JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)

26 June 2008 (*)

(State aid – Measures taken by the Portuguese Republic for the public service broadcaster RTP in order to finance its public service remit – Decision declaring that certain measures do not constitute State aid and that the others are compatible with the common market – Classification as State aid – Compatibility with the common market – Obligation to undertake a diligent and impartial investigation)

In Case T‐442/03,

**SIC – Sociedade Independente de Comunicação, SA,** established in Carnaxide (Portugal), represented by C. Botelho Moniz, E. Maia Cadete and M. Rosado da Fonseca, lawyers,

applicant,

v

**Commission of the European Communities,** represented initially by M. Balta and F. Florindo Gijón, subsequently by M. Niejahr, J. Buendía Sierra and G. Braga da Cruz,
and latterly by B. Martenczuk and G. Braga da Cruz, acting as Agents,

defendant,

APPLICATION for annulment of Commission Decision 2005/406/EC of 15 October 2003 on ad hoc measures implemented by Portugal
for RTP (OJ 2005 L 142, p. 1) inasmuch as that decision declares that certain of those measures do not constitute State aid
and that the others are compatible with the common market,

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber),

composed of M. Vilaras (Rapporteur), President, M.E. Martins Ribeiro and K. Jürimäe, Judges,

Registrar: J. Palacio González, Principal Administrator,

having regard to the written procedure and further to the hearing on 22 November 2007,

gives the following

**Judgment**

**Legal context**

1        Article 16 EC states:

‘Without prejudice to Articles 73 [EC], 86 [EC] and 87 [EC], and given the place occupied by services of general economic
interest in the shared values of the Union as well as their role in promoting social and territorial cohesion, the Community
and the Member States, each within their respective powers and within the scope of application of this Treaty, shall take
care that such services operate on the basis of principles and conditions which enable them to fulfil their missions.’

2        Article 86(2) EC states:

‘Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing
monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the
application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them.
The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.’

3        Article 87(1) EC states:

‘Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever
which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall,
in so far as it affects trade between Member States, be incompatible with the common market.’

4        The protocol on the system of public broadcasting in the Member States (OJ 1997 C 340, p. 109; ‘the Amsterdam Protocol’),
introduced by the Treaty of Amsterdam as an annex to the EC Treaty, states:

‘[The Member States,] considering that the system of public broadcasting in the Member States is directly related to the democratic,
social and cultural needs of each society and to the need to preserve media pluralism, have agreed upon the following interpretative
provisions, which shall be annexed to the [EC] Treaty:

The provisions of the [EC Treaty] shall be without prejudice to the competence of Member States to provide for the funding
of public service broadcasting in so far as such funding is granted to broadcasting organisations for the fulfilment of the
public service remit as conferred, defined and organised by each Member State, and in so far as such funding does not affect
trading conditions and competition in the Community to an extent which would be contrary to the common interest, while the
realisation of the public service remit of that public service shall be taken into account.’

5        On 15 November 2001, the Commission published a communication on the application of State aid rules to broadcasting (OJ 2001
C 320, p. 5; ‘the Communication on broadcasting’) in which the Commission set out the principles to be followed by the Commission
in the application of Articles 87 EC and 86(2) EC to State financing of public service broadcasting (point 4 of that communication).

**Facts of the case**

6        RTP – Radiotelevisão Portuguesa, SA, is a limited liability company with public capital entrusted with providing the Portuguese
public television service, pursuant to contracts entitled ‘concession contracts for public service television’, concluded,
successively, on 17 March 1993 and 31 December 1996 (together ‘the public service contracts’).

7        The applicant, SIC − Sociedade Independente de Comunicação, SA, is a commercial television company which runs one of the main
private television channels in Portugal.

8        By three complaints submitted by the applicant, dated 30 July 1993 and 12 February 1994 (NN 133/B/01), 16 October 1996 (NN
85/B/2001) and 18 June 1997 (NN 94/B/99) respectively, the Commission was informed that the Portuguese Republic had implemented
a number of ad hoc measures and annual compensation measures in favour of RTP which constituted State aid incompatible with
the common market.

9        On 3 March 1997, the applicant brought Case T‐46/97 before the Court of First Instance for the annulment of the Commission
decision of 7 November 1996 taken without prior initiation of the formal investigation procedure laid down in Article 93(2)
of the EC Treaty (now Article 88(2) EC), concerning a proceeding under Article [88] EC on the financing of public television
channels, along with the annulment of a decision allegedly contained in a letter from the Commission of 20 December 1996.
By that decision and by that letter, the Commission found that certain measures challenged in the complaints did not constitute
State aid and requested information from the Portuguese authorities in respect of certain other of those measures.

10      In its judgment in Case T‐46/97 *SIC* v *Commission* [2000] ECR II‐2125, the Court of First Instance noted that serious difficulties remained at the end of the Commission’s preliminary
investigation, which had lasted considerably longer than normally necessary, justifying the initiation, by the Commission,
of the formal investigation procedure (paragraphs 105 to 109 of the judgment) and annulled the decision of 7 November 1996.
By contrast, the Court dismissed as inadmissible the action brought against the letter of 20 December 1996, since that letter
did not constitute a decision (paragraph 49 of the judgment).

11      Following that judgment, the applicant sent the Commission three letters dated 26 July 2001 each containing a request to act
in respect of a different one of its three complaints and seeking to initiate the formal investigation procedure in respect
of the measures of which they complained.

12      Those requests to act were followed by two actions for failure to act brought by the applicant before the Court of First Instance
on 6 December 2001 and lodged under case numbers T‐297/01 and T‐298/01. Following a Commission initiative of 7 November 2001
and that institution’s statements of its position of 13 November 2001 and 30 September 2003 (paragraphs 13 and 14 below),
it was held that there was no need to adjudicate in those cases (Joined Cases T‐297/01 and T‐298/01 *SIC* v *Commission* [2004] ECR II‐743).

13      By letter of 7 November 2001, the Commission requested, pursuant to Article 10(3) of Council Regulation (EC) No 659/1999 of
22 March 1999 laying down detailed rules for the application of Article [88] EC (OJ 1999 L 83, p. 1), that the Portuguese
Republic communicate information regarding the annual compensation measures mentioned in paragraph 8 above in order to enable
it to determine the classification of those payments as new or existing aid. Thus, by letter of 30 September 2003, the Commission
notified the Portuguese Republic of a request for observations, in accordance with Article 17(2) of Regulation No 659/1999,
and initiated, in so doing, the first stage of the investigation of those measures as existing aid. Those annual compensation
measures and the procedure initiated in respect of them by the decision of 30 September 2003 is not the subject of this action.

14      By letter of 13 November 2001, the Commission informed the Portuguese Republic of its decision to initiate the formal investigation
procedure pursuant to Article 88(2) EC regarding a number of ad hoc measures adopted by the Portuguese Republic for RTP between
1992 and 1998. Those measures are the following:

–        the exemption from the duties and expenses relating to the registration of the legal document creating the undertaking in
the amount of Portuguese escudos (‘PTE’) 33 million (‘the tax exemptions’);

–        the grant by Portugal Telecom to RTP of payment facilities for the fees for the use of the television broadcasting network
(‘the payment facilities for the fee’);

–        the amicable settlement concluded between the body responsible for social security and RTP, whereby RTP’s debt was rescheduled
and the social security body’s claim for default interest was waived;

–        the increase in RTP’s capital of PTE 5 400 million in 1993 as compensation for the sale of the television broadcasting network
by RTP;

–        the issue of bonds in 1994 for PTE 5 000 million, allegedly guaranteed by the Portuguese Republic (‘the 1994 bond issue’);

–        the protocol between RTP and the Portuguese Ministry of Culture, concluded in 1996, to support promotion of cinema by RTP;

–        the restructuring plan for the period from 1996 to 2000;

–        increases in RTP’s capital by the Portuguese Republic between 1994 and 1997, amounting to PTE 52 200 million;

–        loans granted by the Portuguese Republic to RTP in 1997 and 1998 in the amount of PTE 20 000 million.

15      The decision to initiate the formal investigation procedure was published in the *Official Journal of the European Communities* (OJ 2002 C 85, p. 9) and was notified to the applicant by letter of 8 January 2002. In that decision, the Commission requested
the interested parties to submit their observations.

16      By letters of 8 February 2002 (ref. 1543.003.CA.001) and 9 May 2002 (ref. 1543.003.OB.001), the applicant submitted its observations
to the Commission.

17      In those observations, it called on the Commission to request the Portuguese authorities to disclose the external audit reports
on RTP, provided for in Article 19 of the 1993 public service contract and by Article 25 of the 1996 public service contract
(‘the contractual external audit reports’). The applicant requested permission to submit observations on the content of those
reports.

18      The Commission did not respond to those requests by the applicant.

19      From the month of March 2003 and in order to obtain disclosure of the contractual external audit reports or a statement to
the effect that they did not exist, the applicant initiated, at a national level, several successive sets of proceedings,
first before the Minister for State and Finance, the minister responsible for carrying out the duties of the President and
the President of the Board of Management of RTP, later before the Portuguese Commission for Access to Administrative Documents
and lastly before the Tribunal Administrativo de Círculo de Lisboa (Administrative Circuit Court for Lisbon) (Portugal).

20      By letter of 16 May 2003, the applicant repeated its request for the Commission to require the Portuguese authorities to disclose
the contractual external audit reports.

21      By letter of 19 June 2003, the Commission turned down that request.

22      By letter of 4 August 2003 to the Commission, the applicant criticised the position which that institution had adopted.

23      By Commission Decision 2005/406/EC of 15 October 2003 on ad hoc measures implemented by Portugal for RTP (OJ 2005 L 142, p. 1;
‘the contested decision’), the Commission decided that certain of the ad hoc measures constituted State aid compatible with
the common market (Article 1 of the contested decision), whilst the other ad hoc measures did not constitute State aid (Article 2
of the contested decision).

24      By letter of 4 December 2003, following the judgment of the Tribunal Administrativo de Círculo de Lisboa of 16 October 2003,
the Portuguese authorities sent the applicant one of the contractual external audit reports carried out in 2001 by a firm
of auditors and relating to the 1998 tax year (‘the contractual external audit report for 1998’). The Portuguese authorities
informed the applicant that, with regard to the contractual external audit reports for the years 1993 to 1997, ‘as they are
not in the possession of the minister responsible for carrying out the duties of the President, it is impossible for him to
issue a statement, since the existence or non-existence of those reports cannot be established with certainty’.

25      By letter of 11 December 2003, the Commission communicated the contested decision to the applicant.

**Procedure and forms of order sought**

26      By application lodged at the Registry of the Court of First Instance on 31 December 2003, the applicant brought this action.

27      The composition of the Chambers of the Court of First Instance changed with effect from 13 September 2004, resulting in the
appointment of the Judge-Rapporteur as President of the Fifth Chamber, to which this case was, consequently, assigned.

28      In the annex to the reply, the applicant produced a management audit report for RTP, No 08/2002 of 6 June 2002, drawn up by
the Tribunal de Contas (Court of Auditors) (Portugal) (‘the report of the Tribunal de Contas’). In addition, pursuant to Article 65(b)
of the Rules of Procedure of the Court of First Instance, the applicant requested the Court to require the Commission to produce
the detailed information which, according to the defence, the Portuguese authorities had sent to that institution.

29      The applicant claims that the Court of First Instance should:

–        annul Article 1 of the contested decision inasmuch as it does not satisfy the criteria necessary for Article 86(2) EC to apply;

–        annul Article 2 of the contested decision inasmuch as it establishes that the tax exemptions, the payment facilities for the
fee and the 1994 bond issue do not constitute State aid;

–        order the Commission to pay the costs.

30      The Commission contends that the Court of First Instance should:

–        dismiss the action;

–        order the applicant to pay the costs.

