Judgment — ECLI:EU:T:2002:61
Date: 2002-03-06
Language of the case: Spanish
Court formation: Third Chamber, Extended Composition
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: State aids;Competition
Concepts: Statement of reasons;Principle of the protection of legitimate expectations;Commission decision following the formal investigation procedure;Damage to competition and effect on trade;Principle of equality and non-discrimination;Beneficiaries of the aid to be recovered;Imputability to a public body;Selective nature of the measure
Procedure: Action for annulment - unfounded
Origin: Spain

Summary of the Judgment 
1. State aid — Definition — Selective nature of the measure — National legislation 
establishing a tax credit — General measure conferring on the administration 
discretion in granting tax concessions — Whether included 
(Art. 87(1) EC) 
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SUMMARY — JOINED CASES T-92/00 AND T-103/00 
2. State aid — Definition — Selective nature of the measure — Measure pursuing an 
economic or industrial policy objective — Irrelevant 
(Art. 87(1) EC) 
3. State aid — Recovery of unlawful aid — Aid granted in breach of the procedural 
rules in Article 88 EC — Possibility of legitimate expectation on the part of 
recipients •—• Protection — Conditions and limits 
(Art. 88(3) EC) 
4. State aid — Definition •— Aid granted by regional or local entities — Whether 
included 
(Art. 87(1) EC) 
5. State aid — Definition — Selective nature of the measure — Objective criteria for 
application •—• Irrelevant 
(Art. 87(1) EC) 
6. State aid — Definition —• Specific tax measure — Selective nature of the measure — 
Justification based on the nature or overall structure of the tax system — Excluded 
(Art. 87(1) EC) 
7. State aid — Commission decision declaring unnotified aid to be incompatible with the 
common market — Obligation to state reasons •— Scope 
(Arts 87 EC, 88(3) EC and 253 EC) 
8. State aid — Commission decision declaring aid to be incompatible with the common 
market — Knowledge by the Commission of the identity of other undertakings 
receiving the same aid — Breach of the principle of equal treatment — None 
(Art. 87 EC) 
1. Article 87(1) EC requires that, in order 
to be classified as State aid, a measure 
must favour 'certain undertakings or 
the production of certain goods'. The 
specific or selective nature of a measure 
therefore constitutes one of the char­
acteristics of State aid. 
Measures of purely general application 
do not fall within the ambit of 
Article 87(1) EC. However, interven­
tions which, prima facie, apply to 
undertakings in general may be to a 
certain extent selective and, accord­
ingly, be regarded as measures designed 
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DIPUTACIÓN FORAL DE ÁLAVA AND OTHĽKS v COMMISSION 
to favour certain undertakings or the 
production of certain goods. That is the 
case, in particular, where the adminis­
tration called upon to apply a general 
rule has a discretionary power so far as 
concerns the application of the meas­
ure. 
In order to preclude the characteri­
sation of national legislation establish­
ing a tax credit for investments as a 
general measure, it is not necessary to 
determine whether the conduct of the 
administration granting the tax con­
cession is arbitrary. It need only be 
established that the administration has 
a discretionary power enabling it to 
vary the amount of, or the conditions 
for granting, the tax concession accord­
ing to the characteristics of the invest­
ment project submitted for its assess­
ment. 
(see paras 23, 31, 35) 
2. If it were to be considered that a 
selective State measure avoided appli­
cation of Article 87(1) EC if it pursued 
an economic or industrial policy objec­
tive, such as the promotion of invest­
ment, that provision would have no 
practical effect. The objective pursued 
by such a measure cannot therefore 
enable it to avoid being characterised 
as State aid within the meaning of 
Article 87(1) EC. 
(see para. 51) 
3. Alleged inaction of the Commission 
cannot cause the undertakings receiv­
ing State aid to entertain legitimate 
expectations where a national measure, 
such as a reduction in the tax base, is 
introduced without prior notification, 
in breach of Article 88(3) EC. 
Acknowledgment of a legitimate 
expectation presupposes that the aid 
was granted in accordance with the 
provisions of Article 88 EC. 
(see para. 54) 
4. The fact that an intra-state entity has 
an autonomy in taxation matters which 
is recognised and protected by the 
Constitution of a Member State does 
not exempt it from complying with the 
provisions of the Treaty concerning 
State aid. Article 87(1) EC, by referring 
to aid granted by 'a Member State or 
through state resources in any form 
whatsoever', is directed at all aid 
financed from public resources. It fol­
lows that measures adopted by intra­
state entities (decentralised, federated, 
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SUMMARY — JOINED CASES T-92/00 AND T-103/00 
regional or other) of the Member 
States, whatever their status and 
description, fall, in the same way as 
measures taken by the federal or cen­
tral authority, within the ambit of 
Article 87(1) EC, if the conditions of 
that provision are satisfied. 
(see para. 57) 
5. Even if a selective State measure deter­
mines its scope on the basis of objective 
criteria, it remains selective in nature 
and may therefore be classified as State 
aid within the meaning of Article 87(1) 
EC. 
(see para. 58) 
6. As regards the assessment of whether a 
State measure constitutes State aid, the 
selective nature of the measure may, in 
certain circumstances, be justified 'by 
the nature or overall structure of the 
system'. If that is the case, the measure 
avoids application of Article 87(1) EC. 
Thus, a specific tax measure which is 
justified by the internal logic of the tax 
system —· such as the progressiveness 
of the tax which is justified by the 
system's aim of redistribution — will 
avoid application of Article 87(1) EC. 
(see paras 59-60) 
7. Only State aid which 'affects trade 
between Member States' and which 
'distorts or threatens to distort compe­
tition' falls within the scope of 
Article 87(1) EC. Although in certain 
cases the very circumstances in which 
the aid has been granted may show that 
it is liable to affect trade between 
Member States and to distort or 
threaten to distort competition, the 
Commission must at least set out those 
circumstances in the statement of rea­
sons for its decision. 
Nevertheless, in decisions on unnot­
ified aid, the Commission is not 
required to demonstrate the real effect 
which the aid has had on competition 
and trade between Member States. If 
the Commission were required in its 
decision to demonstrate the real effect 
of aid which had already been granted, 
that would ultimately favour those 
Member States which grant aid in 
breach of the duty to notify laid down 
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DIPUTACIÓN FORAL DE ÁLAVA AND OTHERS v COMMISSION 
in Article 88(3) EC, to the detriment of 
those which do notify aid at the 
planning stage. 
(see paras 69, 77) 
8. There is no breach of the principle of 
equal treatment even if it is shown that 
the Commission knew, when it 
adopted a decision declaring State aid 
granted to an undertaking to be incom­
patible with the common market, the 
identity of other undertakings benefit­
ing from the same aid, this plea could 
not succeed. Such a finding would not 
make it possible to disregard the fact 
that the aid granted to the recipient 
undertaking is unlawful and incom­
patible with the common market. 
(see para. 95) 
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