Judgment — ECLI:EU:T:2000:174
Date: 2000-06-29
Language of the case: German
Court formation: Fifth Chamber, Extended Composition
Based on: Treaty establishing the European Coal and Steel Community (1951)
Subject matter: State aids;Competition;Steel industry;ECSC matters
Concepts: Investments and financial aid;Measures of inquiry and measures of organisation of procedure;Pleas in law;Commission discretion
Procedure: Action for annulment - unfounded
Origin: Germany

summary of that plan. 
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DSG V COMMISSION 
145 It therefore follows from all the foregoing considerations that the applicant has 
not established that the Commission made an obvious error of assessment in 
holding that a private investor would not have consented to the increase in the 
credit line of December 1992. 
146 Moreover, in the context of an action for annulment, the Community Court's 
function is solely to determine whether the contested decision is vitiated by one of 
the grounds of illegality set out in Article 33 of the ECSC Treaty; it cannot 
substitute its own assessment of the facts for that of the deciding authority, 
especially in the economic sphere (see, by way of analogy, Case T-106/95 FFSA 
and Others v Commission [1997] ECR II-229, paragraph 101). It is therefore not 
for the Court of First Instance to order an expert report designed to show that the 
City of Hamburg and HLB behaved like a private investor in a market economy. 
— The credit line of December 1993 
147 The applicant claims, essentially, that the Commission should have held that the 
City of Hamburg behaved like a private investor by ordering the extension and 
the increase of the credit line in December 1993. 
148 The Commission stated in the contested decision that HLB had considered that 
the particular circumstances in which the initial financing of the new company 
took place were no longer sufficient to justify the economic risk involved in 
continuing to operate the business. Accordingly, the financial situation of HSW, 
the situation of the steel market and the conclusions of the MacKinsey Report led 
HLB to refuse to continue any financial involvement in HSW. 
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JUDGMENT OF 29. 6. 2000 — CASE T-234/95 
149 It therefore falls to be considered whether the Commission made an obvious error 
in applying the private investor test to that measure. 
150 At that time, the financial position of HSW had worsened considerably, as the 
Federal Government states in its communication to the Commission of 
8 September 1994, which shows that, if credit were terminated, the insolvency 
of HSW would have been the inevitable consequence. Similarly, the MacKinsey 
Report refers to an insolvency situation, putting at risk the credits granted by the 
City of Hamburg. 
151 It should also be noted that the situation of the European steel market was 
characterised by an extremely difficult competitive environment, on account of 
subsidised rivals and surplus production capacity (see the MacKinsey Report and 
the forward programme for steel for the first half of 1994 (OJ 1994 C 10, p. 2). 
152 That is the context in which the applicant's argument, essentially based on the 
allegedly favourable prospects announced by the MacKinsey Report, should be 
examined. The applicant argues that the report found HSW to be in a competitive 
situation which would have led to positive results from 1994 onwards. 
153 However, the Mackinsey Report states in its introduction: 
'This report assesses the viability of HSW on the basis of our knowledge of the 
steel market and the competitive environment and of our assessment of the 
technologies introduced by HSW. It is designed as an instrument to assist the 
II - 2652 
DSG V COMMISSION 
decision of the economic authorities concerning the granting of other credits/ 
guarantees (assessment of risks, alternatives, etc.).' 
154 By way of the measures that might be envisaged, the report states: 
'[In] the decisions which it has to take as to the continuation of the business, the 
City of Hamburg must make a choice between, on the one hand, its inclination to 
maintain jobs, and, on the other, its duty to avoid further capital losses (diagram 
8).' 
155 It is thus apparent that, contrary to what the applicant maintains, the MacKinsey 
Report takes into consideration both economic factors connected with the 
viability of the applicant and social factors. 