**Law**

31      This action, in addition to presenting four pleas in law – alleging, first, breach of the obligations of diligence and impartiality,
second, errors of fact and breach of the duty to state reasons, third, an error of law resulting from the failure to classify
certain measures as State aid and, fourth, errors of law as to the conditions for the application of Article 86(2) EC – turns,
essentially, on two main disputes corresponding to the two articles of the operative part of the contested decision and to
the third and fourth pleas in support of annulment.

32      The first main dispute, corresponding to the third plea in support of annulment, relates to the Commission finding, appearing
in Article 2 of the contested decision, that certain of the measures adopted by the Portuguese Republic do not constitute
State aid within the meaning of Article 87(1) EC.

33      The second main dispute, corresponding to the fourth plea in support of annulment, relates to the Commission finding that
other measures, which, it is not disputed, constitute State aid within the meaning of Article 87(1) EC, might benefit from
the derogation laid down in Article 86(2) EC (Article 1 of the contested decision).

34      In connection with the second dispute in particular, the applicant relies, both in the first plea as well as in respect of
certain parts of the second plea, on the Commission’s breach of its obligation to undertake a diligent and impartial investigation.

35      It is necessary, initially, to examine the first main dispute and, accordingly, the third plea in support of annulment.

*The third plea in law, alleging that the Commission erred in law in failing to classify certain measures as State aid*

The first part, alleging the failure to classify the tax exemptions as State aid

–       Arguments of the parties

36      According to the applicant, the measure, provided for in Article 11(1) of Lei no 21/92, transforma a Radiotelevisão Portuguesa, E.P., em sociedade anónima, of 14 August 1992 (Portuguese Law No 21/92 on
the transformation of Radiotelevisão Portuguesa, E.P., into a public limited company) (*Diário da República*I, Series I‐A, No 187, of 14 August 1992; ‘Law No 21/92’) authorising the official registration without notarial deed of RTP’s
transformation into a public limited company, accorded an advantage to RTP which was denied to other economic operators on
the market. It consisted in RTP’s exemption from payment of the registration charges and fees connected with that transformation.
It is alleged that that exemption was worth PTE 33 million.

37      In addition, Article 11(2) of Law No 21/92 also provides that RTP is to be accorded an unlimited exemption from payment of
any charges and fees to all registration departments and to all authorities and public bodies in respect of any act of inscription,
registration or annotation.

38      Those State provisions, which confer advantages on the recipient undertaking and are selective in nature, since they apply
only to public companies, constitute State aid, contrary to the Commission’s finding in the contested decision (recital 125
et seq. of the contested decision).

39      It is not evident how the grant of such privileges to RTP can be justified by the general principles and overall logic of
the legal system applicable in Portugal, as the Commission appears to contend.

40      In reply, the Commission repeats the reasoning it employed in recital 125 et seq. of the contested decision.

41      It notes that RTP’s transformation into a public limited company was not necessary and could not be considered to be an advantage.
Its aim was merely to bring the way in which the public operator functioned closer to that of private operators.

42      It adds that, even if the applicant’s position were valid and in the event that RTP had to bear all the notarial and registration
charges connected with its change of status, the costs arising would have been borne by the Portuguese Republic itself, without
it being possible for such ‘aid’ to be considered unlawful, since, as it is indispensable to the creation of the undertaking,
it is directly linked to the fulfilment of RTP’s public service remit.

–       Findings of the Court

43      According to settled case-law, classification as State aid requires that all the conditions set out in Article 87(1) EC are
fulfilled (Case C‐142/87 *Belgium* v *Commission* [1990] ECR I‐959, paragraph 25; Joined Cases C‐278/92 to C‐280/92 *Spain* v *Commission* [1994] ECR I‐4103, paragraph 20; and Case C‐482/99 *France* v *Commission* [2002] ECR I‐4397, paragraph 68).

44      The principle that State aid is prohibited, laid down in Article 87(1) EC, includes the following requirements. First, there
must be an intervention by the State or through State resources. Second, that intervention must confer an advantage on its
recipient. Third, it must be liable to affect trade between Member States. Fourth, it must distort or threaten to distort
competition.

45      The first of those requirements, concerning the involvement of State resources, is not in dispute in this case. It is not
contested that it was fulfilled.

46      The applicant’s arguments concentrate on the second of those requirements. The tax exemptions granted and continue to grant
selectively to RTP an economic advantage which other economic operators are denied.

47      The Court notes that the applicant identifies, essentially, two advantages.

48      First, RTP benefited from an ad hoc advantage, consisting of the exemption from payment of registration charges and fees relating
to its transformation into a public limited company.

49      Second, RTP benefited from a permanent advantage, consisting of an unlimited exemption from payment to all authorities of
any charges and fees in respect of any act of inscription, registration or annotation.

50      It is appropriate, first, to examine the ad hoc advantage from which, according to the applicant, RTP benefited.

51      That advantage, in fact, comprises two parts: first, RTP was exempted from the usual requirement of a notarial deed and, accordingly,
from the notarial fees (also referred to as ‘notarial charges’) connected thereto; second, it was exempted from the registration
charges and the costs linked to its publication, since the registration formalities relating to RTP’s transformation into
a public limited company occurred automatically and compliance with the publication formalities was, according to the Commission,
rendered unnecessary by the publication of Law No 21/92 in the *Diário da República*(paragraph 36 above).

52      In the contested decision, the Commission contended, in relation to those two parts of the ad hoc advantage, that Article 11(1)
of Law No 21/92, pursuant to which RTP was exempted from payment of notarial and registration charges, did not confer a specific
advantage on RTP. That text merely reaffirms the applicability to the specific case of RTP of Lei no 84/88 transformação das empresas públicas em sociedades anónimas of 20 July 1988 (Portuguese Law No 84/88 on the transformation
of public undertakings into public limited companies) (*Diário da República*I, Series I, No 166, of 20 July 1988; ‘Law No 84/88’), under which public undertakings can be transformed into public limited
companies by a decree-law which is to constitute the act approving the statutes of the limited company and is to be treated
as a sufficient document for all registration requirements (recital 127 of the contested decision). The different treatment
for public undertakings whose legal status is changed for the purpose of transforming them into public limited companies arises
from the internal logic of the system and does not confer on them a specific advantage to the extent that relevant chargeable
events do not exist (recital 128 of the contested decision).

53      Before going on to examine those reasons stated by the Commission, it is appropriate to cite the relevant passages of the
Portuguese legislation.

54      Article 1 of Law No 84/88 states:

‘Public undertakings ... can be transformed by decree-law into public limited companies with public capital or a majority of
public capital, in accordance with the terms of the Constitution and of this Law.’

55      Article 3(3) of Law No 84/88 states that ‘the [decree-law effecting that transformation] constitutes a sufficient document
for all registration requirements’.

56      Article 11(1) and (2) of Law No 21/92 states:

‘1.      The statutes of RTP, SA, annexed to this Law are hereby approved; they do not need to be transformed into a deed, but shall
be automatically registered, free of duties and expenses, on the basis of their publication in the *Diário da República*.

2.      All acts of inscription, registration or annotation before all registration departments, all authorities and all public bodies,
in particular the national register of legal persons, the register of mortgages and the vehicle registration department shall
be carried out on the basis of a simple request signed by two members of the undertaking’s Board of Administration and shall
be free of any charges and fees.’

57      First, it is apparent both from the title of Law No 84/88 (see paragraph 52 above) and from Article 1 thereof (see paragraph 54
above) that that law does not introduce a general measure, applicable to all economic operators. It only applies to transformations
of public undertakings into public limited companies. Private undertakings are, consequently, excluded from benefiting thereunder.

58      Moreover, the applicant specifically claims in its application that a private undertaking governed by market rules does not
benefit from the tax exemptions from which RTP benefited when it changes its legal form.

59      Although the Commission recognises in recital 125 of the contested decision that it is for it ‘to assess whether the measure
... applied specifically to RTP (and alternatively, to only public companies) and not to private companies’, it does not deal
with that issue in the rest of the contested decision, at least with regard to the ad hoc advantage.

60      Thus, recitals 126 to 129 of the contested decision in no way challenge the claim made in paragraph 57 above to the effect
that the provisions of Law No 84/88 are applicable specifically to public undertakings.

61      Recital 126 of the contested decision states that RTP does not enjoy a general exemption from registration charges. However,
this does not alter the fact that even if that exemption is not general, it is granted by Law No 84/88 solely to public undertakings
and not to all operators.

62      With regard to recital 127 of the contested decision, although it states that Article 11 of Law No 21/92 merely confirms that
Law No 84/88 applies to RTP and, thus, that Law No 21/92 does not confer on it a specific advantage, but only applies the
general scheme of Law No 84/88, the fact remains, once again, that that scheme is ‘general’ solely in respect of public undertakings.
It does not apply to other economic operators. Thus, there really is a specific advantage conferred on certain undertakings
within the meaning of the rules applicable to State aid.

63      In recital 128 of the contested decision, the Commission contends, however, that ‘the different treatment for public undertakings
when transforming their legal status into a public limited company arises from the internal logic of the system and does not
confer on them a specific advantage since relevant chargeable events do not exist’.

64      It is true that a State measure which, despite conferring an advantage on a specific category of economic operators, instead
of derogating from the normal application of the system becomes a part of it, constituting, in so doing, a measure inherent
to that system, does not fall within the definition of a selective measure. Moreover, this is also the case where the differences
of treatment arising from that measure can be justified by the nature or the logic of the system (see the Opinion of Advocate
General Tizzano in Case C‐172/03 *Heiser* [2005] ECR I‐1627, I‐1631, point 47, Opinion of Advocate General Jacobs in Case C‐379/98 *PreussenElektra* [2001] ECR I‐2099, I‐2103, point 130, and Opinion of Advocate General Léger in Case C‐159/01 *Netherlands* v *Commission* [2004] ECR I‐4461, I‐4463, points 36 and 37; Case T‐55/99 *CETM* v *Commission* [2000] ECR II‐3207, paragraph 52 and the case-law cited; and Case T‐308/00 *Salzgitter* v *Commission* [2004] ECR I‐1933, paragraph 42 and the case-law cited).

65      Nevertheless, in order to be able to find, in that event, that the exemption from notarial charges – the first part of the
ad hoc advantage – did not constitute State aid, but was justified by the nature and the general logic of the system of which
it was a part, it was not sufficient to find, as the Commission did, that the recourse to legislation for the purpose of transforming
public undertakings into public limited companies meant that the chargeable event for the notarial charges did not occur.
Such a finding was, essentially, a statement of evidence.

66      The question for the Commission to examine was whether it was compatible with the logic of the Portuguese legal system for
the transformation of public undertakings into public limited companies to occur by legislation, or whether the recourse to
legislation for such operations constituted a derogation which, in view of the consequences which resulted therefrom (rendering
a notarial deed unnecessary with the result that no charges were incurred in respect thereof), was intended to confer an advantage
on public undertakings in relation to other undertakings.

67      The Court of First Instance finds, therefore, that the Commission – since it did not examine whether, despite its selective
nature, the exemption from notarial charges did not constitute State aid on the ground that the recourse to a legislative
instrument which entailed that exemption was not chosen with the aim of enabling public undertakings to escape those charges,
but was merely part of the logic of the Portuguese legal system – failed to state grounds in law for its finding to the effect
that the exemption from notarial charges did not constitute State aid.

68      As regards the second aspect of the ad hoc advantage – in other words, the exemption from the registration charges and the
costs of publication relating to RTP’s transformation into a public limited company – the Court notes that the Commission
stated in recital 129 of the contested decision that the same reasoning as that put forward in recital 128 of that decision
is to apply. The Commission adds, essentially, that, in view of the fact that Law No 21/92 (which includes RTP’s statutes
in an annex) was published in the *Diário da República*, it would have been superfluous to impose on RTP the publication requirements of the general law. The publication in the
*Diário da República* produced the same effects as registration.

