHER HALF OF THAT AMOUNT FOR FINANCIAL RESTRUCTURING, SINCE SUCH AID WAS DIFFERENT IN NATURE FROM THAT NOTIFIED ON 28 MAY 1985 .

19 IT MUST BE CONCLUDED THAT THE NOTIFICATION, WHICH STATED THAT AID OF LIT*550*000 MILLION WAS CONTEMPLATED FOR REDUCTIONS IN CAPACITY ARISING FROM THE CLOSURE OF PLANTS AS A RESULT OF SYNERGY, ALLOWED THE COMMISSION, ON THE BASIS OF INFORMATION SUBSEQUENTLY PROVIDED CONCERNING THE MEASURES TO BE TAKEN IF THE PROPOSED SYNERGY DID NOT COME ABOUT, TO APPROVE THE GRANT OF AID FOR REDUCTIONS IN CAPACITY MADE ON A DIFFERENT BASIS BUT DID NOT PERMIT THE APPROVAL OF AID FOR DIFFERENT PURPOSES SUCH AS FINANCIAL RESTRUCTURING .

20 THE APPLICANT' S FIRST SUBMISSION, BASED ON A DIFFERENT INTERPRETATION OF THE LETTER OF 28 MAY 1985, CANNOT THEREFORE BE ACCEPTED .

C - EQUAL TREATMENT

21 THE APPLICANT POINTS OUT THAT ARTICLE 4 ( B ) OF THE ECSC TREATY REQUIRES EQUALITY OF TREATMENT OF ALL STEEL UNDERTAKINGS IN THE COMMUNITY, AND STATES THAT IT IS THE ONLY DIRECT ITALIAN COMPETITOR OF FINSIDER IN THE FLAT PRODUCTS SECTOR . IN THOSE CIRCUMSTANCES THE COMMISSION HAS NO POWER TO AUTHORIZE THE GRANT OF CONSIDERABLE ADDITIONAL AID TO FINSIDER WITHOUT AID BEING GRANTED TO FALCK .

22 IN SUPPORT OF THAT SUBMISSION THE APPLICANT ALLEGES THAT THE INEQUALITY REFERRED TO IS AGGRAVATED BY THE FACT THAT IN THE PAST FINSIDER HAS ENJOYED SUBSTANTIAL AID WHICH HAS ALLOWED IT TO MEET ITS LOSSES WITHOUT BEING REQUIRED TO REDUCE ITS PRODUCTION CAPACITY, WHEREAS UNDERTAKINGS IN THE PRIVATE SECTOR SUCH AS FALCK HAVE HAD TO ENSURE THEIR SURVIVAL BY CARRYING OUT EXTENSIVE RESTRUCTURING OF THEIR PRODUCTION FACILITIES WITHOUT ENJOYING COMPARABLE AID . THE INEQUALITY OF TREATMENT HAS THUS LED TO DISTORTION OF COMPETITION .

23 THE COMMISSION POINTS OUT THAT IN THE PAST IT HAS ALSO APPROVED SUBSTANTIAL AID FOR FALCK, AND ARGUES THAT FINSIDER AND FALCK WERE NOT IN A COMPARABLE POSITION IN RELATION TO THE APPLICATION OF THE CONTESTED DECISION IN THE EVENT THAT SYNERGY WAS NOT ACHIEVED SINCE FINSIDER WAS REQUIRED, AS A CONDITION FOR THE GRANT OF AID, TO MAKE REDUCTIONS IN CAPACITY OF 800*000 TONNES, WHEREAS FALCK IS NOT ENGAGING IN ANY FURTHER RESTRUCTURING .

