Judgment — ECLI:EU:T:2002:59
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;Applications by natural or legal persons;Notification and obligation to suspend payment of the aid;Private investor/private creditor test;Principle of the protection of legitimate expectations;General;Commission decision following the formal investigation procedure;Damage to competition and effect on trade;Existing aid and new aid;Beneficiaries of the aid to be recovered;Imputability to a public body;Selective nature of the measure;Commission discretion
Procedure: Action for annulment - unfounded;Action for annulment - successful;Action for annulment - inadmissible
Origin: Spain

Summary of the Judgment 
1. Actions for annulment — Natural or legal persons — Measures of direct and 
individual concern to them — Commission decision declaring certain aid to be 
incompatible with the common market — Action brought by the public-sector 
undertaking and the regional authority which granted that aid — Whether admissible 
(Art. 230, fourth para., EC) 
II - 1275 
SUMMARY — JOINED CASES T-127/99, T-129/99 AND T-148/99 
2. State aid — Definition — Sale of assets by a public authority on preferential terms — 
Whether included 
(EC Treaty, Art. 92(1) (now, after amendment, Art, 87(1) EC)) 
3. State aid — Definition — Sale of a plot of land by a public-sector undertaking — 
Occupation of land by purchaser free of charge prior to payment of the purchase 
price — Whether included — Assessment criterion — Normal conduct of a private 
undertaking 
(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) 
4. State aid — Definition — Aid granted by regional or local entities — Whether 
included 
(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) 
5. 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 
(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) 
6. State aid — Definition — Selective nature of the measure — Objective criteria for 
application — Irrelevant 
(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) 
7. State aid — Definition — Specific tax measure — Selective nature of the measure — 
Justification based on the nature or overall structure of the tax system — Excluded 
(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) 
8. State aid — Definition — Selective nature of the measure — Measure intended to 
create or maintain employment — Irrelevant 
(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC)) 
9. State aid — Existing and new aid — Definition — Measures altering existing aid or 
initial plans notified to the Commission — Treated as new aid 
(EC Treaty, Art. 93(3) (now Art. 88(3) EC)) 
II - 1276 
DIPUTACIÓN FORAL DE ALAVA AND OTHERS v COMMISSION 
10. State aid — Planned aid — Notification to the Commission — General aid 
scheme — Obligation 
(EC Treaty, Art. 93(3) (now Art. 88(3) EC» 
11. State aid — Affecting trade between Member States — Prejudicial to competition — 
Assessment criteria 
(EC Treaty, Art. 92 (now, after amendment, Art. 87 EC)) 
12. State aid — Commission decision declaring unnotified aid to be incompatible with 
the common market — Obligation to state reasons — Scope 
(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC) and Arts 93(3) and 190 
(now Arts 88(3) EC and 253 EC)) 
13. State aid — Prohibition — Derogations — Commission's discretion — Assessment 
of reasons possibly justifying an individual exemption of an agreement — Excluded 
(EC Treaty, Art. 85(3) (now Art. 81(3) EC) and Art. 92(1) (now, after amendment, 
Art. 87(1) EC)) 
14. State aid — General aid scheme approved by the Commission — Individual aid 
purporting to be covered by the approval — Scrutiny by the Commission — 
Assessment primarily in the light of the approval decision and only secondarily in 
the light of Article 92 of the Treaty (now Article 87 EC) 
(EC Treaty, Art. 92 (now, after amendment, Art. 87 EC) and Art. 93 (now Art. 88 
EC)) 
15. State aid — Aid granted in compliance with the procedural rules in Article 93 of the 
Treaty (now Article 88 EC) — Possibility of legitimate expectation on the part of 
recipients — Protection — Conditions and limits 
(EC Treaty, Art. 93 (now Art. 88 EC)) 
1. The public-sector undertaking and the 
intra-state entity which granted State 
aid are directly and individually con­
cerned by the decision declaring the aid 
incompatible with the common mar­
ket. That decision not only affects 
measures adopted by the applicants, 
but also prevents those applicants from 
exercising their own powers, which 
they enjoy directly under domestic law. 