156 The applicant also claims that its economic viability is established by the 
MacKinsey Report, which indicates that it is competitive. However, the report 
merely states that 'the basic technical structure [of HSW] is competitive', and that 
that assessment does not apply to the latter's financial situation. On the contrary, 
the report states: 
'[H]aving suffered losses of about DEM 15 million in 1993, however, [HSW] is 
on the edge of insolvency. The company's capital currently amounts to just 
DEM 10 million, and will probably be reduced by further losses in the course of 
the year (diagram 5). That situation places in peril the credits of the City of 
Hamburg, granted through the intermediary of [HLB], the current amount of 
which is about DEM 140 million; moreover, the increase in the credit line is likely 
to take the financial risk of the city to DEM 174 million (forecast) in the course 
of the year (diagram 6). In order to arrive at a profitability allowing credits to be 
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JUDGMENT OF 29. 6. 2000 — CASE T-234/95 
repaid, the annual result of HSW must improve by about DEM 20 million 
(diagram 7).' 
157 It is therefore clear from the MacKinsey Report that HSWs financial situation 
was highly precarious, and moreover formed part of an extremely difficult 
competitive environment, characterised by the presence of subsidised competitors 
and surplus production capacity. 
158 The applicant therefore has no basis for arguing, on the strength of the 
MacKinsey Report, that it was a competitive company. 
159 The MacKinsey Report further envisages four options for the City of Hamburg, 
distinct from the financial point of view but also socially. Each of those options 
(continuing the business in accordance with the HSW concept, continuing with 
the 'reinforced concrete' or the 'quality' strategy, or selling and closing HSW) 
entails a consequent increase in the financial risk run by the City of Hamburg, 
save for the sale option. Thus, the report considers: '[I]n every case, continuing to 
support [HSW's] business is very risky. Since there is no certainty of a return to 
profit, continued financial support by the City of Hamburg may prove necessary 
in order to ensure the continuity of [HSW] (diagram 15)'. Sale thus constituted 
the most advantageous solution for the City of Hamburg, since it allowed it, inter 
alia, to transfer the risks and put an end to capital losses. 
160 However, whilst the MacKinsey Report indicates that the City of Hamburg might 
limit its losses by selling HSW, it sees no prospect of profitability for the capital 
invested. That assessment is moreover confirmed by the claims of the German 
Government, which show that the City of Hamburg resolved to increase credit in 
order to limit losses, to ensure the continuation of the business during the search 
for an industrial buyer and to allow an organised transfer. 
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DSG V COMMISSION 
161 The argument which the applicant draws from the favourable prospect of its sale 
is therefore inoperative. 
162 Moreover, the MacKinsey Report was drawn up at a time when the City of 
Hamburg had already granted unlawful aid. The risks incurred by the City of 
Hamburg in breach of Community law on aid cannot therefore be invoked in 
order to maintain that further measures intended to limit the financial 
consequences thereof were economically reasonable. 
163 Having regard to the financial situation of the applicant, its urgent need of 
financing, and the highly precarious state of the European steel market, it has to 
be concluded that, in those circumstances, the possibility of the applicant finding 
a private investor willing to grant the credit line and a swing were negligible or 
even non-existent. 
164 That conclusion is unaffected by the applicant's argument that the Commission 
was wrong to claim that HLB, unlike the City of Hamburg, behaved like a private 
investor in refusing either to renew the credit line previously granted or to 
increase it. The applicant maintains in that respect that HLB's conduct results 
from the tightening of the case-law on capital-replacing loans. 
165 The Commission has indeed stated, without being contradicted by the applicant, 
that the judgment of the Bundesgerichtshof had been published on 2 October 
1992, that is to say even before the first increase in the credit line was granted in 
December 1992. 
166 Moreover, it is hardly likely that a private investor would have carried out the 
operation in question on the same conditions as the City of Hamburg, that is to 
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JUDGMENT OF 29. 6. 2000 — CASE T-234/95 
say with the certainty that the sums injected would be classified as capital-
replacing loans. That assessment is all the more plausible because that private 
investor would have had to have been prepared to grant and renew a credit line 
from 1984 onwards, and increase it in 1992. 
