Opinion of the Advocate General — ECLI:EU:C:2005:522
Date: 2005-09-08
Language of the case: Italian
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: State aids;Competition
Procedure: Reference for a preliminary ruling
Origin: Italy

Summary of the Judgment 1. State aid – Definition – Selective nature of the measure – Tax measure benefiting only undertakings in the banking sector carrying out certain transactions – Included (Art. 87(1) EC) 2. State aid – Effect on trade between Member States – Impairment of competition – Criteria for assessment (Art. 87(1) EC) 3. State aid – Examination by the Commission – Examination of an aid scheme taken as a whole – Lawfulness – Consequence (Commission Notice 96/C 68/06) 4. State aid – Prohibited – Exceptions – Aid contributing to the execution of an important project of common interest – Aid concerning the development of a sector of economic activity – Discretion of the Commission – Judicial review – Limits (Art. 87(3)(b) and (c) EC) 5. State aid – Aid plans – Implementation without prior notification to the Commission – Commission decision ordering the recovery of the aid – Obligation to state the reasons on which the decision is based – Scope (Arts 88(3) EC and 253 EC) 6. State aid – Recovery of unlawful aid – Aid granted in breach of the rules of procedure laid down in Article 88(3) EC – Possible legitimate expectation on the part of the beneficiaries – Legal certainty – Protection – Conditions and limits (Art. 88(3) EC) 7. State aid – Recovery of unlawful aid – Breach of the principle of proportionality – None – Amounts to be recovered – Factors to be taken into consideration (Art. 88(3) EC) 8. State aid – Commission decision finding that aid is incompatible with the common market – National measure ordering repayment of the aid – Challenge to the validity of a national implementing measure in the light of rules of Community law in the absence of information capable of affecting the validity of the Commission’s decision – Not included (Art. 87 EC; Council Regulation No 659/1999, Art. 14) 1. Article 87(1) EC prohibits aid which ‘favours certain undertakings or the production of certain goods’, that is to say, selective aid. Aid may be selective in the light of that provision even where it concerns a whole economic sector. That is the case with a tax reduction which applies only to the banking sector and, within the banking sector, benefits only undertakings which carry out certain operations. Since it does not apply to all economic operators and is, in reality, a departure from the ordinary tax scheme, it cannot be considered to be a general measure of tax or economic policy. Such a tax reduction must therefore be prohibited under Article 87(1) EC, since it is not an adaptation of the general scheme to the particular characteristics of banking undertakings, but was put forward as a means of improving the competitiveness of certain undertakings at a certain stage in the development of the sector. (see paras 44-51) 2. Article 87(1) EC prohibits aid which affects trade between Member States and which distorts or threatens to distort competition. In its assessment of those two conditions, the Commission is required, not to establish that the aid has a real effect on trade between Member States and that competition is actually being distorted, but only to examine whether that aid is liable to affect such trade and distort competition. The result is that aid must be found to be incompatible with the common market if it has or is liable to have an effect on intra-Community trade and to distort competition within such trade. In particular, when aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid. In that regard, the fact that an economic sector has been liberalised at Community level is an element which may serve to determine that the aid has a real or potential effect on competition and on trade between Member States. In addition, it is not necessary that the beneficiary undertaking itself be involved in intra-Community trade. Aid granted by a Member State to an undertaking may help to maintain or increase domestic activity, with the result that undertakings established in other Member States have less chance of penetrating the market of the Member State concerned. Furthermore, the strengthening of an undertaking which, until then, was not involved in intra-Community trade may place that undertaking in a position which enables it to penetrate the market of another Member State. Thus, a tax reduction which strengthens the position of the beneficiary undertakings in relation to other undertakings active in intra-Community trade, especially in the context of an important liberalisation process at Community level in the financial services sector, enhancing the competition that may already have resulted from the free movement of capital provided for in the Treaty, must be prohibited. (see paras 53-60) 3. In the case of an aid scheme, the Commission may, in order to assess whether that scheme involves elements of aid, confine itself to examining the general characteristics of the scheme in question without being required to examine each particular case in which it applies, in particular to check that it is not liable to exceed the maximum amount of de minimis State aid laid down in Notice 96/C 68/06. (see paras 67, 69) 4. For the purposes of applying Article 87(3) EC the Commission enjoys a wide 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 in the matter for that of the competent authority but must confine itself to examining whether the authority’s assessment is vitiated by a manifest error or by misuse of powers. In not classing as ‘a project of common European interest’ within the meaning of Article 87(3)(b) EC a measure which reduces tax and from which it is