24 WITH REGARD TO THE CHARGE OF UNFAIR COMPETITION THE COMMISSION, WHILE RECOGNIZING THAT ANY AID GRANTED TO AN UNDERTAKING GIVES IT AN ADVANTAGE IN RELATION TO OTHERS AND BY ITS NATURE THUS AFFECTS COMPETITION, STATES THAT ARTICLE 2 OF THE SECOND AIDS CODE ALLOWS THE APPROVAL OF AID ONLY IF IT DOES NOT ENTAIL DISTORTION OF COMPETITION "TO AN EXTENT CONTRARY TO THE COMMON INTEREST ". IN ORDER TO ENSURE THAT THAT CONDITION WAS SATISFIED THE COMMISSION FIRST OF ALL DETERMINED WHETHER THE AID GRANTED TO FINSIDER WAS STRICTLY NECESSARY FOR ITS RENEWED VIABILITY; IT THEN REQUIRED A SUBSTANTIAL CONTRIBUTION TO THE REDUCTION OF CAPACITY IN THE SECTOR; FINALLY, IT CARRIED OUT A THOROUGH EXAMINATION OF THE USE OF THE AID IN ORDER TO CHECK INTER ALIA WHETHER THE GRANT OF AID WAS NOT LEADING TO UNDERCUTTING OF PRICES .

25 THAT ISSUE BETWEEN THE PARTIES CALLS FOR THE FOLLOWING OBSERVATIONS . IF THE PROPOSED SYNERGY HAD TAKEN PLACE FALCK WOULD HAVE TAKEN PART IN A SUBSTANTIAL RESTRUCTURING OF FLAT PRODUCTS MANUFACTURE IN ITALY AND WOULD HAVE RECEIVED ADDITIONAL AID ALLOWING IT TO CLOSE CERTAIN PLANTS . SINCE SYNERGY WAS NOT ACHIEVED FALCK DOES NOT RECEIVE ANY ADDITIONAL AID, BUT NOR IS IT REQUIRED TO MAKE ADDITIONAL REDUCTIONS IN ITS PRODUCTION CAPACITY . IN THAT RESPECT IT MUST BE OBSERVED THAT UNDER THE SECOND AIDS CODE RESTRUCTURING POLICY IN THE STEEL INDUSTRY IS CONCEIVED IN SUCH A WAY THAT IT IS IN PRINCIPLE FOR THE MEMBER STATES TO DRAW UP SPECIFIC RESTRUCTURING PLANS AND FOR THE COMMISSION TO ASSESS HOW IMPORTANT IT IS TO ACHIEVE SUCH PLANS IN RELATION TO THE AID WHICH IT IS TO APPROVE OR WHOSE TERMS OF PAYMENT IT IS TO AMEND .

26 THE APPLICANT' S COMPLAINTS MUST BE EXAMINED IN THAT LIGHT . IN EFFECT, FALCK COMPLAINS THAT THE COMMISSION DID NOT INCLUDE IT IN THE GRANT OF AID AND IN THE EFFORTS TO REDUCE CAPACITY WHEN THE SYNERGY PROPOSAL CAME TO NOTHING . THOSE COMPLAINTS, HOWEVER, ARE NOT PRIMARILY THE CONCERN OF THE COMMISSION SINCE IT WAS FOR THE ITALIAN GOVERNMENT TO SUBMIT, WITHIN THE TIME-LIMIT, AN AID PROPOSAL INVOLVING FALCK IN THE EVENT THAT SYNERGY SHOULD NOT BE ACHIEVED .

27 IT IS TRUE, AS THE APPLICANT CLAIMS, THAT ALTHOUGH ANY AID MEASURE IS LIKELY TO FAVOUR ONE UNDERTAKING IN RELATION TO ANOTHER, THE COMMISSION CANNOT APPROVE AID THE GRANT OF WHICH MAY RESULT IN MANIFEST DISCRIMINATION BETWEEN THE PUBLIC AND PRIVATE SECTORS . IN SUCH A CASE THE GRANT OF AID WOULD INVOLVE DISTORTION OF COMPETITION TO AN EXTENT CONTRARY TO THE COMMON INTEREST .

