Opinion of the Advocate General — ECLI:EU:C:2005:618
Date: 2005-10-20
Language of the case: Portuguese
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: State aids;Competition
Procedure: Action for annulment - unfounded
Origin: Portugal

Summary of the Judgment 1. State aid – Meaning – Selective nature of the measure (Art. 87(1) EC) 2. State aid – Meaning – Selective nature of the measure (Art. 87(1) EC) 3. Acts of the institutions – Statement of reasons – Obligation – Scope (Arts 87(1) EC and 253 EC) 4. State aid – Not allowed – Exceptions – Discretion of the Commission (Art. 87(3) EC) 1. Article 87(1) EC prohibits State aid ‘favouring certain undertakings or the production of certain goods’ in comparison with others which are in a legal and factual situation that is comparable in the light of the objective pursued by the measure in question, that is to say, selective aid. However, the concept of State aid does not refer to State measures which differentiate between undertakings and which are, therefore, prima facie selective where that differentiation arises from the nature or the overall structure of the system of charges of which they are part. A measure which creates an exception to the application of the general tax system may be justified by the nature and overall structure of the tax system if the Member State concerned can show that that measure results directly from the basic or guiding principles of its tax system. In that connection, a distinction must be made between, on the one hand, the objectives attributed to a particular tax scheme which are extrinsic to it and, on the other, the mechanisms inherent in the tax system itself which are necessary for the achievement of such objectives. (see paras 52, 54, 81) 2. Where it is a question of examining whether a measure is selective in character, the determination of the reference framework is essential and that framework need not necessarily be defined within the limits of the national territory. Thus, in order to determine the selectivity of a measure adopted by an infra-State body which seeks to establish in one part only of the territory of a Member State a tax rate which is lower than the rate in force in the rest of that State it is appropriate to examine whether that measure was adopted by that body in the exercise of powers sufficiently autonomous vis-à-vis the central power and, if appropriate, to examine whether that measure indeed applies to all the undertakings established in or all production of goods on the territory coming within the competence of that body. Where a regional or local authority adopts, in the exercise of sufficiently autonomous powers in relation to the central power, a tax rate lower than the national rate and which is applicable only to undertakings present in the territory within its competence, the legal framework appropriate to determine the selectivity of a tax measure may be limited to the geographical area concerned where the infra-State body, in particular on account of its status and powers, occupies a fundamental role in the definition of the political and economic environment in which the undertakings present on the territory within its competence operate. In order that a decision taken in such circumstances can be regarded as having been adopted in the exercise of sufficiently autonomous powers, that decision must, first of all, have been taken by a regional or local authority which has, from a constitutional point of view, a political and administrative status separate from that of the central government. Next, it must have been adopted without the central government being able directly to intervene as regards its content. Finally, the financial consequences of a reduction of the national tax rate for undertakings in the region must not be offset by aid or subsidies from other regions or central government. (see paras 56-58, 62, 65-67) 3. The statement of reasons required by Article 253 EC must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the Court to carry out its review. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. Applied to the classification of a measure as aid, that principle requires a statement of the reasons for which the Commission considers that the measure concerned falls within the scope of Article 87(1) EC. In that connection, even in cases where it is clear from the circumstances in which it was granted that the aid is liable to affect trade between Member States or to distort or threaten to distort competition, the Commission must at least set out those circumstances in the statement of reasons for its decision. (see paras 88-89) 4. In the application of Article 87(3) EC, the Commission enjoys a wide margin of discretion, the exercise of which involves assessments of an economic and social nature which must be made within a Community context. The Community Courts, in reviewing whether that freedom was lawfully exercised, cannot substitute their own assessment for that of the competent authority but must restrict themselves to examining whether the authority’s assessment is vitiated by a manifest error or misuse of powers. (see para. 99)