**Case T-376/07**

**Federal Republic of Germany**

**v**

**Commission of the European Communities**

(State aid – Aid to small and medium-sized enterprises – Decision requiring information to be provided concerning two State aid schemes – Commission’s monitoring powers under the fourth sentence of Article 9(2) of Regulation (EC) No 70/2001)

Summary of the Judgment

*State aid – Prohibition – Exceptions – Aid categories, set out in legislation, which can be regarded as compatible with the
common market – Regulation No 70/2001 on aid to small and medium-sized enterprises*

*(Commission Regulation No 70/2001, Art. 9(2), fourth sentence)*

The case-law according to which an implementing regulation must be given, if possible, an interpretation consistent with the
provisions of the basic regulation does not apply in the case of a provision of an implementing regulation whose meaning is
clear and unambiguous and therefore requires no interpretation.

It is clear from the wording of the fourth sentence of Article 9(2) of Regulation No 70/2001 on the application of Articles
87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises that the Commission is entitled to request Member
States to provide it with all the information which it considers necessary to assess whether the conditions of the exemption
regulation have been complied with. It follows necessarily from the clear and unambiguous wording of that provision that the
Commission is entitled to request a Member State to provide it with information in all circumstances.

Furthermore, with regard to the clear terms of that provision there can be no doubt as to the precise extent of the Commission’s
powers. The Member State concerned cannot therefore plead infringement of the principle of protection of legitimate expectations
in order to limit the extent of the powers afforded to the Commission under that provision.

In that regard, even if, between the entry into force of that regulation and the requests for information at the origin of
the contested decision, the Commission carried out checks only where there was doubt about compliance with the conditions
of that regulation, there can be no legitimate expectation that an existing situation which is capable of being altered by
the Commission in the exercise of its discretionary power will be maintained.

(see paras 22-24, 40, 42)


JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)

25 November 2009 ([\*](#Footnote*))

(State aid – Aid to small and medium-sized enterprises – Decision requiring information to be provided concerning two State aid schemes – Commission’s monitoring powers under the fourth sentence of Article 9(2) of Regulation (EC) No 70/2001)

In Case T‐376/07,

**Federal Republic of Germany,** represented by M. Lumma, J. Möller and B. Klein, acting as Agents,

applicant,

v

**Commission of the European Communities,** represented by K. Gross and B. Martenczuk, acting as Agents,

defendant,

APPLICATION for annulment of Commission Decision C(2007) 3226 of 18 July 2007 requiring information to be provided concerning
two State aid schemes coming under Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles
[87 EC] and [88 EC] to State aid to small and medium-sized enterprises (OJ 2001 L 10, p. 33),

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

composed of M. Vilaras, President, M. Prek (Rapporteur) and V.M. Ciucă, Judges,

Registrar: T. Weiler, Administrator,

having regard to the written procedure and further to the hearing on 25 June 2009,

gives the following

**Judgment**

**Legal context**

1        Article 3 of Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles [87 EC] and [88 EC] to certain
categories of horizontal State aid (OJ 1998 L 142, p. 1) (‘the basic regulation’), headed ‘Transparency and monitoring’ reads
as follows:

‘1.      When adopting regulations pursuant to Article 1, the Commission shall impose detailed rules upon Member States to ensure transparency
and monitoring of the aid exempted from notification in accordance with those regulations. Such rules shall consist, in particular,
of the requirements laid down in paragraphs 2, 3 and 4.

2.      On implementation of aid systems or individual aids granted outside any system, which have been exempted pursuant to such
regulations, Member States shall forward to the Commission, with a view to publication in the *Official Journal of the European Communities*, summaries of the information regarding such systems of aid or such individual aids as are not covered by exempted aid systems.

3.      Member States shall record and compile all the information regarding the application of the group exemptions. If the Commission
has evidence which leads it to doubt that an exemption regulation is being applied properly, the Member States shall forward
to it any information it considers necessary to assess whether an aid complies with that regulation.

