Judgment — ECLI:EU:T:2001:145
Date: 2001-06-05
Language of the case: German
Court formation: Third Chamber, Extended Composition
Based on: Treaty establishing the European Coal and Steel Community (1951)
Subject matter: State aids;Competition
Concepts: Investments and financial aid;Principle of the protection of legitimate expectations;General
Procedure: Action for annulment - unfounded;Action for annulment - successful
Origin: Germany

summary table in point II of the preamble to the contested decision, a State guarantee of DEM 60.8 million (80% of DEM 76 million). 144. Then, as regards case N 673/94, it is common ground that, by a communication dated 29 June 1994, the Federal Republic of Germany informed the Commission of a proposed grant to the applicant of a subsidy and an investment premium for further investments estimated at DEM 51 million. That communication contains the following information: ... The financing of the further investments of DEM 51 million is made up as follows: - Own funds (increase of share capital) DEM 5.4 million - Investment subsidy DEM 11.73 million - Investment premium (8%) DEM 4.08 million - Loan at current market rate DEM 30.19 million (it may be necessary to provide an additional guarantee, in respect of which a decision will be taken during the coming months) Total: DEM 51.00 million. The Federal Government notifies the following measures of support in favour [of the applicant]: Investment subsidy DEM 11.73 million Investment premium DEM 4.08 million. 145. By a communication of 26 September 1994 (the communication of 26 September 1994), the Federal Republic of Germany notifie[d] ... a further State guarantee of DEM 24 million, consisting of DEM 19.2 million for investments and DEM 4.8 million for operating loans. 146. It follows both from the communication of 18 February 1998 (see summary table on page 4) and from the contested decision (see summary table at the end of point II of the preamble thereto) that, by its letter of 13 January 1995, the Commission approved, inter alia, the grant to the applicant of a State guarantee amounting to DEM 23.975 million. 147. It follows from the foregoing (paragraphs 140 to 146) that, as regards both the State guarantee relating to file N 351/92 and the guarantee relating to case N 673/94, the Federal Republic of Germany had, in its fax of 17 December 1992 and in its communication of 26 September 1994, provided the Commission, before the latter approved the aid elements inherent in the grant of guarantees to the applicant, with precise information on the breakdown of the costs to which they related. In its answers to the written questions put by the Court, the Commission states that it did not register the fax of 17 December 1992 and that the communication of 26 September 1994 merely constituted further information relating to case N 673/94, so that neither document was regarded as a formal notification. However, it does not deny having received the documents and does not dispute their connection with cases N 351/92 and N 673/94. 148. In each case the Commission adopted a position on the State guarantees in question. The letter of 1 March 1993 refers to the State guarantee amounting to 80% in connection with the costs necessitated by the establishment of the undertaking and estimated at DEM 76 million (see paragraph 143 above). When that extract is compared with the statement in the fax of 17 December 1992 concerning an overall amount of DEM 76 million, 80% of which was to be guaranteed, it may be concluded, and the Commission does not dispute this, that the Commission made a ruling on the State guarantee relating to file N 351/92 in the light of the information provided in that fax. As regards the letter of 13 January 1995, the Commission does not deny that the reference in that letter to the commercial loan with a State guarantee amounting to DEM 23.975 million represents its taking into consideration of the information set out in the communication of 26 September 1994 concerning the proposal to grant the applicant a State guarantee in connection with case N 673/94. 149. For that reason, the approach adopted in Falck v Commission (cited in paragraph 139 above), on which the Commission relies in its written submissions, cannot be applied in the present case. The Court of Justice held in that judgment, in regard to aid to the steel industry which, under the code on aid to the steel industry then applicable, had to be notified to the Commission by 31 May 1985, that the Commission was not required to accept further information provided after that date which would have altered the nature of the aid envisaged so that the plan implemented did not correspond with that notified. In the present case, it is not disputed that the fax of 17 December 1992 reached the Commission in time and the analysis set out in the two preceding paragraphs shows that the information in that fax was taken into account by the Commission in the context of the final decision contained in its letter of 1 March 1993. As regards the communication of 26 September 1994, the Commission has itself stated, in its answers to the written questions put by the Court, that that communication was regarded as merely providing further information in case [N] 673/94 and that it was therefore placed on the notification file which the Federal Republic of Germany had sent it on 29 June 1994 and which had declared a possible proposal to grant a further State guarantee to the applicant (see paragraph 144 above). Furthermore, the analysis set out in the two preceding paragraphs shows that the information in that communication was taken into account by the Commission in the context of the final decision contained in its letter of 13 January 1995. 