69      Even if those assertions, concerning the effects of publication in the*Diário da República*, are correct – which is, moreover, doubtful since the wording of the Portuguese law (cited in paragraph 55 above) suggests,
on the contrary, that registration formalities continue to be necessary even though RTP’s transformation into a public limited
company was brought about by a legislative act – nevertheless, the question remains, there again, whether it is consistent
with the logic of the Portuguese legal system for RTP’s transformation into a public limited company to occur not in the normal
way laid down for private companies, in other words, by a notarial deed (with all the consequences that entails under the
general law concerning registration requirements and publication), but by legislation.

70      As the Commission did not reply to that question in the contested decision, it is necessary to find that, as with the exemption
from notarial charges, that institution has failed to prove to the requisite legal standard that, in respect of the exemption
from registration and publication charges connected with RTP’s transformation into a public limited company, that exemption
did not confer on RTP a specific advantage and that, accordingly, it did not constitute State aid.

71      Concerning, next, the permanent advantage granted to RTP, the applicant claims that RTP benefits from an unlimited exemption
from payment to all authorities of any charges and fees in respect of any act of inscription, registration or annotation.

72      The Commission counters by stating, in its defence, that Article 11(2) of Law No 21/92 (see paragraph 56 above) merely confirms
the applicability to RTP of a provision of general application, Article 1 of Decreto-Lei no 404/90 of 21 December 1990 (Portuguese Decree-Law No 404/90) (*Diário da República*I, Series I, No 293, of 21 December 1990; ‘Decree-Law No 404/90’) approving the system exempting from transfer tax (‘regime
de isenção de sisa’) undertakings that carried out acts of cooperation or concentration (see, also, recital 130 of the contested
decision).

73      Moreover, the Commission disputes that the exemption accorded by Article 11(2) of Law No 21/92 is ‘general’ in the sense of
permanent in time. The Commission contends that, on several occasions, RTP paid notarial and registration charges related
to changes in the company after its transformation into a public limited company (see, also, recital 126 of the contested
decision).

74      The Court notes that the Commission’s argument consists, essentially, of the contention that Article 11(2) of Law No 21/92
is merely the application to a specific case of a general rule and that the requirement imposed by Article 87(1) EC that the
aid should relate to a specific undertaking in order for it to be classified as State aid is thus not fulfilled in this case.

75      That argument of the Commission is not convincing, in the light of the wording of Decree-Law No 404/90, Articles 1 and 2 of
which state:

‘Article 1

It is possible to grant to undertakings that, up to 31 December 1993, carry out acts of cooperation or concentration, an exemption
from transfer tax on the transfer of fixed assets necessary for that concentration or that cooperation as well as emoluments
and other statutory charges payable in the context of the performance of those acts.

Article 2

1.      For the purpose of this Decree-Law, “act of concentration” shall mean:

(a)      The merger of two or more individual undertakings and/or corporations into a new company limited by shares [public limited
company or private limited company], including the total assets of the undertakings or companies.

(b)      The incorporation by an undertaking, by a transfer in its favour, of all or part of the assets of another undertaking even
if that other undertaking is not wound up.

2.      For the purposes of this Decree-Law, “act of cooperation” shall mean:

(a)      The creation of additional groups of undertakings in accordance with legislation in force for the provision of joint services,
joint or cooperative purchase or sale, specialisation or rationalisation of production, market research, sales promotion,
the acquisition and transfer of technical knowledge or practical arrangements, the development of new techniques and new products,
the training of personnel and the perfecting of their skills, the carrying-out of specific work or services and all other
joint objectives of a relevant nature.

(b)      The creation of legal persons governed by private law which are non-profit making through the association of public undertakings,
of companies with public capital or mostly public capital or of companies and other persons governed by private law, with
the object, in their respective sectors, of maintaining a technical assistance service, organising an information system,
promoting standards and the quality of products and good technology of manufacturing processes and researching the prospects
for the development of the sector.’

76      That decree-law, which is indeed, on first analysis, a rule of general application, does not appear to cover the present case
at all, namely the transformation of a company governed by public law into a public limited company. It concerns the case
of a concentration or cooperation between two or more undertakings. At the hearing, in answer to a question from the Court,
the applicant moreover explained, without being seriously challenged by the Commission, that that decree-law was in no way
intended to apply to the present case.

77      It does not therefore appear that a private undertaking which limits itself to changing its corporate form to that of a public
limited company can rely on that text in order to obtain exemption from the statutory fees and charges relating to that transformation.
It follows that the contested decision, in recital 130, does not prove to the requisite legal standard that the exemption
introduced by Article 11(2) of Law No 21/92 is merely the specific application to RTP of a general rule.

78      Once again, as in the case of the ad hoc advantage, the Court notes that the Commission has not proved to the requisite legal
standard that the measure at issue did not confer a specific advantage on RTP and that, accordingly, it did not constitute
State aid.

79      With regard to the Commission’s argument that the exemption is not permanent (see paragraph 73 above), it is probably well
founded, but in no way alters the finding that the general nature of that exemption had not been proved to the requisite legal
standard and, that being so, that it was thus not possible to conclude that that exemption did not constitute State aid.

80      In the defence, the Commission puts forward the argument that, even if the Court were to find that RTP should bear the notarial,
registration and publication charges which apply to private undertakings, the costs arising will be paid by the State itself
and that it will not be possible for that ‘aid’ to be found to be unlawful, since, as it is indispensable for the creation
of the undertaking, it is directly linked to the fulfilment of the public service remit.

81      If the Commission’s contention is correct – that RTP was transformed into a public limited company because the Portuguese
Government considered that to be necessary for the proper performance, by RTP, of its public service remit – then it is logical,
inasmuch as a notarial deed and the classic formalities may be necessary for that transformation and that transformation was
not in itself advantageous for RTP, for the costs relating thereto to be borne in full by the State.

82      Nevertheless, that contention by the Commission, which does not appear in the contested decision, is not accompanied by any
evidence. It cannot be ruled out that the Portuguese Government transformed RTP into a public limited company for reasons
other than those connected with the proper performance of the public service remit. The Commission itself states in the defence
that that transformation was not necessary.

83      Accordingly, that argument of the Commission should be dismissed.

84      Having regard to all of the foregoing considerations, the Court of First Instance finds that the first part of this plea,
concerning tax exemptions, is well founded in law and must, therefore, be upheld.

The second part, alleging the failure to classify the payment facilities for the licence as State aid

–       Arguments of the parties

85      The applicant claims that, according to Article 13(1)(f) of Lei no 58/90 regime da actividade de televisão of 7 September 1990 (Portuguese Law No 58/90 on the regime for television activities)
(*Diário da República*, Series I, No 207, of 7 September 1990; ‘Law No 58/90’), late payment of the network fee to Portugal Telecom by a private
operator constitutes a ground for withdrawal of its licence. The seriousness of the penalty applicable contrasts with the
leniency with which RTP was treated. That contradicts the Commission’s argument that there was no difference between the network
fees which Portugal Telecom charged to RTP and those it charged to the private operators, to the extent that the decisive
element was the reasonable time-limit for requiring payment. The acceptance by Portugal Telecom, whose majority shareholder
from 1991 to 1997 was the Portuguese Republic, of late payments of the network fee by RTP thus constitutes State aid. The
allegation that Portugal Telecom did not waive recovery of those debts or its claim for default interest is not in itself
sufficient to call that assessment into question.

86      In the reply, the applicant claims that the Portuguese Republic was in control of Portugal Telecom until at least 1997 and
that the agreements concluded between Portugal Telecom and RTP relate to March 1996 and December 1997. RTP was in a state
of technical insolvency.

87      The Commission states that it examined that point, but the applicant notes that the contested decision does not answer the
questions which it asked in the administrative procedure concerning the date on which the debt to Portugal Telecom was settled,
if at all, the amounts of default interest actually settled and the amount of RTP’s debt to Portugal Telecom as at the date
of the request.

88      The fact that the Autoridade Nacional de Comunicações (Portuguese National Communications Authority; ‘Anacom’), responsible
for ensuring respect for the pricing rules for the television broadcasting network, decided in 2003 to reduce the level of
the network fee paid by television operators to Portugal Telecom in 2002 was not relevant to the examination of the period
from 1992 to 1998.

89      The Commission contests the applicant’s position that the Portuguese Republic was not unconnected with Portugal Telecom’s
acceptance of late payments and thus with the grant, allegedly, of terms of payment which were not available to RTP’s competitors.

90      The Commission did not exclude a priori the involvement of public resources. However, having noted the absence of evidence
of actual participation by the Portuguese authorities in the adoption of the agreements concerning the acceptance of payment
deferrals, it was unable to find that such resources were implicated for the purposes of Article 87 EC.

91      In addition, Portugal Telecom’s behaviour before and after its privatisation in 1997 did not change. Portugal Telecom continued,
after its privatisation, to conclude agreements with RTP accepting late payments of RTP’s network fee. The main reason for
these agreements was a disagreement as to the level of the annual network fee, connected with the interdependence of the two
undertakings. That fact was moreover underlined by Anacom’s decision of 2003 pursuant to which Portugal Telecom was obliged
to reduce its tariffs considerably. That shows that Portugal Telecom’s behaviour towards RTP was that of a private creditor.

92      In the rejoinder, the Commission indicates that the only reason for its reference to Anacom’s decision of 2003 was the fact
that that decision stated that the main reason for the agreements between RTP and Portugal Telecom appeared to be a dispute
over the level of the annual network fee and that that constituted additional evidence that Portugal Telecom’s behaviour was
that which a private creditor would have adopted in the same situation.

–       Findings of the Court

93      For advantages to be capable of being classified as aid within the meaning of Article 87(1) EC, they must, first, be granted
directly or indirectly through State resources and, second, be imputable to the State (*France* v *Commission*, paragraph 43 above, paragraph 24 and the case-law cited; Case C‐355/00 *Freskot* [2003] ECR I‐5263, paragraph 81; Case C‐345/02 *Pearle and Others*[2004] ECR I‐7139, paragraph 35; Opinion of Advocate General Jacobs in Case C‐457/00 *Belgium* v *Commission* [2003] ECR I‐6931, I‐6934, points 67 and 69; Joined Cases T‐228/99 and T‐233/99 *Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen*v *Commission* [2003] ECR II‐435, paragraph 179; and Case T‐351/02 *Deutsche Bahn*v *Commission*[2006] ECR II‐1047, paragraph 101).

94      According to case-law, the imputability of a measure to the State cannot be inferred from the mere fact that the measure at
issue was taken by a public undertaking (*France* v *Commission*, paragraph 43 above, paragraphs 51 and 57).

95      Even if the State is in a position to control a public undertaking and to exercise a dominant influence over its operations,
actual exercise of that control in a particular case cannot be automatically presumed. A public undertaking may act with more
or less independence, according to the degree of autonomy left to it by the State. Therefore, the mere fact that a public
undertaking is under State control is not sufficient for measures taken by that undertaking to be imputed to the State. It
is also necessary to examine whether the public authorities must be regarded as having been involved, in one way or another,
in the adoption of those measures (*France* v *Commission*, paragraph 43 above, paragraph 52).

96      On that point, it cannot be demanded that it be demonstrated, on the basis of a precise inquiry, that in the particular case
the public authorities specifically incited the public undertaking to take the aid measures in question. In the first place,
having regard to the fact that relations between the State and public undertakings are close, there is a real risk that State
aid may be granted through the intermediary of those undertakings in a non-transparent way and in breach of the rules on State
aid laid down by the Treaty (*France* v *Commission*, paragraph 43 above, paragraph 53).

97      Moreover, it will, as a general rule, be very difficult for a third party, precisely because of the privileged relations existing
between the State and a public undertaking, to demonstrate in a particular case that aid measures taken by such an undertaking
were in fact adopted on the instructions of the public authorities (*France* v *Commission*, paragraph 43 above, paragraph 54).