28 HOWEVER, EXAMINATION OF THE DOCUMENTS BEFORE THE COURT AND IN PARTICULAR THE CORRESPONDENCE SINCE LATE 1984 BETWEEN FALCK, THE ITALIAN MINISTRY FOR INDUSTRY AND THE COMMISSION DOES NOT INDICATE THAT ANY SUCH MANIFEST DISCRIMINATION BETWEEN THE PUBLIC AND PRIVATE SECTORS OCCURRED IN THE PRESENT CASE .

29 IT FOLLOWS FROM THE FOREGOING THAT THE SECOND SUBMISSION MUST BE REJECTED .

D - RESTRUCTURING PROGRAMME

30 IN ITS THIRD SUBMISSION THE APPLICANT ALLEGES THAT THE CONTESTED DECISION IS UNLAWFUL SINCE THERE WAS NO SYSTEMATIC AND SPECIFIC RESTRUCTURING PROGRAMME . IN RELYING ON TWO ALTERNATIVES, DEPENDING ON THE OUTCOME OF THE DISCUSSIONS ON SYNERGY, THE COMMISSION ITSELF ADMITTED THAT WHEN IT TOOK ITS DECISION IT DID NOT HAVE BEFORE IT ANY GENERAL PLAN FOR THE RESTRUCTURING OF THE ITALIAN STEEL INDUSTRY .

31 THE ABSENCE OF ANY SUCH PLAN MEANS THAT ACCORDING TO THE APPLICANT THERE IS NO PROPER STATEMENT OF REASONS FOR THE CONTESTED DECISION, FOR THE REFERENCE TO EXPERTS' REPORTS PREPARED FOR THE COMMISSION CAN BE NO MORE THAN AN EMPTY FORMULA SINCE THE SAME AID WAS TO BE APPROVED IN FAVOUR OF FINSIDER WHETHER OR NOT SYNERGY WAS ACHIEVED, ALTHOUGH FINSIDER' S POSITION WOULD OBVIOUSLY BE VERY DIFFERENT DEPENDING ON WHAT BECAME OF ITS WIDE-STRIP MILL AT BAGNOLI .

32 THE COMMISSION CHALLENGES THAT VIEW . IT STATES THAT IT ASSESSED THE EFFECT OF THE AID TO BE GRANTED TO FINSIDER ON ITS VIABILITY BOTH IN THE EVENT THAT SYNERGY WAS ACHIEVED AND IN THE EVENT THAT THERE WAS NO SYNERGY . SIMILARLY, IT REQUIRED DIFFERENT REDUCTIONS IN CAPACITY IN THE TWO CASES, FOR FINSIDER WAS NOT REQUIRED TO MAKE THE SAME REDUCTIONS IN CAPACITY IN THE EVENT THAT SYNERGY RESULTED IN A CONSIDERABLE REDUCTION OF CAPACITY IN THE PRIVATE SECTOR .

33 SINCE THE SYNERGY PROPOSAL ULTIMATELY CAME TO NOTHING, THE APPLICANT' S ARGUMENTS ARE RELEVANT ONLY IN SO FAR AS THEY CONCERN THE RESTRUCTURING PROGRAMME IMPLEMENTED BY FINSIDER IN ORDER TO MODERNIZE ITS OPERATIONS AND REDUCE ITS PRODUCTION CAPACITY IN THE ABSENCE OF SYNERGY .