4.      At least once a year, Member States shall supply the Commission with a report on the application of group exemptions, in accordance
with the Commission’s specific requirements, preferably in computerised form. The Commission shall make access to those reports
available to all the Member States. The Advisory Committee referred to in Article 7 shall examine and evaluate those reports
once a year.’

2        Recital 20 of Commission Regulation (EC) No 70/2001 of 12 January 2001 on the application of Articles [87 EC] and [88 EC]
to State aid to small and medium-sized enterprises (OJ 2001 L 10, p. 33), in the version then in force (‘the Regulation exempting
SMEs’), adopted on the basis of Article 1 of the basic regulation, reads as follows:

‘In order to ensure transparency and effective monitoring, in accordance with Article 3 of [the basic regulation], it is appropriate
to establish a standard format in which Member States should provide the Commission with summary information whenever, in
pursuance of this Regulation, an aid scheme is implemented or an individual aid outside such schemes is granted, with a view
to publication in the *Official Journal of the European Communities*. For the same reasons, it is appropriate to establish rules concerning the records that Member States should keep regarding
the aid exempted by this Regulation. For the purposes of the annual report to be submitted to the Commission by Member States,
it is appropriate for the Commission to establish its specific requirements, including, in view of the wide availability of
the necessary technology, information in computerised form.’

3        Article 9(2) of the Regulation exempting SMEs, headed ‘Transparency and monitoring’ provides:

‘Member States shall maintain detailed records regarding the aid schemes exempted by this Regulation, the individual aid granted
under those schemes, and the individual aid exempted by this Regulation that is granted outside any existing aid scheme. Such
records shall contain all information necessary to establish that the conditions for exemption, as laid down in this Regulation,
are fulfilled, including information on the status of the company as an SME. Member States shall keep a record regarding an
individual aid for 10 years from the date on which it was granted, and regarding an aid scheme, for 10 years from the date
on which the last individual aid was granted under such scheme. On written request, the Member State concerned shall provide
the Commission, within a period of 20 working days or such longer period as may be fixed in the request, with all the information
which the Commission considers necessary to assess whether the conditions of this Regulation have been complied with.’

**Background to the dispute**

4        By two letters dated 26 July 2006, the Commission of the European Communities requested the Federal Republic of Germany to
provide it with information relating to aid schemes XS 24/2002 and XS 29/2002, in order for it to verify whether those schemes
were consistent with the Regulation exempting SMEs. In particular, the Federal Republic of Germany was requested to provide
the Commission with a list of recipients of aid exceeding EUR 200 000 in 2005 under those schemes, and information concerning
those recipients. The Federal Republic of Germany complied with those requests on 24 August 2006 in the case of aid scheme
XS 24/2002 and on 1 September and 25 October 2006 in the case of aid scheme XS 29/2002.

5        In two letters dated 30 October 2006 concerning aid schemes XS 24/2002 and XS 29/2002, respectively, the Commission stated
that the schemes in question appeared to be consistent with the provisions of the Regulation exempting SMEs. After restating
the intention it had expressed in its letters of 26 July 2006 to verify compliance with that regulation as regards a limited
number of aid measures, the Commission requested that information be provided in respect of aid schemes XS 24/2002 and XS
29/2002 concerning the five recipients which had received the major aid measures in 2005.

6        With regard to aid scheme XS 24/2002, in a letter received by the Commission on 10 November 2006 the Federal Republic of Germany
refused to provide fresh information on the projects at issue. The Commission again, on 21 December 2007, sent a request for
information to the Federal Republic of Germany, then a reminder on 9 February 2006. On 18 April 2007 the Federal Republic
of Germany confirmed its refusal to provide the information requested.

7        With regard to aid scheme XS 29/2002, in the absence of a written reply from the Federal Republic of Germany to its letter
of 30 October 2006, the Commission sent that Member State a reminder on 19 December 2006. On 29 January 2007 the Federal Republic
of Germany refused to provide the information requested. That refusal was confirmed on 18 April 2007.