98      For those reasons, the Court, in paragraph 55 of the judgment in *France* v *Commission*, paragraph 43 above, held that it must be accepted that the imputability to the State of an aid measure taken by a public
undertaking may be inferred from a set of indicators arising from the circumstances of the case and the context in which that
measure was taken. In that respect, the Court noted that it had already taken into consideration the fact that the body in
question could not take the contested decision without taking account of the requirements of the public authorities (see,
inter alia, Joined Cases 67/85, 68/85 and 70/85 *Van der Kooy and Others* v *Commission*[1988] ECR 219, paragraph 37) or the fact that, apart from factors of an organic nature which linked the public undertakings
to the State, those undertakings, through the intermediary of which aid had been granted, had to take account of directives
issued by an inter-ministerial committee (see Case C-303/88 *Italy* v *Commission* [1991] ECR I‐1433, paragraphs 11 and 12, and Case C-305/89 *Italy* v *Commission* [1991] ECR I‐1603, paragraphs 13 and 14).

99      In addition, other indicators might, in certain circumstances, be relevant in concluding that an aid measure taken by a public
undertaking is imputable to the State, such as, in particular, its integration into the structures of the public administration,
the nature of its activities and the exercise of the latter on the market in normal conditions of competition with private
operators, the legal status of the undertaking (in the sense of it being subject to public law or ordinary company law), the
intensity of the supervision exercised by the public authorities over the management of the undertaking, or any other indicator
showing, in the particular case, an involvement by the public authorities in the adoption of a measure or the unlikelihood
of their not being involved, having regard also to the compass of the measure, its content or the conditions which it contains
(*France* v *Commission*, paragraph 43 above, paragraph 56).

100    However, the mere fact that a public undertaking has been constituted in the form of a capital company under ordinary law
cannot, having regard to the autonomy which that legal form is capable of conferring upon it, be regarded as sufficient to
exclude the possibility of an aid measure taken by such a company being imputable to the State. The existence of a situation
of control and the real possibilities of exercising a dominant influence which that situation involves in practice makes it
impossible to exclude from the outset any imputability to the State of a measure taken by such a company, and hence the risk
of an infringement of the Treaty rules on State aid, notwithstanding the relevance, as such, of the legal form of the public
undertaking as one indicator, amongst others, enabling it to be determined in a given case whether or not the State is involved
(*France* v *Commission*, paragraph 43 above, paragraph 57 and the case-law cited).

101    In the present case, the Commission, after contending that, at least before the middle of 1997, the Portuguese Republic was
in a position to control Portugal Telecom (recital 109 of the contested decision), concluded, however, that nothing indicated
that the Portuguese public authorities were implicated in the adoption of the payment facilities for the fee (recital 116
of the contested decision).

102    The Commission contended, in that respect, that the regulation of tariffs and services proposed by Portugal Telecom made no
distinction between private operators and the public broadcaster and that Portugal Telecom did not have to provide RTP with
an obligatory universal service in terms of a network service (recital 111 of the contested decision).

103    It contended that Portugal Telecom, as a public limited company governed by company law, was not integrated into the structures
of the public administrations (recital 113 of the contested decision).

104    It stated that, in response to a question on its part, the Portuguese authorities expressly stated that they had not intervened,
directly or indirectly, in the grant of the payment facilities for the fee. In addition, no third party had come forward with
any indications of such an intervention (recital 114 of the contested decision).

105    Lastly, the Commission, first, contended that Portugal Telecom’s behaviour did not change after the middle of 1997, since
it continued to conclude agreements on payment facilities for the fee with RTP, and, second, stated that the main reason for
those agreements was a dispute over the level of that fee. That was confirmed by Anacom’s decision of 2003 (recital 115 of
the contested decision).

106    The Court notes that the applicant’s criticisms of the arguments and the evidence put forward by the Commission in the contested
decision are limited.

107    Although the applicant’s argument that Portugal Telecom was controlled by the Portuguese Republic, as majority shareholder,
constitutes an uncontested fact in the dispute, in view of the case-law outlined above, it is not sufficient for a finding
that the measure at issue was imputable to the State.

108    The applicant claims that the law contained a breach of the principle of equal treatment of private and public operators,
with regard to the penalty incurred for late payment of the network fee. Only private operators incurred the withdrawal of
their licence for late payment.

109    The Court notes that, even though, as the applicant claims, Article 13(1)(f) of Law No 58/90 relates solely to private operators,
that fact is not such as to constitute evidence that the Portuguese Republic was implicated in the grant to RTP of the payment
facilities for the fee. The Commission contends in that regard and the applicant does not contest that Portugal Telecom was,
in any event, under no obligation to provide RTP with a broadcasting service in the context of a universal service obligation.
In other words, even though the law formally provided for withdrawal of the licence for late payment only in respect of private
operators, Portugal Telecom was not prohibited from interrupting or suspending its services to RTP in the same situation.

110    The Court notes, lastly, that the applicant does not contest the Commission’s assessment that the payment facilities were
mainly caused by a dispute between RTP and Portugal Telecom as to the level of the network fee. The applicant, at most, claims
that the decision taken by Anacom in 2003 is without any relevance to this case. However, that objection, which does not,
moreover, call into question the Commission’s assessment, is not relevant. Nothing precludes the Commission from relying on
that 2003 decision as evidence – tenuous certainly, but none the less relevant – in support of its assessment that it was
a tariff dispute between RTP and Portugal Telecom that was at the origin of the payment facilities for the fee.

111    The applicant’s argument that the alleged fact that Portugal Telecom did not waive recovery of those debts or its claim for
default interest is insufficient, in itself, to prevent the measures being classified as State aid is clearly not related
to the question whether the measure at issue is imputable to the State, but, at most, to the question whether State resources
were involved. That question is not at issue inasmuch as, in recital 107 of the contested decision, the Commission decided,
essentially, to find that State resources may have been involved.

112    Concerning, lastly, the applicant’s reference to the fact that RTP was in a state of technical insolvency, a reference which
could be understood as suggesting that it is only because of the implication of the Portuguese Republic that Portugal Telecom
accorded the payment facilities for the fee to RTP, it does not in itself, however, include any specific refutation of the
Commission’s argument that payment facilities for the fee can be explained by a tariff dispute between RTP and Portugal Telecom.

113    Accordingly, the Court of First Instance finds that the applicant has not succeeded in calling into question the Commission’s
assessment, contained in the contested decision, according to which there was no information to permit it to conclude that
the payment facilities for the fee could be imputed to the Portuguese Republic.

114    It is thus necessary to reject that part of the plea.

The third part, alleging failure to classify the 1994 bond issue as State aid

–       Arguments of the parties

115    The applicant disputes that the Commission’s finding that the information notice for the 1994 bond issue indicated that RTP
guaranteed repayment of the loan with its own revenue entitled that institution to find that there was no State aid.

116    It is apparent from the contested decision that RTP’s financial position was very poor in 1994. It was solely because all
its share capital was held by the State – and because it was thought that the State would not allow the undertaking to go
into insolvency – that the 1994 bond issue was accepted by the market. That situation should have been properly taken into
account in the assessment of the measure at issue.

117    In the reply, the applicant cites the report of the Tribunal de Contas, from which it appears that the level of RTP’s bank
indebtedness is explained by the fact that RTP is a public undertaking, entrusted with providing public service television
and benefiting from the regular financial support of the State, which was sufficient guarantee for RTP’s various creditors.

118    The Commission contends that the applicant’s position is incorrect. The Commission explained in the contested decision (recital 121)
why it considered that the 1994 bond issue did not constitute State aid. No State guarantee was formally given, which is something
which the applicant admits. RTP itself guaranteed the servicing of the debt. RTP was a public limited company at the time
and thus did not have a status which would have resulted in an implicit State guarantee.

119    Consequently, the Commission contends that the 1994 bond issue was carried out under market conditions and that the State
did not forgo revenue. Lastly, the fact that RTP was owned by the State in no way alters that finding in view of the neutrality
of the Treaty as to whether the undertaking at issue is in public or private ownership.

120    The Commission maintains that the report of the Tribunal de Contas is inadmissible because it was not produced in the application,
and notes that even the quotation from the report upon which the applicant relies shows that the Portuguese Republic did not
provide any guarantee whatsoever.

–       Findings of the Court

121    In recital 121 of the contested decision, the Commission stated that it had received no information to show that the 1994
bond issue was accompanied by a State guarantee. According to the prospectus for that bond issue, it was RTP itself which
guaranteed repayment of the debt. RTP did not have a legal status which led to an implicit State guarantee.

122    It is not contested that RTP was a public limited company at the time of the 1994 bond issue. As a result, RTP’s owner, the
Portuguese Republic, was not subject to an unlimited obligation to repay that company’s debts.

123    Neither is it contested that the prospectus for the 1994 bond issue provided for no guarantee on the part of the State.

124    The applicant claims, however, that the fact that the State had a 100% stake in RTP led to the existence of an implicit guarantee
which alone explains how that company, despite its poor financial position, was successful in placing the 1994 bond issue
on the market.

125    It is necessary, however, not to confuse the question whether the State granted, expressly or implicitly, a guarantee – the
only question relevant to this case – with that of how the market reacted to the fact that the issuer of the bonds was not
just another private operator, but RTP.

126    The fact that the market agreed to subscribe to the 1994 bond issue – in the applicant’s opinion, because it considered that
the State would guarantee de facto its repayment – does not permit a finding that there is State aid, since it is not disputed
that the State did not give its guarantee, either expressly or implicitly. Only objective findings leading to the conclusion
that the State legally had to repay that issue in the event of default by RTP would permit a finding of the existence of a
State guarantee.

127    It is not apparent from the court file or the applicant’s pleadings that the Portuguese Republic was under such an obligation.

128    Concerning the report of the Tribunal de Contas produced in the reply, that report, as noted in paragraphs 186 to 193 below,
is not relevant to the assessment of the lawfulness of the contested decision.

129    Thus, the applicant having, in its pleadings, submitted no evidence such as to call into question the Commission’s assessment
set out in recital 121 of the contested decision, it is necessary to dismiss the applicant’s head of claim concerning the
1994 bond issue.

Conclusion on the third plea in law

130    In view of all the foregoing considerations, it is necessary to uphold the present plea in part and to annul Article 2 of
the contested decision inasmuch as it finds that the exemption from registration charges does not constitute State aid.

131    By contrast, the remainder of the present plea is dismissed, that is to say, in so far as it concerns the payment facilities
for the fee and the 1994 bond issue.

132    It is necessary to examine, next, the second main contention, referred to in paragraph 33 above and, accordingly, the fourth
plea in support of annulment.

*The fourth plea in law, alleging that the Commission erred in law as to the conditions for the application of Article 86(2) EC*

133    This plea is divided into two parts. In the first part, the applicant claims that the award of the public television service
by the Portuguese Republic to RTP, without competitive tendering, precluded the grant of a derogation under Article 86(2) EC.
In the second part, the applicant alleges an infringement of Article 86(2) EC, resulting from breach by the Commission, in
the contested decision, of the criteria for the application of that provision as defined in the Communication on broadcasting.

The first part, alleging the award of the public television service to RTP without competitive tendering

–       Arguments of the parties

134    The applicant, after stating that the public television service was not awarded to RTP on the basis of competitive tendering,
complains that the Commission failed to question the lawfulness of that award. It claims that, if the Commission had carried
out that examination, it would have been compelled to find that that award did not comply with the requirements of Community
law and, accordingly, that the funding granted to RTP could not benefit from any exemption under Article 86(2) EC. It relies
on the Commission’s interpretative communication on concessions under Community law (OJ 2000 C 121, p. 2; ‘Communication on
concessions’) and on what it alleges was the Commission’s interpretation of the judgment in Case C‐324/98 *Telaustria and Telefonadress* [2000] ECR I‐10745 contained in its *XXXIst Report on Competition Policy – 2001*(SEC(2002) 462 final). The applicant also relies on Case C‐107/98 *Teckal* [1999] ECR I‐8121.