apparent that it is essentially designed to improve the competitiveness of operators established in a Member State in order to strengthen only their competitive position in the internal market, the Commission did not make a manifest error of assessment. It cannot reasonably be claimed that that measure is part of the framework for completing a process of privatisation, since a process of that nature undertaken by a Member State cannot be regarded, in itself, as amounting to a project of common European interest. Moreover, it did not make a manifest error of assessment in considering that a measure which essentially improves the competitiveness of the beneficiaries in a sector characterised by intensive international competition and is in fact aimed at strengthening the position of the beneficiaries of the aid in relation to those competitors which do not benefit from it, it did not meet the requirement that trading conditions must not be adversely affected to an extent that is contrary to the common interest, which aid to facilitate the development of certain activities within the meaning of Article 87(3)(c) EC must satisfy. (see paras 71-72, 74-77, 79, 82-83) 5. The requirements to be satisfied by the statement of reasons laid down in Article 253 EC depend, in principle, on the circumstances of each case, in particular on the content of the measure in question, the nature of the reasons given and the interest which its addressee may have in obtaining explanations. However, in the matter of State aid, where, contrary to the provisions of Article 88(3) EC, the aid has already been granted, the Commission, which has the power to require the national authorities to order repayment, is not obliged to provide specific reasons in order to justify the exercise of that power. Therefore, since the Member State did not notify it of the scheme laying down the tax reduction before its implementation, the Commission was not obliged to provide specific reasons in support of its order to recover the aid. (see paras 99-101) 6. In view of the mandatory nature of the review of State aid by the Commission under Article 88 EC, undertakings to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless, first, it has been granted in compliance with the procedure laid down in that article and, second, a diligent businessman should normally be able to determine whether that procedure has been followed. In particular, where aid is implemented without prior notification to the Commission, so that it is unlawful under Article 88(3) EC, the recipient of the aid cannot have at that time a legitimate expectation that its grant is lawful. Neither the Member State in question nor the operator involved can plead the principle of legal certainty either, in order to prevent recovery of the aid, since the risk of national proceedings was foreseeable from the moment that the aid was implemented. The recovery of aid granted contrary to the procedure laid down in Article 88(3) EC constitutes a foreseeable risk for the operator benefiting from it and that operator can accordingly not rely on the protection of a legitimate expectation in order to avoid that risk. In addition, the undertakings in receipt of unlawful aid generally take account of that aid when making economic decisions and the subsequent recovery of that aid does, generally speaking, have an adverse effect on their finances. If such a situation were to prevent recovery, in virtually all cases the aid would remain ultimately in the possession of the beneficiaries and the control of State aid at Community level would be ineffective. In the light of such considerations, the recipient of unlawful aid cannot therefore claim that it may rely on exceptional circumstances on the basis of which it might legitimately have expected the aid to be lawful. (see paras 104, 108-111) 7. The withdrawal of unlawful aid by recovery is the logical consequence of the finding that it is unlawful. That recovery for the purpose of re-establishing the previously existing situation cannot, in principle, be regarded as disproportionate to the objectives of the Treaty provisions on State aid. By repaying, the recipient forfeits the advantage which it had enjoyed over its competitors on the market, and the situation prior to payment of the aid is restored. It would not be right to determine the amounts to be repaid in the light of various operations which could have been implemented by the undertakings if they had not opted for the type of operation which was coupled with the aid. That choice was made in the knowledge of the risk of recovery of aid granted contrary to the procedure laid down in Article 88(3) EC. Those undertakings could have avoided that risk by opting immediately for operations structured in other ways. As regards an aid measure granted in the form of a tax reduction, the reestablishment of the status quo ante merely enables account to be taken, at the stage of recovery of the aid by the national authorities, of tax treatment which may be more favourable than the ordinary treatment which, in the absence of unlawful aid and in accordance with domestic rules which are compatible with Community law, would have been granted on the basis of the operation actually carried out. (see paras 113-116, 119) 8. Article 87 et seq. EC, Article 14 of Council Regulation No 659/1999, and the principles of legal certainty, proportionality and the protection of legitimate expectations cannot preclude a national measure ordering repayment of aid in compliance with a Commission decision which found that aid to be incompatible with the common market and examination of which in the light of those provisions and general principles has not disclosed any factor capable of affecting its validity. (see para. 125, operative part 2)