150. It is clear from the letter of 1 March 1993 that the proposed grant of the State guarantee in question is designated, on the same basis as the other aid elements relating to case N 351/92, as proposed investment aid and was examined and approved in the light of the third indent of Article 5 of the fifth code on aid to the steel industry, concerning regional investment aid for undertakings established on the territory of the former German Democratic Republic. The letter of 13 January 1995 also states that the proposed grant to the applicant of a State guarantee in connection with a commercial loan was, like the other aid elements concerned by case N 673/94, examined and approved on the basis of the same provision of the code on aid to the steel industry. 151. In the eleventh paragraph of point IV of the preamble to the contested decision, the Commission none the less states that [the Federal Republic of Germany] gave notification of general operating aid in favour of an ECSC steel undertaking. In its answers to the written questions put by the Court and at the hearing, the Commission confirmed that that assertion, as may be seen from its position in the contested decision, refers to the fax of 17 December 1992 and the communication of 26 September 1994. In the light of those factors, it is permissible to think that the Commission understood at the material time, on reading those documents, that the State guarantees described therein contained elements of general operating aid. The Commission's assertion in its written submissions that the fax of 17 December 1992 and the communication of 26 September 1994 disclosed that those State guarantees were in part earmarked to cover operating loans (see paragraph 137 above) confirms that analysis. 152. In those circumstances, it must be concluded that, by approving, in the context of cases N 351/92 and N 673/94, and with full knowledge of the facts, the State guarantees up to the full amounts mentioned by the Federal Republic of Germany in its fax of 17 December 1992 and its communication of 26 September 1994, to within DEM 25 000 in the second case, the Commission authorised the partial use of those State guarantees as operating aid, as declared in those two documents. 153. It is not possible to accept the Commission's argument that the lack of any reference in its letters of 1 March 1993 and 13 January 1995 to the proposed partial allocation of the State guarantees to cover operating loans must necessarily have made the Federal Republic of Germany aware that no operating aid had been authorised. 154. If the Commission had any objection to the German authorities' intention to allocate part of the State guarantees to cover such loans, it should at the material time, and in accordance with the procedure laid down for that purpose, have adopted a decision either authorising the grant of those guarantees only up to the amount needed to cover the investment costs, or approving those guarantees in their entirety only on condition that they were wholly allocated to cover investment costs. However, the two letters in question clearly convey no such meaning. 155. Nor can the Commission rely on manifest incompatibility of the operating aid with the common market in coal and steel to support its argument that the Federal Republic of Germany must necessarily have suspected that the partial allocation of the State guarantees to cover operating loans had not been approved. 156. Apart from what has been stated in paragraphs 152 and 154 above, in the 11th paragraph of point IV of the preamble to the contested decision the Commission states that [it] did not as a matter of course approve operating aid that did not conform to well-known principles. The Commission itself therefore does not rule out authorisation of such aid. In those circumstances, it cannot plead that the Federal Republic of Germany could not reasonably interpret its letters of 1 March 1993 and 13 January 1995 as approving the elements of operating aid contained in the State guarantees in question. 