135    In the reply, the applicant claims, essentially, that the fourth of the conditions set out in paragraphs 88 to 93 of Case
C‐280/00 *Altmark Trans and Regierungspräsidium Magdeburg* [2003] ECR I‐7747 (‘the fourth *Altmark* condition’) required the Commission, in view of the failure to follow a competitive tendering procedure, to verify that the
level of compensation awarded to RTP had been determined on the basis of a typical undertaking, well run and adequately provided
with means. Such was manifestly not the case.

136    The Commission contends that the award of the public service television remit to RTP is a different question from that of
whether the compensation awarded to that undertaking was compatible with the State aid rules and one which was never raised
during the formal procedure.

137    Whatever the position, it does not follow from the provisions of Article 86(2) EC or from the case-law that Member States
are required to follow specific procedures for choosing undertakings entrusted with the operation of services of general economic
interest (‘SGEIs’).

138    In any event, in the case of broadcasting SGEIs, Community law does not require the open and competitive procedures normally
required as a matter of course in contracts for concessions for public services.

139    The references made by the applicant to the regime applicable to concessions and to the case-law of the Court are not relevant.

140    With regard to the fourth *Altmark* condition, the applicant mistook its purpose. That condition concerns the question whether the measure is State aid and not
whether it can benefit from the derogation provided for in Article 86(2) EC.

–       Findings of the Court

141    First, with regard to the Commission’s preliminary remark – that the question of the conditions for the award of the television
SGEI to RTP was raised for the first time before the Community judicature – it is necessary to point out that, although it
is not admissible for a party interested in a State aid procedure to rely before the Community judicature on factual arguments
which were unknown to the Commission and which it had not notified to the latter during the investigation procedure, nothing
prevents, as in the present case, that party from raising against the final decision a legal plea not raised at the stage
of the administrative procedure (see, to that effect, Case T‐110/97 *Kneissl Dachstein*v *Commission* [1999] ECR II‐2881, paragraph 102 and the case-law cited; Case T‐274/01 *Valmont* v *Commission* [2004] ECR II‐3145, paragraph 102; and Joined Cases T‐111/01 and T‐133/01 *Saxonia* *Edelmetalle* *and* *ZEMAG* v *Commission* [2005] ECR II‐1579, paragraph 68).

142    The Commission’s position, alleging that the applicant has raised a new argument, is thus not such as to permit that argument
to be disregarded.

143    None the less, the Court of First Instance finds, like the Commission, that that argument has not succeeded in calling into
question the lawfulness of the contested decision.

144    As stated in point 29 of the Communication on broadcasting, the grant of the derogation from the prohibition on State aid
laid down in Article 86(2) EC requires, according to the case-law (see, to that effect, Case C‐179/90 *Merci Convenzionali Porto di Genova* [1991] ECR I‐5889, paragraph 26; Case T‐106/95 *FFSA and Others* v *Commission* [1997] ECR II‐229, paragraphs 173 and 178; and Joined Cases T‐204/97 and T‐270/97 *EPAC* v *Commission* [2000] ECR II‐2267, paragraphs 125 and 126), the fulfilment of three conditions: first, the service in question must be an
SGEI and clearly defined as such by the Member State; second, the undertaking in question must have been explicitly entrusted
by the Member State with the provision of that SGEI; thirdly, the application of the competition rules of the Treaty – in
this case, the ban on State aid – must obstruct the performance of the particular tasks assigned to the undertaking and the
exemption from such rules must not affect the development of trade to an extent that would be contrary to the interests of
the Community.

145    Among its conditions for application, Article 86(2) EC does not include a requirement to the effect that the Member State
must have followed a competitive tendering procedure for the award of the SGEI. Moreover, in Case T‐17/02 *Olsen* v *Commission* [2005] ECR II‐2031, paragraph 239, the Court expressly stated that it is not apparent either from the wording of Article
86(2) EC or from the case-law on that provision that an SGEI may be entrusted to an operator only as a result of a tendering
procedure.

146    In view of the foregoing considerations, the applicant’s head of claim alleging that the Commission should, in the context
of its examination under Article 86(2) EC, have verified whether the television SGEI had been awarded to RTP after competitive
tendering must be rejected.

147    It follows equally from this conclusion – to the effect that, in the context of its examination under Article 86(2) EC, the
Commission was not required to examine whether the award to RTP of the television SGEI occurred in the context of a competitive
tendering – that, even if the television SGEI, for other reasons, such as those relied on by the applicant and recalled in
the last two sentences of paragraph 134 above, should have been the subject of such a competitive tendering, its absence in
this case would, at most, have justified the Commission in bringing an action for failure to fulfil obligations against the
Portuguese Republic pursuant to Article 226 EC, a procedure which, if that case had arisen, might have resulted in that Member
State bringing that award to an end and organising a tendering procedure. However, that absence of competitive tendering cannot,
by contrast, have the result that State funding of the SGEI holder’s public service obligations must, even though the requirements
concerning the definition of the SGEI, the remit and proportionality are fulfilled, be considered to be State aid incompatible
with the common market.

148    In any event, the Court of First Instance finds, contrary to what the applicant claims on the grounds recalled in the last
two sentences of paragraph 134 above, that the Portuguese Republic was in no way required to organise a competitive tendering
prior to the award of the television SGEI to RTP.

149    In that regard, the applicant refers, first, to the Communication on concessions (paragraph 134 above). Although the public
service contracts concluded between the Portuguese Republic and RTP are headed ‘concession’, it does not appear that RTP is
a concession holder within the meaning of that communication and, moreover, the applicant puts forward no evidence to that
effect (see, in particular, the sixth subpoint of point 2.2 and the third subpoint of point 2.4 of the Communication on concessions).
In other words, RTP was remunerated for its operation (as a television service broadcasting to subscribers) and therefore
bore the operating risk.

150    It appears, on the contrary, that RTP is a public television operator broadcasting programmes to and for the benefit of the
entire population, whose costs for that service to the public are borne by the State.

151    In addition, even though RTP was a concession holder within the meaning of the Communication on concessions, it should be
borne in mind that, although that communication states that ‘relationships between public authorities and public enterprises
entrusted with the operation of services of general economic interest are, in principle, covered by this communication’ (eighth
subpoint of point 2.4), it states expressly that, ‘in the audiovisual sector, account should be taken of the [Amsterdam Protocol]’
(footnote 29, eighth subpoint of point 2.4). In so doing, the Communication on concessions acknowledges the specific nature
of broadcasting and exempts that sector from the general rule.

152    Lastly, it is necessary to note that, according to the Communication on concessions, those concessions are ‘subject to the
rules and principles of the Treaty, in so far as ... their object is the provision of economic activities’ (first subpoint of
point 2.4). Further on, the Communication on concessions states that it ‘does not concern ... acts concerning non-economic
activities such as obligatory schooling or social security’ (second indent of the fifth subpoint of point 2.4).

153    Although the public service of broadcasting is considered to be an SGEI and not a service of general non-economic interest,
it must none the less be pointed out that that classification as an SGEI is explained more by the de facto impact of public
service broadcasting on the otherwise competitive and commercial broadcasting sector, than by an alleged commercial dimension
to broadcasting. As is clear from the Amsterdam Protocol, public service broadcasting ‘is directly related to the democratic,
social and cultural needs of each society’. To the same effect, the resolution of the Council and of the Member States of
25 January 1999 concerning broadcasting (OJ 1999 C 30, p. 1) states that that public service, ‘in view of its cultural, social
and democratic functions which it discharges for the common good, has a vital significance for ensuring democracy, pluralism,
social cohesion, cultural and linguistic diversity, [and] must be able to continue to provide a wide range of programming
... [for] society as a whole’ (recital B and point 7 of the resolution).

154    That specific status for public service broadcasting is, moreover, the basis for the freedom accorded by the Amsterdam Protocol
to Member States in the award of broadcasting SGEIs. It explains and justifies the fact that a Member State cannot be required
to have recourse to competitive tendering for the award of such an SGEI, at least where it decides to ensure that public service
itself through a public company, as in this case.

155    Next, it is for the same reasons that the references also made by the applicant to the *XXXIst Report on Competition Policy – 2001*, to the interpretation which the Commission gave therein to the judgment in *Telaustria and Telefonadress*, paragraph 134 above, and to the judgment in *Teckal*, paragraph 134 above, appear just as lacking in relevance. By those references, which concern totally different broadcasting
activities, the applicant disregards, once again, the specific features of that sector and the particular objectives pursued
by Member States when they define and organise broadcasting.

156    It follows from all the foregoing considerations that, for the purposes of granting the derogation laid down in Article 86(2) EC,
not only did the Commission not have to examine whether the television SGEI was granted after competitive tendering (paragraph 146
above), but that, in any event, the Portuguese Republic was not obliged to have recourse to competitive tendering.

157    Concerning the applicant’s head of claim regarding the fourth *Altmark* condition (paragraph 135 above), it should be pointed out that, pursuant to Article 113 of its Rules of Procedure, the Court
of First Instance may of its own motion decide that an absolute bar exists to proceeding with an action. On that basis, it
is necessary to declare inadmissible, according to Article 48(2) of those rules, the pleas in law set out for the first time
at the reply stage which are not based on matters of law or of fact which come to light in the course of the procedure (Case
T‐40/01 *Scan Office Design* v *Commission* [2002] ECR II‐5043, paragraph 96, and Joined Cases T‐134/03 and T‐135/03 *Common Market Fertilizers* v *Commission* [2005] ECR II‐3923, paragraph 51). However, a submission or argument which may be regarded as amplifying a plea made previously
in the application must be considered to be admissible (Case C‐412/05 P *Alcon* v *OHIM* [2007] ECR I‐3569, paragraphs 38 to 40, and Case T‐107/04 *Aluminium Silicon Mill Products* v *Council* [2007] ECR II‐669, paragraph 60 and the case-law cited).

158    The Court notes that that head of claim was raised only at the reply stage (paragraphs 14 to 22), and was not based on matters
of law or of fact which came to light in the course of the procedure before the Court. In that regard, the fact that the Commission
referred, on its own initiative, to the fourth *Altmark* condition in its defence (in particular, in paragraph 37), for the purpose of refuting the applicant’s argument alleging
that competitive tendering was required for the award of the SGEI at issue, does not constitute a matter of law or of fact
which comes to light within the meaning of the case-law referred to in the preceding paragraph which would allow the applicant
to put forward this head of claim effectively at the reply stage.

159    Moreover, the Court points out that, inasmuch as it refers to the Commission’s obligation to verify whether the level of compensation
needed was determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided
with means, would have incurred in meeting its public service obligations, that head of claim does not constitute the amplification
of any plea raised at the application stage. In the application, the applicant confined itself to attacking, without, moreover,
making any reference to the fourth *Altmark* condition, the lack of competitive tendering upon the award of the television SGEI to RTP (see paragraphs 175 to 183 of the
application) and did not in any way raise the – completely different – head of claim currently at issue, according to which,
in the absence of competitive tendering, the Commission, before according a derogation pursuant to Article 86(2) EC, should
have verified, in the applicant’s view, in accordance with the fourth *Altmark* condition, that the level of compensation awarded to RTP had been determined on the basis of a typical undertaking, well
run and adequately provided with means**.**

160    Accordingly the applicant’s head of claim concerning the fourth *Altmark* condition is inadmissible.

161    It follows from all the foregoing considerations that it is necessary to reject the first part of this plea.

The second part, alleging infringement of the criteria for the application of Article 86(2) EC

–       Arguments of the parties

162    The applicant claims that the Commission failed to comply with the criteria for the application of Article 86(2) EC, as stated
in the Communication on broadcasting and according to which, first, the State must define the public service remit entrusted
to the undertaking in question, second, the service must actually be supplied, third, the actual supply of the service which
is the subject of the contract must be subject to independent monitoring and, fourth, the financial compensation granted by
the State must comply with the principles of transparency and proportionality.

163    Concerning the first of those criteria, where it chooses, as in this case, to award the public service to an undertaking which
pursues, simultaneously, commercial activities in competition with other operators, the State cannot opt for a ‘wide’ definition
of the public service. Such a definition does not allow a clear distinction to be drawn between competitive activity and public
service activity and renders it impossible both to monitor the actual supply of the public service and to apportion the costs
incurred by the undertaking between its commercial activities and its public service activities. The Portuguese State failed
to define clearly, in a transparent and accountable way, the public service remit entrusted to RTP and the resources allocated
for the funding thereof.