167 The Commission was therefore entitled to take the view that a private investor 
would not have granted the credits in question and that they constituted State aid. 
The applicant has not adduced any evidence to demonstrate that that assessment 
is obviously incorrect. 
168 Having regard to the wide discretion which the Commission has in factual, and 
particularly economic, matters (see paragraph 146 above), it is not the duty of the 
Court to order an export report for the purpose of establishing that, in similar 
circumstances, a private investor would have granted the credits in question. 
169 The Commission was therefore right to classify each of the financial measures 
taken in favour of the applicant in December 1992 and December 1993 as State 
aid. 
170 It remains to be determined, however, whether that conclusion may be 
invalidated by the applicant's argument that the Commission's assessment is 
obviously defective for failure to take account of the fact that a private third party 
would have been able to obtain sufficient securities to cover the increase of the 
credit line granted in December 1992 and the credit line and the credits granted in 
December 1993. 
The possibility of obtaining loans on the private capital market, thanks to the 
sureties 
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DSG V COMMISSION 
171 The applicant claims, essentially, that it could have obtained capital from third 
parties, thanks to its sureties. 
172 The Court considers, however, that the Commission did not make an obvious 
error of assessment in taking the view that the possibility of HSW obtaining loans 
from third parties thanks to its sureties does not prevent the measures in question 
from being classified as aid. 
173 First, that is only a hypothesis, given that the applicant's sureties were engaged in 
favour of HLB. 
174 Moreover, even if the sureties had been entirely freed in order to obtain 
corresponding loans from third parties, it may properly be considered that such 
loans would not have been comparable with those granted by HLB on the orders 
of the City of Hamburg, given that loans from third parties unconnected with 
HSW would not have been classified by German case-law as capital-replacing 
loans. 
175 The Commission rightly emphasises, moreover, that the fact that the applicant 
might have been able to obtain loans from third parties which would not have 
been classified as State aid does not mean that the credits which it actually 
obtained on the orders of the City of Hamburg are not aid. 
176 Next, it should be noted that, in the contested decision, the Commission held that 
HSW would only have been able to cover part of its financing in the event of the 
total freeing of the sureties held by HLB. 
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177 It has indeed not been established that the sureties covered the increase of the 
credit line in 1992 and the credit line and the credits granted in 1993. 
178 On the contrary, the German Government stated in its communication to the 
Commission of 8 September 1994: 
'The readiness to increase the credit line by DEM 20 million existed because the 
prospects of results were favourable. Since, however, the amount of the sureties, 
mainly linked to the circulating capital, had not grown in the same proportion 
but had, on the contrary — according to a banking assessment — diminished by 
reason of the fall in prices due to the crisis, it was necessary to guarantee those 
prospects of results by an increase in the credit opening order, taking account of 
the lesser amount of the sureties, raising it from 60 to 75% in relation to the 
credit line of DEM 130 million (apart from the increase of DEM 20 million).' 
179 Moreover, by letter of 23 June 1995, the German Government asked the 
Commission to defer the closure of the administrative procedure so as to enable it 
to establish that possibilities of financing by third parties existed, and, more 
specifically, to enable it to establish to what extent HSW was capable of ensuring 
its own financing, thanks to its own sureties, even without an agreement between 
HLB and the Government of the Land. 
180 However, the communication of 18 August 1995 sent by the German Govern­
ment to the Commission does not show that third parties would have been able to 
benefit from sufficient sureties in order to consent to the granting of the necessary 
loans. 
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DSG V COMMISSION 
181 The applicant's criticisms of the Commission's assessment of the sureties in the 
contested decision are therefore of no consequence, and the Court has no duty to 
order an expert report on the point. 
The amount and the repayment of the alleged aid 
182 The applicant challenges the legality of Article 3 of the contested decision. It 
maintains, first, that the Commission wrongly assessed the amount of the aid to 
be recovered and, secondly, that it was not competent to require the Federal 
Republic of Germany to make repayment. 