(see paras 50-51) 
II - 1277 
SUMMARY — JOINED CASES T-127/99, T-129/99 AND T-148/99 
2. The sale of assets by a public authority, 
on preferential terms, may constitute 
State aid. In order to determine 
whether an undertaking received State 
aid when it acquired an asset from a 
public-sector undertaking, it is necess­
ary to examine whether the purchasing 
undertaking bought that asset at a price 
which it would have been unable to 
obtain under normal market con­
ditions. 
(see paras 72-73) 
3. Where a public-sector undertaking sells 
a plot of land to a private undertaking 
occupying that land and the purchase 
price is paid only after several months 
of occupation, the Commission is 
entitled to find that the purchasing 
undertaking occupied that land free of 
charge. 
Nevertheless, the Commission cannot 
automatically infer from that occu­
pation that the public-sector undertak­
ing granted State aid to the purchasing 
undertaking. That would be the case 
only if the conduct of the public-sector 
undertaking were not the normal con­
duct of a private undertaking. 
The Commission must consider 
whether a private operator could have 
required payment of the purchase price 
on an earlier date and, if that is not the 
case, whether he could have required a 
payment in respect of the period during 
which the land was occupied before 
payment of the purchase price. 
In the absence of such an examination, 
the Commission fails to prove to the 
requisite legal standard that the pur­
chasing undertaking received State aid 
within the meaning of Article 92(1) of 
the Treaty (now, after amendment, 
Article 87(1) EC) by virtue of occupy­
ing the plot of land free of charge 
before paying the purchase price. 
(see paras 97-100, 105-106) 
4. The fact that a tax credit has been 
granted on the basis of legislation 
adopted by an intra-state entity, and 
not by a Member State, is irrelevant for 
the purposes of the application of 
Article 92(1) of the Treaty (now, after 
amendment, Article 87(1) EC). That 
provision, 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 follows that measures 
II - 1278 
DIPUTACIÓN FORAL DE ALAVA AND OTHERS v COMMISSION 
adopted by intra-state entities (decen­
tralised, federated, regional or other) of 
the Member States, whatever their 
legal status and description, fall, in 
the same way as measures taken by the 
federal or central authority, within the 
ambit of Article 92( 1 ) of the Treaty, if 
the conditions laid down in that provi­
sion are satisfied. 
(see para. 142) 
5. Article 92(1) of the Treaty (now, after 
amendment, Article 87(1) EC) requires 
that, in order to be defined as State aid, 
a measure must favour 'certain under­
takings or the production of certain 
goods'. The specific or selective nature 
of a measure therefore constitutes one 
of the characteristics of State aid. 
Measures of purely general application 
do not fall within the ambit of 
Article 92(1) of the Treaty. However, 
interventions which, prima facie, apply 
to undertakings in general may be to a 
certain extent selective and, accord­
ingly, be regarded as measures designed 
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, in 
particular, to vary the amount of, or 
the conditions for granting, the tax 
concession according to the character­
istics of the investment project sub­
mitted for its assessment. 
(see paras 144, 149, 154) 
6. Even if a selective State measure deter­
mines its scope on the basis of objective 
criteria, the fact remains that it is 
selective in nature and may therefore 
be treated as State aid within the 
meaning of Article 92( 1 ) of the Treaty 
(now, after amendment, Article 87(1) 
EC). 
(see para. 163) 
7. As regards the assessment of whether a 
State measure constitutes State aid, the 
selective nature of the measure may, in 
II - 1279 
SUMMARY — JOINED CASES T-127/99, T-129/99 AND T-148/99 
certain circumstances, be justified 'by 
the nature or overall structure of the 
system'. If that is the case, the measure 
avoids application of Article 92(1) of 
the Treaty (now, after amendment, 
Article 87(1) EC). Thus, a specific tax 
measure which is justified by the inter­
nal logic of the tax system — such as 
the progressiveness of the tax which is 
justified by the system's aim of redis­
tribution — will avoid application of 
Article 92(1) of the Treaty. 
In any event, the justification based on 
the nature or overall structure of the 
tax system constitutes an exception to 
the principle that State aid is prohibited 
and must therefore be interpreted 
strictly. 