164    Those criticisms are not abstract. They are specifically based on the ineffectiveness of the monitoring mechanisms. Among
the monitoring mechanisms referred to in recitals 56 to 59 of the contested decision, the only ones carried out by authorities
independent of the Portuguese Republic and of RTP are those carried out by a consultative council of representatives of public
opinion, and by external auditors.

165    Not only did the Commission make no reference in the contested decision to the performance of independent monitoring, but
it did not even seek to satisfy itself whether, in practice, such monitoring took place. None the less, the Commission is
not only obliged to take account of the mechanisms which are, in theory, provided for, but also to verify that they were actually
applied.

166    Despite having all the necessary powers of investigation for that purpose, the Commission took no initiative or action in
respect of the applicant’s repeated requests to the Portuguese authorities for the contractual external audit reports or a
statement that no such reports existed. First, the information obtained by the applicant by its own efforts revealed that
RTP had not been independently audited between 1992 and 1997. Second, the evidence available concerning the contractual external
audit carried out in 1998 revealed serious deficiencies.

167    Moreover, neither did the Commission comply with the criterion regarding the actual supply of the public service. The contested
decision was not substantiated by any documentary evidence of RTP’s actual compliance with the public service remit entrusted
to it. Furthermore, no independent audit had been carried out from 1992 to 1997 and the contractual external audit report
for 1998 revealed numerous shortcomings in the supply of the public service by RTP.

168    Accordingly, as the criteria for the application of Article 86(2) EC, as defined by the Commission itself, have not been complied
with, the contested decision must be annulled.

169    The applicant adds that, where mechanisms to monitor fulfilment of public service obligations do not function, the Communication
on broadcasting precludes the finding that the public service has actually been supplied. Moreover, where monitoring is in
operation and the competent authorities consider that the public service has not been supplied or that certain costs are not
attributable to that service, the Commission cannot dismiss that monitoring and state, as it did in the contested decision
and in the defence, that, in short, everything was attributable to the public service and that all the costs submitted by
the undertaking resulted from the public service remit.

170    It is necessary to go back to the report of the Tribunal de Contas, adopted more than a year before the contested decision,
which was clearly known to the Portuguese Republic and RTP and which should also have been known to the Commission. In view
of both the length of its investigation of RTP and the duty of the Member States to cooperate in good faith with the Community
institutions, the Commission could not have been unaware that the Tribunal de Contas was conducting an in-depth investigation,
nor could it have been unaware of the existence of that report.

171    That report confirms the contractual external audit report for 1998 and the wording of the application describing how the
Commission erred in law when assessing the costs which RTP incurred in providing the public service. It also confirms the
applicant’s allegations that the Commission erred in law concerning the assessment of the conditions for the application of
Article 86(2) EC, particularly with regard to the ineffectiveness of the monitoring mechanisms. It confirms, also, that RTP
did not supply the service which was expected. Thus, having regard to the criteria in the Communication on broadcasting, ‘the
Commission would not [have been] able to carry out its tasks under Article 86(2) [EC] and, therefore, [would not have been
able to] grant any exemption under that provision’ (point 43 of the Communication).

172    According to the applicant, it was not possible for the Commission not to have known of the report of the Tribunal de Contas,
from which it was clearly apparent that the conditions for the application of Article 86(2) EC had not been fulfilled. The
Commission cannot monitor the way in which RTP ensures the public service on the basis of the annual reports drawn up by an
auditor of the undertaking or the undertaking’s accounting records. Moreover, the role of an auditor is not to verify whether
a specific undertaking provides or does not provide public services and still less to verify whether certain sums correspond
or not to those services. The contested decision is thus manifestly unlawful and must be annulled.

173    The Commission contends that, contrary to the applicant’s assertions, the Communication on broadcasting imposes no obligation
of independent verification that the public service of broadcasting is actually provided. In point 29, that communication
lays down three criteria to be fulfilled for a measure to benefit from the derogation provided for in Article 86(2) EC. Those
criteria, which consist of the definition of an SGEI, the public service remit and proportionality, are those which were applied
in the contested decision.

174    It is incorrect that a ‘wide’ definition of public service does not allow a clear distinction to be drawn between competitive
activity and public service activity, nor does such a definition render it impossible either to verify that public services
are actually provided or to apportion the costs incurred by the undertaking between its commercial activities and its public
service activities.

175    The role of the Commission in the broadcasting sector is limited to verifying any manifest errors in the definition of public
service, which must be in harmony with the objective of responding to the democratic, social and cultural needs of a given
society. The Commission did not find such errors.

176    Accordingly, it is a question of whether the funding of the public service remit is proportional or not to the net cost of
the public service. The Commission’s finding is that the total financing received by RTP in the course of the period under
consideration did not exceed the net costs of the public service.

177    It appears that RTP drew up separate accounts for public service activities and commercial activities, and the latter were
carried on by legally separate undertakings. RTP’s accounting thus showed the costs and income of the public service remit,
as well as RTP’s holdings in commercial undertakings, treated for accounting purposes as financial investments. RTP’s financial
accounts were always subject to annual audit by an auditor. In addition, under the Portuguese internal system of funding,
RTP obtained only partial reimbursement of its public service costs. Moreover, in that context, RTP operated a second level
of cost accounting within the public service activities properly so called – something which was always reflected in the reports
on the public service – which showed in a transparent way which costs were reimbursable by public service activity.

178    Admittedly, the Portuguese authorities chose initially to apply, through the public service contract, a compensation mechanism
which did not cover all public service costs. The fact remains that Community law permits full compensation of those costs.
Thus, the applicant cannot object to other measures taken subsequently by the Portuguese authorities in order to cover that
portion of costs which had not yet been the subject of compensation.

179    In addition, the idea that it was legitimate to accept a ‘wide’ definition of the public service remit in RTP’s case, since
RTP had established that the funding of that remit was proportional to its net costs, is also confirmed by the fact that there
was no distortion of the market in respect of commercial activities resulting from public service activities.

180    The argument alleging that monitoring mechanisms were ineffective is not valid. The Commission’s role is not to assess whether
RTP or the Portuguese Republic correctly applied all the internal Portuguese rules, but only to verify whether RTP’s State
funding was compatible with the Treaty. In order to do this, the Commission was required to analyse and assess the objective
and credible data relating to the cost of RTP’s public service and commercial activities.

181    What should be noted is that, as detailed in recital 177 et seq. of the contested decision, all the data analysed and confirmed
by the Commission were subject to appropriate monitoring mechanisms in Portugal.

182    Even if it were to be found subsequently that any monitoring system described did not operate as it should have or that the
data supplied to the Commission were inaccurate, that does not mean that the contested decision was defective in any way.
The Commission adopted that decision on the basis of the evidence at its disposal at the date of its adoption which it had
no reason to doubt.

183    Concerning, lastly, the contention that the contested decision was not substantiated by any documentary evidence to show that
RTP had actually fulfilled its public service remit, that argument is incorrect. It is not for the Commission to assess specifically
whether the public service contracts were precisely performed or whether the quality standards which are defined therein were
complied with. Its role is confined to verifying whether the activities carried out by RTP as a public service may or may
not be considered to be an SGEI within the meaning of the Treaty.

184    All the activities carried out by RTP as an SGEI are legitimate and are not vitiated by any manifest error. In addition, the
investigation permitted the finding that the funding awarded to RTP was actually allocated to the fulfilment of RTP’s public
service remit.

185    The Commission contends that the production of the report of the Tribunal de Contas in the reply occurred late and without
a convincing justification for that lateness. That institution expressly denies that it was aware of the existence of that
report prior to the contested decision. In any event, that report does not call into question the assessment contained in
the contested decision.

–       Findings of the Court

186    It is necessary, at the outset, to resolve the question whether the report of the Tribunal de Contas, produced as an annex
to the reply, is admissible and relevant to the present action, in order to assess the lawfulness of the contested decision.

187    It is necessary to consider, first, the relevance of that report.

188    According to settled case-law, in an action for annulment brought under Article 230 EC, the legality of a Community measure
must be assessed on the basis of the information existing at the time when the measure was adopted. In particular, the complex
assessments made by the Commission must be examined solely on the basis of the information available to it at the time when
the assessments were made (Joined Cases 15/76 and 16/76 *France* v *Commission* [1979] ECR 321, paragraph 7; Case C‐197/99 P *Belgium* v *Commission* [2003] ECR I-8461, paragraph 86; Joined Cases T‐371/94 and T‐394/94 *British Airways and Others*v *Commission* [1998] ECR II‐2405, paragraph 81; and Joined Cases T‐126/96 and T‐127/96 *BFM and EFIM* v *Commission* [1998] ECR II‐3437, paragraph 88).

189    The applicant claims that, in view of the length of the Commission’s investigation of RTP and the duty of the Member States
to cooperate in good faith with the Community institutions, the Commission must have known that the Tribunal de Contas was
conducting a detailed investigation of RTP and could not have been unaware of the existence of that report.

190    Clearly, however, apart from the general assertions referred to above, the applicant, on whom the burden of proof rests, has
not adduced any specific evidence that the Commission had actual knowledge even of the existence of the report, when it adopted
the contested decision. The applicant maintains, however, that it was unaware of the existence of that report when that decision
was adopted.

191    The Commission formally denies that it had any knowledge of the existence of that report at the time of the contested decision
and contends that it was, accordingly, impossible for it even to request that it be disclosed to it.

192    In that regard, the Court of First Instance finds that it has not been established that the Commission had knowledge of the
existence of the report of the Tribunal de Contas at the time of the contested decision.

193    Consequently, regardless even of whether that report, despite being produced only at the reply stage, must be considered to
be admissible pursuant to Article 48(2) of the Rules of Procedure, it must be held to be lacking in any relevance and cannot
be taken into consideration for the purpose of assessing the lawfulness of the contested decision.

194    Having disposed of that preliminary question, it is necessary to deal with the applicant’s argument that, where, as in this
case, it chooses to award the broadcasting SGEI to an operator which at the same time pursues commercial activities, a Member
State cannot opt for a ‘wide’ definition of public service.

195    It is necessary, first, to note that, as stated in the case-law (see, to that effect, *FFSA and Others* v *Commission*, paragraph 144 above, paragraph 99) and as set out by the Commission in point 22 of its communication COM(2000) 580 final
of 20 September 2000 on services of general interest in Europe, Member States have a wide discretion to define what they regard
as SGEIs. Hence, the definition of such services by a Member State can be questioned by the Commission only in the event of
manifest error (Opinion of Advocate General Léger in Case C‐309/99 *Wouters and Others* [2002] ECR I‐1577, I‐1583, point 162, and the judgment in *Olsen* v *Commission*, paragraph 145 above, paragraph 216).

196    The importance of SGEIs for the European Union and the need to guarantee the proper functioning of those services has, moreover,
been underlined by the insertion of Article 16 EC in the EC Treaty by the Treaty of Amsterdam (see, in that regard, the Opinion
of Advocate General Alber in Case C‐340/99 *TNT Traco* [2001] ECR I‐4109, I‐4112, point 94, Opinions of Advocate General Jacobs in Case C‐475/99 *Ambulanz Glöckner*[2001] ECR I‐8089, I‐8094, point 175, and Case C‐126/01 *GEMO* [2003] ECR I‐13769, I‐13772, point 124, and Opinion of Advocate General Poiares Maduro in Case C‐205/03 P *FENIN* v *Commission* [2006] ECR I‐6295, I‐6297, footnote 35, point 26; see also the order of the President of the Court in Case T‐53/01 R *Poste Italiane* v *Commission* [2001] ECR II‐1479, paragraph 132).