183 It should be noted, first, that the applicant is wrong in claiming that the 
extensions of the credit line could not constitute State aid, since they were to be 
regarded as a 'maintenance of capital' or 'long-term credits'. It is clear from the 
facts of this case that those extensions had to be negotiated each year, whereupon 
it was for the City of Hamburg and HLB to decide whether or not to renew their 
agreement as to their extension and increase. The Commission did not therefore 
make an obvious error of assessment by holding that the extension of the credit 
line of 1993 constituted a State aid as such. 
184 The Court therefore considers that the Commission was entitled to take the view 
that the amount of the aid corresponded to the amount of the loans granted, and 
not just to the difference between the rate which HSW would have obtained from 
a commercial bank and that which was actually granted to it. 
185 As for the applicant's argument that the Commission did not have the power to 
require the repayment of aid, it should be noted, first, that aid which is not 
compatible with the common market must, as a matter of principle, be repaid by 
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JUDGMENT OF 29. 6. 2000 — CASE T-234/95 
the recipient and that recovery of such aid is a consequence inherent in the strict 
system of aid for the steel industry, and, secondly, that that argument is based on 
an incorrect interpretation of Article 88 of the Treaty. 
186 Article 88 of the Treaty provides, inter alia: 
'If the Commission considers that a State has failed to fulfil an obligation under 
this Treaty, it shall record this failure in a reasoned decision after giving the State 
concerned the opportunity to submit its comments. It shall set the State a time 
limit for the fulfilment of its obligation. 
[...] 
If the State has not fulfilled its obligation by the time limit set by the Commission, 
or if it brings an action which is dismissed, the Commission may, with the assent 
of the Council acting by a two thirds majority: 
(a) suspend the payment of any sums which it may be liable to pay to the State in 
question under this Treaty; 
(b) take measures, or authorise the other Member States to take measures, by 
way of derogation from the provisions of Article 4, in order to correct the 
effects of the infringement of the obligation. 
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DSG V COMMISSION 
[...]' 
187 It is clear from that article that the assent of the Council is required only if the 
State has not fulfilled its obligation, which has not been found to be the case here. 
The Commission was entitled therefore, under Article 3 of its decision, to require 
the German Government to order HSW to repay the aid in question. 
188 This complaint must therefore be dismissed. 
189 It follows from all the foregoing considerations that the Commission did not 
commit an obvious error in holding that a private investor would not have 
granted the sums in question, holding that those sums had to be classified as State 
aid, and requiring that they be repaid. This plea must therefore be dismissed. 
2. The plea alleging misuse of powers 
Arguments of the parties 
190 The applicant complains of the Commission's failure to refer for an expert report 
the question whether an investor in a market economy would, in identical 
circumstances, have behaved like the City of Hamburg and HLB, and of its 
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JUDGMENT OF 29. 6. 2000 — CASE T-234/95 
failure to take into consideration the arguments concerning the closure of the 
Euskirchen plant, with a capacity of 80 000 tonnes per year, which in the 
applicant's submission constitutes compensation for the aid granted. On that 
latter point, the Federal Republic of Germany adds that it has shown that all the 
conditions required by the Commission in other cases, such as the closure of 
capacity, were met in this case, and that the declaration of the Council on the 
reorganisation of the steel industry in Europe did not exclude the possibility of 
granting public aid to promote the closure of unprofitable businesses. In that 
respect, the Commission did not seek to obtain the assent of the Council referred 
to in Article 95 of the ECSC Treaty. The Commission's failure to state its reasons 
constituted a misuse of powers in that respect. 
191 The Commission refers to the absence of any direct link between the reduction of 
steelmaking capacity and the assessment made of the credits, and argues that it 
was for the German Government to request the Council to rule on the 
authorisation of the aids to HSW, pursuant to Article 95 of the ECSC Treaty. 
192 Furthermore, the Commission contends that any further expert report would 
have been of no use, since it had the relevant economic data and was aware of the 
conduct adopted by HLB. 