8        On 18 July 2007 the Commission adopted Decision C(2007) 3226 requiring the Federal Republic of Germany to provide certain
information concerning aid schemes XS 24/2002 and XS 29/2002 (‘the contested decision’).

9        By letter of 30 August 2007 the Federal Republic of Germany provided the Commission with the information requested, whilst
maintaining its position that the Commission had no power to order it to provide that information when there was no doubt
on the latter’s part that the obligations laid down in the Regulation exempting SMEs had been fulfilled.

**The contested decision**

10      Paragraphs 14 to 25 of the contested decision, headed ‘General remarks’, read:

‘14      The information sent by the Federal Republic of Germany in response to [the] request for information [of 26 July 2006] is
incomplete and does not enable the Commission to assess the compatibility of the abovementioned aid schemes with the [Regulation
exempting SMEs].

15      The Federal Republic of Germany refuses to send information concerning the individual cases in which the aid schemes have
been applied on the ground that, under Article 3(3) of the [basic regulation], the Commission must have specific doubts whether
the Regulation exempting [SMEs] is being applied properly in order to be able to send a Member State a request for information.

16      The German authorities contend that the provisions relating to monitoring and transparency contained in Article 9 of the Regulation
exempting [SMEs], which permit the Commission to request all the information which it considers necessary to assess whether
the conditions for exemption have been complied with, do not confer on the Commission a general right of review, but limit
that right to cases in which there are doubts.

17      The German authorities are of the view that Article 9 of the Regulation exempting [SMEs] does not give the Commission any
powers other than those resulting from Article 3(3) of the [basic regulation]. That is why the element of doubt must be regarded
as restricting the Commission’s power of review.

18      The Commission’s response to that is that monitoring cannot be considered to have finished once a number of individual aid
measures granted under the aid scheme selected have been examined.

19      The Commission adds that Article 3(3) of the [basic regulation] merely lays down the general minimum requirements with regard
to transparency and monitoring and does not have the effect of limiting the Commission’s power of review only to suspicious
cases.

20      The obligation on the Commission to lay down rules with regard to monitoring in accordance with Article 3(1) of the [basic
regulation] must be interpreted in the light of recital 10 in the preamble to that regulation, which states that ‘the Commission
is under an obligation, in cooperation with Member States, to keep under constant review all systems of existing aid’, as
required by Article 88(1) EC.

21      That is why Article 9 of the Regulation exempting [SMEs] cannot be regarded as conflicting with the [basic regulation].

22      It follows, therefore, that by refusing to provide the information requested the Federal Republic of Germany is failing to
comply with its obligation under Article 9 of the Regulation exempting [SMEs], which is based on Article 3 of the [basic regulation]
and Article 88(1) EC.

23      It should be noted that the Court has held that the Commission is entitled to take protective measures in order to maintain
the status quo, since the practice of some Member States results in the scheme provided for in Articles [87 EC] and [88 EC]
being distorted or circumvented.

24      Compliance with the provisions of the Regulation exempting [SMEs] relating to transparency and monitoring is an essential
precondition for aid to be exempted from notification pursuant to Article 88(3) EC. That is the reason the Commission is not,
in such circumstances, always in a position to decide whether every aid measure that might be granted under that aid scheme
fulfils all the conditions of the Regulation exempting [SMEs], as required by Article 3(2)(a) of that regulation.

25      The Commission has therefore decided to order the Federal Republic of Germany to provide the information it has already requested
under Article 9 of the Regulation exempting [SMEs]. The information requested must be sent to the Commission within a period
of 20 days.’

**Procedure and forms of order sought**

11      By application lodged at the Registry of the Court of First Instance on 26 September 2007, the Federal Republic of Germany
brought the present action.

12      The Federal Republic of Germany claims that the Court should:

–        annul the contested decision;

–        order the Commission to pay the costs.

13      The Commission contends that the Court should:

–        dismiss the action;

–        order the Federal Republic of Germany to pay the costs.

**Law**

14      In support of its action the Federal Republic of Germany relies on two pleas in law, alleging, first, that the Commission
lacked competence to adopt the contested decision and, second, infringement of the principle of *non venire contra factum proprium* (equivalent to estoppel).