157. In accepting that at the material time, in spite of what the Commission states in the contested decision and in its written submissions (see paragraph 151 above), it viewed the proposed grant of the State guarantees in issue as corresponding in full to proposed investment aid, it must be emphasised that it formed that view, and also examined and approved the State guarantees as investment aid, in the light of the information provided by the Federal Republic of Germany in its fax of 17 December 1992 and in its communication of 26 September 1994 concerning the costs relating to those guarantees (see paragraphs 147 and 148 above). In that regard, the Federal Republic of Germany cannot in the light of that information be accused of having sought to conceal the purposes of the guarantees in question and thus to secure the Commission's approval of an allocation of those guarantees different from that notified to it. 158. In those circumstances, the authorisation as investment aid, set out in the letters of 1 March 1993 and 13 January 1995, of the State guarantees up to the full amount - within DEM 25 000 in the second case - of the overall sums indicated by the Federal Republic of Germany in its fax of 17 December 1992 and in its communication of 26 September 1994 must be regarded as approval of the use of those State guarantees to cover the respective amounts of the various types of costs indicated in those two documents. 159. It is not for the Court to speculate on the Commission's reasons for approving, at the material time, the grant to the applicant of the State guarantees in question without the slightest reservation in regard to the information provided by the Federal Republic of Germany in its fax of 17 December 1992 and in its communication of 26 September 1994 concerning the allocation of the guarantees envisaged in the two documents. Clearly, following the foregoing analysis (see paragraphs 140 to 158 above), the letters of 1 March 1993 and 13 January 1995 must be read as authorising the grant to the applicant of State guarantees of DEM 60.8 million and DEM 23.975 million respectively, as described in detail, as regards their allocation, by the Federal Republic of Germany in its fax of 17 December 1992 and its communication of 26 September 1994, the relevant passages of which were set out in paragraphs 142 and 145 above. 160. Neither in the contested decision nor in its written submissions does the Commission dispute the link established by the Federal Republic of Germany during the administrative procedure between the State guarantee of DEM 7.2 million referred to in the second paragraph of Article 1 of the contested decision, granted to the applicant at the end of 1994 to cover operating loans, and the allocation, described in the fax of 17 December 1992 relating to case N 351/92, of the State guarantee referred to in that fax to cover the losses sustained during the implementation of the investment and the accrued interest, evaluated together at DEM 18 million. Nor is it disputed that the amount of DEM 7.2 million referred to above does not exceed the allowable limit, having regard to the level of the various types of costs to which the Sate guarantee in question related, of the part of that guarantee allocated to cover operating loans. 161. Nor does the Commission refute in the contested decision or in its written submissions the link established by the Federal Republic of Germany during the administrative procedure between the State guarantee of DEM 4.8 million referred to in the second paragraph of Article 1 of the contested decision, granted to the applicant at the end of 1994 to cover operating loans, and the allocation, described in the communication of 26 September 1994 relating to case N 673/94, of the State guarantee referred to in that communication to cover operating loans amounting to DEM 4.8 million. 162. In those circumstances, it must be concluded that the aid element contained in the State guarantees granted to the applicant at the end of 1994 to cover operating loans amounting to DEM 7.2 million and DEM 4.8 million respectively had been approved by the Commission in its letter of 1 March 1993 relating to case N 351/92 and in its letter of 13 January 1995 relating to case N 673/94. 163. It is still necessary to ascertain whether the Commission was justified in finding, in the second paragraph of Article 1 of the contested decision, that that aid element is incompatible with the sixth code on aid to the steel industry and with the common market in coal and steel. 164. In that regard, the classification as general operating aid which the Commission conferred on that aid element in the contested decision (eighth and eleventh paragraphs of point IV of the preamble) is not disputed by the applicant or the interveners. General operating aid does not come within any of the categories of aid defined in the sixth code on aid to the steel industry, applicable since 1 January 1997, which are covered by a general derogation from the principle laid down in Article 4(c) of the ECSC Treaty that aid is prohibited. Furthermore, both during the administrative procedure and during the judicial procedure the parties concerned merely maintained that the State guarantees of DEM 7.2 million and DEM 4.8 million granted to the applicant at the end of 1994 to cover operating loans had been approved by the Commission. They did not put forward any arguments intended to show that those guarantees were compatible with the common market in coal and steel. 