Findings of the Court of First Instance 
193 According to consistent case-law, a measure may amount to a misuse of powers 
only if it appears, on the basis of objective, relevant and consistent factors, to 
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DSG V COMMISSION 
have been taken with the exclusive purpose, or at any rate the main purpose, of 
achieving an end other than that stated or of evading a procedure specifically 
prescribed for dealing with the circumstances of the case (see Case T-57/91 
NALOO v Commission [1996] ECR II-1019, paragraph 327). 
194 The applicant's argument that the Commission should have used an outside 
expert's report in order to determine what the conduct of a private investor would 
have been cannot be accepted. 
195 First, there is no provision of Community legislation imposing such an obligation 
on the Commission. 
196 Secondly, it has already been found that the Commission did not make any 
obvious error of assessment in holding that a private investor would not have 
granted the loans in dispute having regard to the financial structure of the 
business, its need for investment, and the situation of the market for the products 
concerned. 
197 It is clear from the documents before the Court that the Commission had the 
information necessary for its assessment. In particular, amongst the documents 
available and admissible at the time of the administrative procedure, it had the 
MacKinsey Report concerning HSWs financial situation and future prospects. 
Moreover, the successive Commission decisions establishing Community rules for 
aid to the steel industry (including the fifth Steel Aid Code) demonstrate its 
knowledge of the industry in question. 
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JUDGMENT OF 29. 6. 2000 — CASE T-234/95 
198 Therefore, and given that the applicant has not provided any further explanation 
of the factors for assessment that it maintains the Commission should have had at 
its disposal, the absence of a further export report is not capable of establishing 
that the Commission misused its powers. 
199 The applicant's argument that the Commission should have taken account, as 
compensation for the aid, of the closure of production capacity at the Euskirchen 
site, even outside the procedure under Article 95 of the ECSC Treaty, cannot be 
accepted either. 
200 The applicant's arguments concerning events subsequent to the granting of the aid 
are irrelevant in that respect, since the comparison with a private investor had to 
be made only on the basis of information that was in the possession of the City of 
Hamburg in December 1992 and December 1993. 
201 Thus, the beneficial consequences flowing from the closure of the Euskirchen 
subsidiary after the purchase of HSW by ISPAT, even if established, cannot be 
taken into consideration when examining the contested decision. A fortiori, the 
argument of the Federal Republic of Germany, to the effect that, by reason of that 
closure, the conditions imposed by the Commission when examining aid for the 
restructuring of steel businesses are fulfilled, is irrelevant. 
202 The Court of First Instance has moreover held that, under the scheme of the 
Treaty, Article 4(c) does not prevent the Commission from authorising, by way of 
derogation, aid envisaged by the Member States and compatible with the 
objectives of the Treaty, on the basis of the first and second paragraphs of 
Article 95, in order to deal with unforeseen situations. Those provisions of 
Article 95 empower the Commission to adopt a decision or a recommendation, 
with the unanimous assent of the Council and after the ECSC Consultative 
Committee has been consulted, in all cases not provided for by the Treaty in 
II - 2664 
DSG V COMMISSION 
which such a decision or recommendation appears necessary in order to attain, 
within the common market in coal and steel and in accordance with Article 5, 
one of the objectives of the Community set out in Articles 2, 3 and 4 (Case 
T-239/94 EISA v Commission [1997] ECR II-1839, paragraphs 63 and 64). 
203 Thus the Commission has, first, adopted the codes for aid to the steel industry, 
establishing a general derogation for certain specified categories of aid, but has 
also, secondly, adopted individual decisions authorising certain types of specific 
aid on an exceptional basis (EISA, paragraphs 65 and 66). 
204 Aid not falling within the categories specially referred to by the provisions of the 
fifth Steel Aid Code, as is the case here, may benefit from an individual 
derogation from that prohibition if the Commission considers, in the exercise of 
the discretion which it enjoys under Article 95 of the Treaty, that such aid is 
necessary for attainment of the objectives of the Treaty (EISA, paragraph 72). 