*First plea: the Commission’s alleged lack of competence*

 Arguments of the parties

15      The Federal Republic of Germany claims that the Commission lacked competence to adopt the contested decision, since the fourth
sentence of Article 9(2) of the Regulation exempting SMEs, interpreted in the light of the second sentence of Article 3(3)
of the basic regulation, did not afford it the power to request that it be provided with information concerning aid schemes
coming under the Regulation exempting SMEs, in the absence of evidence raising doubts regarding compliance with the conditions
of that regulation.

16      It is necessary to interpret the fourth sentence of Article 9(2) of the Regulation exempting SMEs in the light of the second
sentence of Article 3(3) of the basic regulation, due to the vagueness of that provision. The Federal Republic of Germany
points out that the fourth sentence of Article 9(2) of the Regulation exempting SMEs states merely that the Commission may
request the Member State concerned for information in order to assess whether the conditions for exemption have been complied
with. Hence, that provision, taken in isolation, does not make clear whether a request for information is possible only where
there are grounds for such a request or irrespective of whether such grounds exist.

17      The Federal Republic of Germany considers that the second sentence of Article 3(3) of the basic regulation permits the Commission
to request a Member State to provide information only when the Commission has evidence for doubting that the conditions laid
down in an exemption regulation have been complied with.

18      Consequently, in the light of the wording of the second sentence of Article 3(3) of the basic regulation, the discretion which
the Commission has under the fourth sentence of Article 9(2) applies, in its view, only with regard to the volume of information
to be provided and not to the grounds justifying the request for information.

19      Moreover, the Federal Republic of Germany claims, with reference in particular to recital 20 in the preamble to the Regulation
exempting SMEs, that the purpose of Article 9 of that regulation is not to ensure effective monitoring in a general way but
rather to ensure effective monitoring within the meaning of Article 3 of the basic regulation. It infers from this that the
extent of the Commission’s monitoring powers must be assessed in the light of the only real criterion, which is Article 3
of that regulation.

20      The Commission contends that that plea in law should be rejected.

 Findings of the Court

21      It should be noted first of all that the Federal Republic of Germany’s reasoning with regard to the Commission’s alleged lack
of competence to adopt the contested decision does not contain, either expressly or implicitly, an assertion that the fourth
sentence of Article 9(2) of the Regulation exempting SMEs is unlawful since it conflicts with the second sentence of Article
3(3) of the basic regulation, which the Federal Republic of Germany acknowledged at the hearing and of which the Court took
formal note. Thus, the Federal Republic of Germany’s arguments are based solely on the alleged ambiguity of the fourth sentence
of Article 9(2) of the Regulation exempting SMEs and the resulting need to interpret it in the light of the basic regulation.

22      According to settled case-law, when the wording of secondary Community law is open to more than one interpretation, preference
should be given to the interpretation which renders the provision consistent with the Treaty. An implementing regulation must
also be given, if possible, an interpretation consistent with the provisions of the basic regulation (Case C‐61/94 *Commission* v *Germany* [1996] ECR I‐3989, paragraph 52, and Case C‐90/92 *Dr. Tretter* [1993] ECR I‐3569, paragraph 11). However, that case-law does not apply in the case of a provision of an implementing regulation
whose meaning is clear and unambiguous and therefore requires no interpretation.

23      Clearly, the wording of the fourth sentence of Article 9(2) of the Regulation exempting SMEs contains no ambiguity as to its
precise meaning. It is clear from it that the Commission is entitled to request Member States to provide it with all the information
which it considers necessary to assess whether the conditions of the Regulation exempting SMEs have been complied with.

24      It follows necessarily from the clear and unambiguous wording of the fourth sentence of Article 9(2) of the Regulation exempting
SMEs that by virtue of that provision the Commission is entitled to request a Member State to provide it with information
in all circumstances.