34 IT IS TRUE THAT THE NOTIFICATION SUBMITTED BY THE ITALIAN GOVERNMENT IS CONCERNED IN PARTICULAR WITH THE SYNERGY PROPOSAL AND SAYS NOTHING ABOUT WHAT RESTRUCTURING EFFORTS WILL BE MADE SHOULD THE PROPOSAL COME TO NOTHING . THE CONTESTED DECISION, HOWEVER, IS VERY EXPLICIT ON THAT POINT : IT MAKES THE GRANT OF AID TO FINSIDER SUBJECT TO THE CLOSURE OF ITALSIDER' S HEAVY SECTION MILL AT BAGNOLI ( PRODUCTION CAPACITY : 400*000 TONNES ) AND OF ITALSIDER' S STRIP MILL AT BAGNOLI ( PRODUCTION CAPACITY : 400*000 TONNES ). ACCORDING TO THE DECISION, IN IMPOSING THOSE REQUIREMENTS THE COMMISSION TOOK ACCOUNT OF THE RESTRUCTURING EXPECTED BY THE ITALIAN GOVERNMENT AS A RESULT OF THE PROPOSED SYNERGY, ADDITIONAL INFORMATION SUPPLIED BY THE ITALIAN GOVERNMENT, ESPECIALLY IN ITS TELEX MESSAGE OF 22 JULY 1985, THE OBSERVATIONS MADE BY THE OTHER MEMBER STATES PURSUANT TO ARTICLE 8 ( 2 ) OF THE SECOND AIDS CODE AND AN EXPERT' S REPORT ORDERED JOINTLY BY THE COMMISSION AND THE ITALIAN GOVERNMENT . THE DECISION STATES THAT ON THE BASIS OF ALL THOSE PARTICULARS THE COMMISSION CAME TO THE CONCLUSION THAT THE CONTEMPLATED CLOSURES COULD BE MADE WITHOUT EXCESSIVE DIFFICULTY AND WITHOUT PUTTING AT RISK FINSIDER' S PROBABLE RETURN TO VIABILITY, WHICH WAS THE OBJECTIVE OF THE APPROVAL OF AID TO IT .

35 ARTICLE 2 ( 1 ) OF THE SECOND AIDS CODE PROVIDES THAT AIDS TO THE STEEL INDUSTRY MAY BE CONSIDERED COMPATIBLE WITH THE ORDERLY FUNCTIONING OF THE COMMON MARKET PROVIDED THAT THE RECIPIENT UNDERTAKING "IS ENGAGED IN THE IMPLEMENTATION OF A SYSTEMATIC AND SPECIFIC RESTRUCTURING PROGRAMME"; ARTICLE 8 ( 1 ) AND ( 3 ) REQUIRES MEMBER STATES TO NOTIFY THEIR "PLANS TO GRANT OR ALTER AIDS" AND THE COMMISSION TO TAKE ITS DECISION "AFTER RECEIVING THE INFORMATION NEEDED TO ENABLE IT TO ASSESS THE AID IN QUESTION ". THERE IS THUS NOTHING IN THOSE ARTICLES TO STOP THE COMMISSION FROM SPECIFYING IN ITS DECISION THE RESTRUCTURING EFFORTS WHICH IT CONSIDERS NECESSARY FOR THE APPROVAL OF AID .

36 IT FOLLOWS FROM THE FOREGOING CONSIDERATIONS THAT IN ADOPTING THE CONTESTED DECISION THE COMMISSION DID NOT APPLY CRITERIA ALIEN TO THE PROVISIONS AND OBJECTIVES OF DECISIONS 2320/81 AND 1018/85 OR FAIL TO STATE REASONS FOR ITS APPROVAL OF THE GRANT OF AID TO FINSIDER . THE THIRD SUBMISSION THEREFORE CANNOT BE ACCEPTED .

37 IN THE RESULT, THEREFORE, THE ACTION MUST BE DISMISSED IN ITS ENTIRETY .

Decision on costs

COSTS

## Decision on costs

38 UNDER ARTICLE 69 ( 2 ) OF THE RULES OF PROCEDURE THE UNSUCCESSFUL PARTY IS TO BE ORDERED TO PAY THE COSTS . AS THE APPLICANT HAS FAILED IN ITS SUBMISSIONS IT MUST BE ORDERED TO PAY THE COSTS .

Operative part

On those grounds,

## Operative part

THE COURT ( Sixth Chamber )

hereby :

( 1 ) Dismisses the application;

( 2 ) Orders the applicant to pay the costs .