197    More specifically concerning broadcasting SGEIs, the Court in Case 155/73 *Sacchi*[1974] ECR 409 – concerning, inter alia, whether the exclusive right granted by a Member State to an undertaking to make all
kinds of television transmissions, even for advertising purposes, constitutes a breach of the rules of competition – recognised,
essentially, that Member States could legitimately define a broadcasting SGEI to include the broadcast of full-spectrum programming.
In that judgment, the Court held that ‘nothing in the Treaty prevents Member States, for considerations of public interest
of a non-economic nature, from removing radio and television transmissions ... from the field of competition by conferring on
one or more establishments an exclusive right to conduct them’ (*Sacchi*, paragraph 14; see, also, the Opinion of Advocate General Reischl in that judgment, p. 433, p. 445, second to fifth unnumbered
points, and Opinion of Advocate General Léger in *Wouters and Others*, paragraph 195 above, point 163).

198    In addition, when Member States stated in the Amsterdam Protocol that ‘the system of public broadcasting in the Member States
is directly related to the democratic, social and cultural needs of each society and to the need to preserve media pluralism’,
they were making a direct reference to public service broadcasting systems introduced by them and entrusted with broadcasting
full-spectrum television programmes for the benefit of the entire population of those States.

199    Lastly, it is necessary to bear in mind the terms in which the Council and the Member States, in their resolution of 25 January
1999 concerning public service broadcasting (paragraph 153 above), reaffirmed the importance of broadcasting SGEIs.

200    In that resolution, Member States, ‘considering the fact that public service broadcasting, in view of its cultural, social
and democratic functions which it discharges for the common good, has a vital significance for ensuring democracy, pluralism,
social cohesion, cultural and linguistic diversity; ... stressing that the increased diversification of the programmes on offer
in the new media environment reinforces the importance of the comprehensive mission of public service broadcasters; [and]
recalling the affirmation of competence of the Member States concerning remit and funding set out in the [Amsterdam Protocol]’
noted and reaffirmed that that protocol confirms ‘[their] will ... to stress the role of public service broadcasting’ and
that ‘public service broadcasting must be able to continue to provide a wide range of programming in accordance with its remit
as defined by the Member States in order to address society as a whole’ and that ‘in this context it is legitimate for public
service broadcasting to seek to reach wide audiences’.

201    It follows from the foregoing considerations that Community law in no way precludes a Member State from defining broadcasting
SGEIs widely to include the broadcasting of full-spectrum programming.

202    That possibility cannot be called into question by the fact that the public service broadcaster carries on, in addition, commercial
activities, in particular the sale of advertising space.

203    Calling such activities into question would be tantamount to making the very definition of the broadcasting SGEI dependent
on its method of financing. An SGEI is defined, ex hypothesi, in relation to the general interest which it is designed to
satisfy and not in relation to the means which will ensure its provision. As the Commission points out in point 36 of the
Communication on broadcasting, ‘the question of the definition of the public service remit must not be confused with the question
of the financing mechanism chosen to provide these services’.

204    It follows from all of the foregoing considerations that the power of the Member States to define broadcasting SGEIs in such
a way as to include broadcasting a wide range of programmes, whilst authorising the operator in charge of that SGEI to carry
on commercial activities, such as the sale of advertising space, cannot be disputed.

205    The Court points out, moreover, that, beyond the criticism expressed by the applicant of a wide definition of public service
in the case of a broadcaster carrying on, in addition, commercial activities, the applicant’s heads of claim concern, above
all, RTP’s fulfilment of that remit and monitoring by the Commission in that regard.

206    According to the applicant, the Commission did not, in fact, seek to satisfy itself that the fulfilment by RTP of its remit
had been subject to independent monitoring. The Commission is not only obliged to take account of the monitoring mechanisms
which are, in theory, provided for. It must also verify their actual application. The applicant criticises the Commission
for failing to act on its request for the disclosure by the Portuguese authorities of the contractual external audit reports
or for a statement that no such reports exist. It further criticises the Commission for the lack of evidence, in the contested
decision, of actual compliance by RTP with the public service remit with which it was entrusted.

207    The relevant recitals of the contested decision are recitals 56 to 59 and 177 to 181.

208    In order to rule on whether the applicant’s heads of claim are well founded, it is necessary to examine the question of the
monitoring of the public service broadcaster’s compliance with its public service remit.

209    That examination necessitates a two-part analysis. In the first part, it is necessary to examine the monitoring of RTP’s compliance
with the qualitative criteria – or quality standards – which were generally applicable to all its public service broadcasting
activity. In the second part, it is necessary to examine the monitoring of the actual provision by RTP of the public services
expected of it and the correspondence between those services and the costs declared.

210    Although the first part of the analysis relates to an assessment, tinged with subjectivity, of the qualitative level of public
service television, the second part concerns the objective question of the administrative and accounting fairness of RTP’s
accounts in relation to the cost items of which they are comprised and the costs which they exhibit. The Commission can meaningfully
verify whether State financing is proportional to public service costs only if it is reasonably convinced that the financial
and accounting data sent to it concerning the public service operator and its activity are reliable.

211    First, concerning the question of the monitoring of RTP’s compliance with the qualitative criteria, it must be found that,
in view of its economic impact, on a wide definition, public service broadcasting can have its State funding declared to be
compliant with the provisions of the Treaty on State aid only inasmuch as the qualitative requirements set out in the public
service remit are complied with. Those qualitative requirements are the justification for the existence of broadcasting SGEIs
in the national audiovisual sector and there is, thus, no reason for a widely defined broadcasting SGEI which sacrifices compliance
with those qualitative requirements in order to adopt the conduct of a commercial operator, by broadcasting programming specifically
designed to generate optimal audiences for advertisers, to continue to be financed by the State on the same conditions as
if those qualitative requirements were complied with.

212    However, only the Member State is able to assess the public service broadcaster’s compliance with the quality standards defined
in the public service remit. As the Commission points out in its communication COM(1999) 657 final to the Council, the European
Parliament, the Economic and Social Committee and the Committee of the Regions of 14 December 1999 on the principles and guidelines
for the Community’s audiovisual policy in the digital age, ‘content issues are essentially national in nature, being directly
and closely connected to the cultural, social and democratic needs of a particular society’ and ‘in line with the principle
of subsidiarity, therefore, content regulation is primarily the responsibility of Member States’. It is thus not for the Commission
to assess compliance with quality standards; that institution must be able to rely on appropriate monitoring by the Member
States (recital 41 of the Communication on broadcasting).

213    As the Commission, thus, does not have the power specifically to verify compliance with quality standards, it can and generally
must confine itself to finding that there is a mechanism for the monitoring by an independent body of compliance by the broadcaster
with its public service remit.

214    It is only where the information sent to the Commission during the investigation contains serious evidence to the effect that,
despite its existence, a monitoring mechanism was not used that the Commission can be required to examine whether it was actually
used, whilst ensuring that it does not go beyond that examination and, in particular, that it does not replace the Member
State in the specific assessment of compliance with the qualitative criteria.

215    In the present case, it is not contested that the Commission noted the existence of a mechanism for monitoring RTP’s compliance
with its public service obligations. Thus, the contested decision states that ‘the public service contracts provide for the
setting-up of a Public Opinion Council consisting of representatives from the different sections of public opinion that can
intervene in order to assess whether the general and specific public service television broadcasting obligations are being
complied with’ (recital 56), that RTP had to provide ‘a report on the public service obligations during the previous year’
(‘the public service report’) (second sentence of recital 57 of the contested decision) and that ‘the Minister for Finance
and the member of the government responsible for the media have to verify compliance with the public service contracts’ (first
sentence of recital 58).

216    Those findings made in the contested decision sufficiently establish that an independent mechanism existed for monitoring
RTP’s compliance with the qualitative requirements of its public service remit.

217    Moreover, the Court of First Instance finds, for the sake of completeness, that it is not disputed that, as the contested
decision states (recitals 178 and 179), the public service report was actually issued every year by RTP and that the Minister
for Finance and the member of the government responsible for the media carried out an audit of the performance of the public
service contracts.

218    In view of the foregoing, the lawfulness of the contested decision cannot be called into question for reasons linked to the
verification by the Commission of the existence of monitoring mechanisms for quality standards.

219    It is necessary, second, to examine the question of the verification that RTP actually supplied the specific public services
expected of it and that the costs allegedly incurred in supplying them were actually incurred.

220    The applicant’s argument is that the Commission did not satisfy itself, with the requisite diligence, of the truth and reliability
of the information which was communicated to it, concerning the public services supplied and their costs. The Commission did
not exercise a minimum level of neutrality and impartiality when assessing whether the figures presented by RTP as the costs
related to the public service were credible. In particular, the applicant criticises the Commission for taking no action in
response to its requests for the Portuguese Republic to be required to produce the contractual external audit reports which
were provided for in the public service contracts for the assessment and monitoring of the relationship between the public
service remit and the payment of the actual costs corresponding thereto.

221    The Commission’s response is that, in view of the accounting and monitoring mechanisms instituted and applied, it was entitled
to consider that the information sent was reliable. Therefore, it cannot be criticised for not having judged it expedient
or necessary to grant the applicant’s request that the Portuguese Republic be required to produce the contractual external
audit reports. It is irrelevant that all the monitoring procedures laid down at national level had to be complied with, since
the objective reliability of the information provided by the Member State as to the public services supplied and their costs
was sufficiently safeguarded.

222    It is necessary to recall that the procedure for reviewing State aid is, in view of its general scheme, a procedure initiated
in respect of the Member State responsible, in the light of its Community obligations, for granting the aid. Under that procedure,
interested parties other than the Member State concerned have essentially the role of sources of information for the Commission
and, in that regard, they cannot themselves lay claim to an exchange of arguments with the Commission such as that initiated
in regard to that Member State (Case T‐366/00 *Scott* v *Commission* [2003] ECR II‐1763, paragraphs 52 and 53; Case T‐109/01 *Fleuren Compost* v *Commission* [2004] ECR II‐127, paragraphs 42 and 43 and the case-law cited; and *Saxonia Edelmetalle and ZEMAG*v *Commission*, paragraph 141 above, paragraph 48). Interested parties other than the Member State concerned have only the right to be involved
in the administrative procedure to the extent appropriate in the light of the circumstances of the case (*British Airways and Others* v *Commission*, paragraph 188 above, paragraph 60, and *Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen* v *Commission*, paragraph 93 above, paragraph 125).

223    Accordingly, an interested party which requests the Commission to exercise its powers in order to obtain from the Member State
certain information has no right to Commission action in respect of its request. It is a matter for the Commission, where
appropriate, to assess the usefulness of that request for the purposes of its monitoring of the measures at issue. In that
assessment, the Commission may take account of the information already at its disposal.

224    Nevertheless, the limited nature of the rights of the interested parties other than the Member State to participate and to
be informed is in no way at variance with the obligation to undertake a diligent and impartial investigation to which the
Commission is subject in the field of State aid (see, by analogy, for the same reasoning applied to the obligation to state
reasons, *British Airways and Others*v *Commission*, paragraph 188 above, paragraph 64; see, for confirmation of the obligation to undertake a diligent and impartial investigation,
Case C‐367/95 P *Commission* v *Sytraval and Brink’s France* [1998] ECR I‐1719, paragraphs 60 to 62; and *Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen* v *Commission*, paragraph 93 above, paragraph 167).

225    Thus, the Commission, although it enjoys a discretion, cannot, however, in view of its duty to undertake a diligent and impartial
investigation, omit to require the disclosure of information which appears likely to confirm or to refute other information
which is relevant for the examination of the measure at issue, but whose reliability cannot be considered to be sufficiently
established.

226    In the present case, it is, first, not contested that RTP’s annual accounts were available to the Commission (recital 67 and
the second sentence of recital 180 of the contested decision). Neither is it contested that those annual accounts were subject
to annual auditing between 1992 and 1998 by a statutory auditor (third sentence of recital 180 of the contested decision),
in other words, by a body external to the undertaking and independent.