205 In this case, the applicant has not demonstrated that the Commission committed 
a misuse of powers or an obvious error in assessing, in the light of the provisions 
of the Treaty, the situation in response to which the contested decision was taken 
(see Joined Cases 15/59 and 29/59 Knutange v High Authority [1960] ECR 1). 
206 The applicant has adduced no evidence to show that it was confronted with an 
exceptional situation not specifically envisaged by the Treaty and that, all things 
considered, the aid in question was necessary for the purposes of attaining the 
objectives of the Treaty. 
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JUDGMENT OF 29. 6. 2000 — CASE T-234/95 
207 Thus, the closure of the Euskirchen subsidiary is unrelated to the granting of the 
aid in question. Nor, moreover, was that aid notified. 
208 It follows that the applicant has no grounds in this case for claiming that the 
Commission has misused its powers. 
209 This plea is therefore unfounded. 
Conclusion 
210 It follows from all the foregoing considerations that the pleas must be rejected in 
their entirety. Since the applicant has not demonstrated that the contested 
decision is vitiated by illegality, this action for annulment must be dismissed. 
Costs 
211 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 applicant has been unsuccessful and the Commission has 
applied for costs, the applicant must be ordered to pay the costs. 
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DSG V COMMISSION 
On those grounds, 
THE COURT OF FIRST INSTANCE (Fifth Chamber, Extended Composition) 
hereby: 
1. Dismisses the application; 
2. Orders the applicant to bear its own costs and to pay those incurred by the 
Commission; 
3. Orders the Federal Republic of Germany and the United Kingdom, which 
have intervened in the dispute, to bear their own costs. 
Cooke García-Valdecasas Lindh 
Pirrung Vilaras 
Delivered in open court in Luxembourg on 29 June 2000. 
H. Jung 
Registrar 
J.D. Cooke 
President 
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Index 
Judgment II-2609 
Background to the dispute II-2612 
1. Facts prior to the disputed measures II-2612 
2. Loan of equity capital II-2613 
3. The credit line of 1984 II-2614 
4. The credit line of December 1992 II-2615 
5. The credit line of December 1993 II-2615 
6. The sale of HSW II-2616 
Administrative procedure II-2616 
The contested decision II - 2618 
1. Loan of equity capital II-2619 
2. The credit line of 1984 II-2620 
3. The credit line of December 1992 II-2622 
4. The credit line of December 1993 II - 2623 
Procedure and forms of order sought by the parties II - 2624 
The replies to the written questions from the Court of First Instance and the documents 
annexed to those replies II - 2627 
Substance II-2629 
1. The plea alleging infringement of Article 4(c) of the ECSC Treaty and Article 1(2) 
of the Steel Aid Code II-2630 
Arguments of the parties II - 2630 
The economic unity between the City of Hamburg and HLB II - 2631 
The Commission's examination of the credit lines granted in December 1992 and 
December 1993 II-2633 
— Increase of the credit line in December 1992 II - 2633 
— The credit line of December 1993 II - 2636 
The possibility of obtaining loans on the private capital market in reliance on the 
sureties II - 2639 
The amount and the repayment of the alleged aid II-2641 
Findings of the Court of First Instance II - 2642 
Preliminary observations II - 2642 
Economic unity between the City of Hamburg and HLB II - 2644 II - 2668 
DSG V COMMISSION 
The Commission's analyses concerning the credit lines granted in December 1992 
and December 1993 II-2647 
— Increase of the credit line in December 1992 II - 2647 
— The credit line of December 1993 II - 2651 
The possibility of obtaining loans on the private capital market, thanks to the 
sureties II - 2656 
The amount and the repayment of the alleged aid II-2659 
2. The plea alleging misuse of powers II - 2661 
Arguments of the parties II - 2661 
Findings of the Court of First Instance II - 2662 
Conclusion II - 2666 
Costs II-2666 
II - 2669