25      The reference made by the Federal Republic of Germany to recital 20 in the preamble to the Regulation exempting SMEs cannot
cast doubt on that conclusion. Indeed, reading that recital does not reveal any conflict with the fourth sentence of Article
9(2) of the Regulation exempting SMEs capable of giving rise to any ambiguity as to the meaning of that provision. In that
regard, it should be noted that that recital contains no reference to the circumstances in which the Commission is entitled
to request a Member State to provide information concerning exempted aid schemes.

26      It is therefore apparent from the clear wording of the fourth sentence of Article 9(2) of the Regulation exempting SMEs, on
the one hand, that it is not necessary to interpret that provision in the light of the second sentence of Article 3(3) of
the basic regulation and, on the other hand, that the Commission did not exceed its powers under that provision in adopting
the contested decision.

27      The first plea in law must therefore be rejected without the need to assess the extent of the powers conferred on the Commission
by the second sentence of Article 3(3) of the basic regulation.

*Second plea in law: alleged infringement of the principle of non venire contra factum proprium*

 Arguments of the parties

28      The Federal Republic of Germany contends that the Commission published several proposed amendments in connection with the
reform of the law on State aid, from which it may be inferred that it did not have the power to carry out checks in the absence
of grounds to justify them.

29      First, it is apparent from paragraphs 52 and 54 of the State aid action plan, to which the Commission referred in its letters
of 26 July 2006, that its purpose is ‘to enable the Commission to verify the compatibility of aid in case of doubts or complaint’.

30      Secondly, the Federal Republic of Germany refers to a proposed amendment of the basic regulation, the purpose of which is
to afford the Commission the opportunity to carry out spot-checks without having any evidence which leads it to doubt whether
an exemption regulation is being applied properly. It is clear from this that such an opportunity is not available under the
law as it stands.

31      Thirdly, the same conclusion should be drawn from the draft General Block Exemption Regulation in the area of State aid, put
forward by the Commission in 2007 (OJ 2007 C 210, p. 14). The Federal Republic of Germany points out that the Commission proposes
to introduce a new paragraph 7 into Article 9, stating that it will ‘regularly monitor aid measures of which it has been informed
pursuant to paragraph 1’.

32      The Federal Republic of Germany infers from the above that the Commission infringed the principle of *non venire contra factum proprium*. In its reply it adds that the Commission infringes the principle of protection of legitimate expectations in departing from
that earlier position. At the hearing it also referred to the Commission’s practice of not carrying out checks except where
there is doubt as to compliance with the conditions of the Regulation exempting SMEs.

33      In response to the Commission’s assertion that the principle of *non venire contra factum proprium* does not constitute a principle of Community law, the Federal Republic of Germany submits that the Community courts have
referred on several occasions to that ‘principle’. It also points out that it is in practice close not only to the principle
of protection of legitimate expectations but also to the principle of legal certainty.

34      Moreover, the Federal Republic of Germany disputes the Commission’s view that this plea is not supported by arguments to demonstrate
that legitimate expectations exist.

35      With regard to the Commission’s argument that the principle of protection of legitimate expectations is not infringed since
the fourth sentence of Article 9(2) of the Regulation exempting SMEs allows checks where no doubt exists, the Federal Republic
of Germany reiterates its arguments, raised in connection with the first plea, concerning the meaning to be ascribed to that
provision. It infers from this that the amendment to the Commission’s practice does indeed constitute infringement of the
principle of protection of legitimate expectations.

36      With regard to the Commission’s assertion that the purpose of its draft amendment of the basic regulation was solely to make
clear that it is entitled to carry out checks whether or not there is any doubt, the Federal Republic of Germany considers
that it is not convincing. In essence, it submits that the need for such clarification implies that the Commission does not
consider that Article 3 of the basic regulation allows it to undertake such checks.

37      Lastly, with regard to the conclusions which the Commission draws from the fact that its draft General Block Exemption Regulation
is based on the basic regulation, the Federal Republic of Germany considers in essence that they are founded on an incorrect
interpretation of the basic regulation.