(see paras 163-164, 250) 
8. If it were to be considered that reasons 
relating to the creation or maintenance 
of employment caused specific meas­
ures to fall outside the scope of 
Article 92(1) of the Treaty (now, after 
amendment, Article 87(1) EC), that 
provision would have no practical 
effect. In the large majority of cases, 
State aid is granted in order to create or 
protect employment. 
(see para. 168) 
9. Existing aid is aid which existed before 
the entry into force of the Treaty or 
entry of the Member State into the 
European Communities and aid which 
could be properly put into effect under 
the c o n d i t i o n s la id down in 
Article 93(3) of the Treaty (now 
Article 88(3) EC). 
On the other hand, measures to grant 
or alter aid, where the alterations may 
relate to existing aid or initial plans 
notified to the Commission, must be 
regarded as new aid subject to the 
obligation of notification laid down by 
Article 93(3). 
(see para. 173) 
10. Article 93(3) of the Treaty (now 
Article 88(3) EC) makes no distinction 
between individual aid and general aid 
schemes. 
II - 1280 
DIPUTACIÓN FORAL DE ÁLAVA AND OTHERS v COMMISSION 
It follows that, where a Member State 
or a regional or local authority of a 
Member State establishes a legislative 
and/or administrative mechanism 
involving a general aid scheme, that 
scheme has to be notified to the Com­
mission. 
(see paras 184-185) 
11. State aid granted to an undertaking in 
order to enable it to start manufactur­
ing a certain product in a Member 
State has the effect, in a competitive 
market, of reducing the opportunities 
for undertakings established in other 
Member States to export their products 
to the market in that Member State. 
Such aid is therefore likely to affect 
trade between Member States and to 
distort competition. 
(see para. 219) 
12. Although in certain cases the very 
circumstances in which the State 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 circum­
stances in the statement of reasons for 
its decision declaring aid incompatible 
with the common market. 
Nevertheless, in decisions on unnot­
ified aid, the Commission is not 
required to demonstrate the real effect 
of the national measures since that 
would ultimately favour those Member 
States which grant aid in breach of the 
duty to notify laid clown in 
Article 93(3) of the Treaty (now 
Article 88(3) EC), to the detriment of 
those which do notify aid at the 
planning stage. 
(see paras 201, 225) 
13. Ascertaining whether State aid is in 
conformity with the Treaty does not 
involve assessing reasons which might 
possibly justify an individual exemp­
tion of an agreement, practice or anti­
c o m p e t i t i v e d e c i s i o n , u n d e r 
Article 85(3) of the EC Treaty (now 
Article 81(3) EC). Since the Commis­
sion has proved to the requisite legal 
standard that the aid granted to an 
undertaking distorts or threatens to 
distort competition within the meaning 
of Article 92(1) of t h e Treaty (now, 
after amendment, Article 87(1) EC) 
II - 1281 
SUMMARY — JOINED CASES T-127/99, T-129/99 AND T-148/99 
and that it is liable to affect trade 
between Member States, that aid is, 
subject to exceptions, incompatible 
with the common market. 
(see para. 223) 
14. When the Commission has before it 
individual aid alleged to be granted in 
pursuance of a previously authorised 
scheme, it cannot at the outset examine 
it directly in relation to the Treaty. 
Prior to the initiation of any procedure, 
it must first confine itself to examining 
whether the aid is covered by the 
general scheme and satisfies the con­
ditions laid down in the decision 
approving it. If it did not do so, the 
Commission could, whenever it exam­
ined each individual aid, go back on its 
decision approving the aid scheme 
which already involved an examination 
in the light of Article 92 of the Treaty 
(now, after amendment, Article 87 
EC). This would jeopardise the prin­
ciples of the protection of legitimate 
expectations and legal certainty from 
the point of view of both the Member 
States and traders since individual aid 
in strict conformity with the decision 
approving the aid scheme could at any 
time be called in question by the 
Commission. 
(see para. 228) 
15. The acknowledgement that an under­
taking receiving State aid has a legit­
imate expectation presupposes, in prin­
ciple, that the aid was granted in 
accordance with the provisions of 
Article 93 of the Treaty (now 
Article 88 EC). It is considered, in fact, 
that a trader and a regional authority 
exercising all due care should normally 
be able to ensure compliance with that 
procedure. 
(see para. 236) 
II - 1282