227    The applicant in no way disputes that that monitoring existed, nor does it claim to have discovered errors in RTP’s annual
accounts. It confines itself to stating that the Commission ‘is unable to monitor the way in which RTP provides public service
television on the basis of annual reports established by an auditor of the undertaking on the basis of the undertaking’s accounting’,
and notes, in that regard, that, according to their statutory status (Decreto-Lei no 487/99 of 16 November 1999 (Portuguese
Decree-Law No 487/99) (*Diário da República* I, Series I-A, No 267, of 16 November 1999)), auditors are not required to verify whether a particular undertaking provides
public services or not and still less to determine whether certain sums correspond or not to the provision of those public
services.

228    In that regard, the statutory duty of an auditor is not, generally, to verify whether an undertaking provides public services
or not, nor is it to make an assessment of the ‘public service’ classification of services which have been recorded in the
accounts, nor yet is it to assess what costs may be attributed to those provisions. The statutory role of the auditor is,
generally, to certify the accounts, thereby giving an external and independent appraisal of the validity and fairness of the
accounts and of the question whether the impression they give of the state of the company is a faithful one.

229    If and to the extent that the certification of annual accounts by the company’s auditor properly allows the Commission to
consider them to be reliable, there is nothing to preclude the use by that institution of the accounts thus certified, indeed
it should do so, where those accounts include information relevant to the assessment of the costs for the purposes of its
assessment of whether the aid is proportional within the context of Article 86(2) EC.

230    Moreover and inasmuch as an auditor may be entrusted, alongside his duty to statutorily certify the accounts, with giving
ad hoc advice on other questions, relating, for example, to the performance of a public service remit, there is nothing to
prohibit the Commission, where appropriate, from taking that advice into account.

231    It follows from the foregoing considerations that there is nothing to permit the finding that the Commission was unable to
base its assessment legitimately on RTP’s certified annual accounts or on the advice of RTP’s auditors.

232    Next, with regard to the public service reports, mentioned in the second sentence of recital 57 and in recital 178 of the
contested decision and which ‘describ[ed] how each public service obligation had been fulfilled and identif[ied] the costs
of each public service obligation by using an analytical accounting system’ (recital 178), it is not contested that they were
available to the Commission for all years included in the investigation period.

233    Nevertheless, the information in those reports suffered from an objective weakness of which the Commission was aware. That
weakness consisted in the fact that those reports were not systematically accompanied by an ‘audit statement’ (‘relatório
de auditoria’) (last sentence of recital 180 of the contested decision).

234    In other words, it was not certain whether those public service reports, which supplied the analytical detail for the costs
incurred in providing the public services, were subject to independent external verification by RTP’s auditors.

235    It should be noted at this stage that that independent external verification by the auditors in respect of the public service
reports, mentioned in the last sentence of recital 180 of the contested decision, is referred to, in other places in the contested
decision – both in its authentic Portuguese version and in other language versions, inter alia in the French version – using
terminology which is changeable and lacks coherence: ‘Paracer do Gabinete de Auditoria’ and ‘avis du conseil des commissaires
aux comptes’ (‘opinion of the board of auditors’) (second sentence of recital 57); ‘Paracer do Gabinete de Auditoria’ and
‘avis du conseil interne des commissaires aux comptes’ (‘opinion of the internal board of auditors’) (first sentence of recital 178);
‘controlo ... pelo Gabinete de Auditoria a nível interno’ and ‘contrôle ... par le comité d’audit en interne’ (‘verification
... internally by the board of auditors’) (first sentence of recital 181); or even ‘auditoria externa sistemática’ and ‘audit
externe systématique’ (‘systematic external auditing’) (second sentence of recital 181).

236    Regardless of those terminological inaccuracies, the Court notes that the Commission found that the weakness referred to in
paragraphs 233 and 234 above was compensated for by the capacity for the rules of the cost accounting system applied to identify,
clearly and verifiably, the public services supplied and their costs (last sentence of recital 180 of the contested decision).

237    Further on, the Commission added that, ‘although no systematic external auditing of the public service reports seems to have
taken place, the system described ensured that the public service obligation was carried out in the manner provided for’ (second
sentence of recital 181 of the contested decision).

238    However, neither of those two considerations can be accepted.

239    Concerning the first consideration (paragraph 236 above), suffice it to state that the lack of external verification by auditors
cannot, logically, be covered by the assertion that ‘the strict rules of the cost accounting system ensured that the costs
of each public service obligation ... could be identified and properly verified’ (last sentence of recital 180 of the contested
decision).

240    That assertion amounts, in short, to the following proposition, the terms of which are contradictory: the fact that there
was no verification has no effect on the reliability of the information because that verification was possible. An undertaking
may have precise and clear rules of cost accounting, permitting effective identification and verification and, at the same
time, record in its accounting, whether by error or consciously, figures or headings which do not correspond to the truth.
Where, in particular, there is no verification, those departures from the truth will quite simply not be noticed.

241    It follows that, in the absence of systematic external verification of the public service reports by RTP’s auditors and contrary
to the Commission’s contention contained in the last sentence of recital 180 of the contested decision, there existed or should
have existed, necessarily, a doubt on the part of that institution as to the reliability of the information contained in those
reports, which the simple assertion of the quality of the rules of cost accounting could not dispel.

242    Concerning the Commission’s second consideration, set out in recital 181 of the contested decision and recalled in paragraph 237
above, to the effect that, beyond even the first consideration inferred from the quality of the accounting rules, it was the
‘system’ (‘sistema’) as a whole which led that institution to conclude that it had reliable information, the Court notes that
it cannot be accepted either, since it also constitutes a contradiction in its own terms.

243    That consideration, read in the light of the clarification of the terminology of the contested decision provided in paragraph 235
above, includes the following reasoning.

244    First, the Commission states, essentially, in the first paragraph of recital 181 of the contested decision, that it is apparent
from the preceding recitals of that decision that there was a verification system which operated on three different levels.

245    The first element of that system identified by the Commission is ‘verification ... internally by the board of auditors’. It
concerns verification by auditors of the public service reports, referred to in recital 178 of the contested decision and
referred to again at the beginning of the last sentence of recital 180 of that decision.

246    The second element of that system identified by the Commission is ‘verification ... by the responsible government bodies’.
It concerns the verification mentioned in recital 179 of the contested decision.

247    The third element of that system identified by the Commission is ‘verification ... by an external auditing firm’. It concerns
the verification referred to in the first sentence of recital 180 of the contested decision.

248    The Commission continues, at the second sentence of recital 181 of the contested decision, by stating, essentially, that,
although no systematic external auditing of the public service reports appears to have taken place and although the first
element of the system does not appear to have functioned correctly, that system ensured that the public service obligation
was carried out in the prescribed manner.

249    It is apparent from that description of the Commission’s reasoning that that institution therefore relies on the existence
and the application of a verification system comprising three elements in order to infer therefrom that the public service
was supplied as laid down, even though it noted the malfunctioning of that system, in particular in one of those three constituent
elements. That being so, the reasoning stated in the contested decision, once again, constitutes a contradiction in its own
terms.

250    Accordingly, the Court of First Instance finds that, notwithstanding the two considerations above, put forward by the Commission,
that institution was unable, in the absence of proof of systematic external verification of the public service reports by
an auditor, to consider the information contained in those reports which were unaccompanied by an audit statement to be reliable.

251    Moreover, it is not contested that, on numerous occasions, the applicant drew the Commission’s attention to other reports,
namely the contractual external audit reports, and requested that that institution require the Portuguese Republic to disclose
them. In its observations of 8 February 2002, the applicant stated that, according to its information, the contractual external
audit report for 1998 was very critical of RTP’s performance of the obligations resulting from the public service contract
for 1996.

252    Although, in view of the limited role assigned to interested parties in the State aid investigation procedure, those observations
by the applicant are not in themselves conclusive, nevertheless, in view of the uncertainty in which the Commission must necessarily
have found itself, those observations were clearly such as to confirm that it was necessary for that institution to require
the Portuguese Republic to disclose the contractual external audit reports.

253    That necessity was all the greater since the Commission knew that the purpose of the contractual external audit reports was,
according to the terms themselves of the public service contracts, to verify that the public services supplied corresponded
to the costs expended. The Commission could not, therefore, be unaware that those contractual external audit reports were,
at least for the years for which there was no external verification of reports, liable to supply that institution with relevant
information which would confirm – or refute – the data already at its disposal.

254    In view of the foregoing considerations, the Court of First Instance finds that the Commission, in not requiring the Portuguese
Republic to disclose the contractual external audit reports, failed to fulfil its obligation to undertake a diligent and impartial
investigation.

255    That being the case, the Commission failed to place itself in a position in which it had information which was sufficiently
reliable available to it to determine the public services actually supplied and the costs actually incurred in supplying them.
In the absence of such information, the Commission was unable to proceed subsequently to a meaningful verification of whether
the funding was proportionate to the public service costs and was unable to make a valid finding that there had been no overcompensation
of the public service costs.

256    It follows from this that, without it being necessary to order the measure of inquiry mentioned in paragraph 28 above or to
examine the applicant’s other heads of claim and pleas in law, the answer to which, inasmuch as they allege breach by the
Commission of its obligation to investigate, is, moreover, to be found above, it is necessary to annul Article 1 of the contested
decision, by which the Commission found that the State aid granted to RTP mentioned in that article had not led to any overcompensation
of the net costs of the public service tasks entrusted to the operator.

*Conclusion*

257    It follows from all of the foregoing that it is necessary to annul, first, Article 1 of the contested decision and, second,
Article 2 of that decision in so far as it lays down that the ‘exemption from registration charges’ does not constitute State
aid.

258    It is necessary to dismiss the action as to the remainder, that is to say, in so far as it seeks annulment of Article 2 of
the contested decision concerning the payment facilities for the fee and the 1994 bond issue.

**Costs**

259    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. Pursuant to Article 87(3) of the Rules of Procedure, the Court of First Instance
may order that the costs be shared or that each party bear its own costs where each party succeeds on some and fails on other
heads. In the circumstances of this case, it must be decided that the Commission is to bear its own costs and pay four fifths
of the applicant’s costs and that the applicant is to bear one fifth of its own costs.

On those grounds,

THE COURT OF FIRST INSTANCE (Fifth Chamber)

hereby:

1.      **Annuls Article 1 of Commission Decision 2005/406/EC of 15 October 2003 on ad hoc measures implemented by Portugal for RTP;**

2.      **Annuls Article 2 of Decision 2005/406 in so far as it found that the exemption from registration charges does not constitute
State aid;**

3.      **Dismisses the action as to the remainder;**

4.      **Orders the Commission to bear its own costs and to pay four fifths of the costs of SIC – Sociedade Independente de Comunicação,
SA;**

5.      **Orders SIC to bear one fifth of its own costs.**

| Vilaras | Martins Ribeiro | Jürimäe |
| ------- | --------------- | ------- |

Delivered in open court in Luxembourg on 26 June 2008.

| E. Coulon | | M. Vilaras |
| --------- | | ---------- |

| Registrar | | President |
| --------- | | --------- |

Table of contents

Legal context

Facts of the case

Procedure and forms of order sought

Law

The third plea in law, alleging that the Commission erred in law in failing to classify certain measures as State aid

The first part, alleging the failure to classify the tax exemptions as State aid

– Arguments of the parties

– Findings of the Court

The second part, alleging the failure to classify the payment facilities for the licence as State aid

– Arguments of the parties

– Findings of the Court

The third part, alleging failure to classify the 1994 bond issue as State aid

– Arguments of the parties

– Findings of the Court

Conclusion on the third plea in law

The fourth plea in law, alleging that the Commission erred in law as to the conditions for the application of Article 86(2) EC

The first part, alleging the award of the public television service to RTP without competitive tendering

– Arguments of the parties

– Findings of the Court

The second part, alleging infringement of the criteria for the application of Article 86(2) EC

– Arguments of the parties

– Findings of the Court

Conclusion

Costs

---

- Language of the case: Portuguese.