38      The Commission contends that this plea in law should be rejected.

 Findings of the Court

39      In the context of this plea, the Federal Republic of Germany contends, in essence, that the Commission itself interpreted
the fourth sentence of Article 9(2) of the Regulation exempting SMEs as not authorising it to carry out checks where there
is no doubt regarding compliance with the conditions laid down, which is reflected in its decision-making practice. Hence,
it is not entitled to depart from that interpretation. That is what may be inferred from its claims alleging infringement
of the maxim *non venire contra factum proprium*, and subsequently at the reply stage, alleging infringement of the principle of protection of legitimate expectations.

40      That line of argument is not persuasive. With regard to the clear terms of the fourth sentence of Article 9(2) of the Regulation
exempting SMEs, the Federal Republic of Germany could not be in any doubt as to the precise extent of the Commission’s powers
under that provision. It cannot therefore plead infringement of the principle of protection of legitimate expectations in
order to limit the extent of the powers afforded to the Commission under that provision.

41      In any event, the various factors put forward by the Federal Republic of Germany are not capable of giving rise to legitimate
expectations regarding the way in which the Commission intends to use its powers under the fourth sentence of Article 9(2)
of the Regulation exempting SMEs.

42      In the first place, with regard to the arguments put forward by the Federal Republic of Germany at the hearing, concerning
the existence, between the entry into force of the Regulation exempting SMEs and the requests for information at the origin
of the contested decision, of a Commission practice of carrying out checks only where there was doubt about compliance with
the conditions of that regulation, it should be noted that according to settled case-law there can be no legitimate expectation
that an existing situation which is capable of being altered by the Commission in the exercise of its discretionary power
will be maintained (see, to that effect and by analogy, Joined Cases C‐189/02 P, C‐202/02 P, C‐205/02 P to C‐208/02 P and
C‐213/02 P *Dansk Rørindustri and Others* v *Commission* [2005] I‐5425, paragraph 171, and case-law cited).

43      In the second place, the Federal Republic of Germany refers to the fact that the Commission wrote in paragraph 52 of its State
aid action plan that ‘Member States should engage more actively to ensure that the conditions for the exemptions are fully
respected and that necessary information is kept ..., in order to enable the Commission to verify the compatibility in case
of doubts or complaint’. However, as the Federal Republic of Germany itself acknowledges, that passage must be read in conjunction
with paragraph 54 of the action plan, in which the Commission states it will step up its monitoring. Consequently, no clear
indication of the Commission’s intention to limit the exercise of its power to monitor compliance with the conditions of the
Regulation exempting SMEs merely to circumstances in which there are doubts emerges from a combined reading of those two paragraphs.

44      In the third place, the fact that the Commission, in its draft General Block Exemption Regulation, envisaged a different definition
of its powers in respect of monitoring exempted aid does not affect the clear meaning of the fourth sentence of Article 9(2)
of the Regulation exempting SMEs, which alone applies in the circumstances of this case.

45      Lastly, with regard to the fact that the Commission proposal to amend the basic regulation is designed to afford it the power,
under that regulation, to carry out spot checks, it should be stated that it concerns the interpretation of the second sentence
of Article 3(3) of the basic regulation and cannot therefore be taken into account. Since no plea of illegality has been raised
with regard to the fourth sentence of Article 9(2) of the Regulation exempting SMEs, and in the light of the clear wording
of that regulation, the meaning of the second sentence of Article 3(3) has no effect on the outcome of this action.

46      Consequently, the second plea in law must be rejected, as must, therefore, the action as a whole.

**Costs**

47      Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
applied for in the successful party’s pleadings. Since the Federal Republic of Germany has been unsuccessful, it must be ordered
to pay the costs, in accordance with the form of order sought by the Commission.

On those grounds,

THE COURT OF FIRST INSTANCE (Fifth Chamber)

hereby:

1.      **Dismisses the action;**

2.      **Orders the Federal Republic of Germany to pay the costs.**

| | | |
| --- | --- | --- |
| Vilaras | Prek | Ciucă |

Delivered in open court in Luxembourg on 25 November 2009.

[Signatures]

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[\*](#Footref*) Language of the case: German.