165. In those circumstances, it must be concluded that the Commission was justified in declaring in the second paragraph of Article 1 of the contested decision that the aid element of the guarantees covering the operating loans of DEM 7.2 million and DEM 4.8 million granted to the applicant at the end of 1994 is incompatible with the sixth code on aid to the steel industry and the common market in coal and steel. 166. In the light of all the foregoing (paragraphs 140 to 165 above), the second paragraph of Article 1 of the contested decision must be annulled in so far as it provides that the aid element of the State guarantees covering the operating loans of DEM 7.2 million and DEM 4.8 million granted to the applicant at the end of 1994 had not been authorised. The remainder of the plea under consideration must be dismissed. The plea alleging infringement of the principle of protection of legitimate expectations and seeking annulment of Article 2 of the contested decision Arguments of the parties 167. The applicant claims that it could legitimately believe that aid for its plant not allocated as such to an activity coming within the scope of the ECSC Treaty would be examined in the light of the EC rules on State aid, even if a separate undertaking was not involved in the operation of that plant (Case T-129/96 Preussag Stahl v Commission [1998] ECR II-609, paragraph 77, and the case-law cited there). 168. As regards the State guarantees, the applicant states that it believed that the Federal Republic of Germany had complied with the notification obligation by means of its communications to the Commission. Furthermore, by approving those guarantees, the Commission gave rise to justified hopes on the applicant's part (Case T-489/93 Unifruit Hellas v Commission [1994] ECR II-1201, paragraph 51). 169. The applicant states that it made irreversible investments, using to a very large extent the resources which it had been granted. Had it been informed of the risk of a demand for repayment of the aid in question, it would not have made such investments and would not now be faced with the problems caused by such a demand. 170. The applicant observes that Community case-law endeavours to strike a balance between the principle of legality on the one hand and the principles of legal certainty and the protection of legitimate expectations on the other hand (Joined Cases 205/82 to 215/82 Deutsche Milchkontor and Others [1983] ECR 2633, paragraph 30). 171. The Freistaat Sachsen maintains that the investment aid in question consisted of a number of individual measures taken to implement regional aid programmes which had been authorised by the Commission under Article 93 of the EC Treaty (now Article 88 EC). It is therefore to be regarded as existing aid, which is exempt from the obligation to give prior notification to the Commission. 172. The Commission asserts that, apart from the fact that the applicant incorrectly classes the straightening operation, it is settled case-law that undertakings to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure laid down, something which a diligent businessman should normally be able to determine (Case C-5/89 Commission v Germany [1990] ECR I-3437, paragraph 14). In that regard, a Commission notice (OJ 1983 C 318, p. 3) warned potential recipients of illegally-granted aid to beware of the risk that such aid would have to be repaid. 173. Nor, as regards the aid referred to in the first paragraph of Article 1 of the contested decision, could the applicant rely on any approval decision capable of giving rise to its legitimate expectation. The argument that its investments were irreversible is irrelevant. The Commission is not demanding that the applicant cancel the investments but only that it repay the funds illegally received. Such a recovery measure is the logical consequence of the finding that the aid is incompatible with the common market, as it seeks to re-establish the previously existing situation (Case C-142/87 Belgium v Commission [1990] ECR I-959). 174. The State guarantees relating to cases N 351/92 and N 673/94 were used in breach of the fifth code on aid to the steel industry. They were allocated to purposes other than those declared to the Commission and were prohibited by that code. Furthermore, they were granted to the applicant before the Commission adopted a position in regard to them. In those circumstances, the applicant was not entitled to claim that the approval of those guarantees as investment aid legitimately led it to consider that the guarantees were authorised as operating aid (see, in that regard, Case 236/86 Dillinger Hüttenwerke v Commission [1988] ECR 3761, paragraph 14, and Case C-180/88 Wirtschaftsvereinigung Eisen- und Stahlindustrie v Commission [1990] ECR I-4413, paragraph 22). 175. The Commission further argues that Community case-law requires recovery of illegal aid even if the national authority is responsible for the illegality of the aid decision to such a degree that revocation appears to be a breach of good faith towards the recipient, since the recipient could not have had a legitimate expectation that the aid was lawful because the procedure laid down had not been followed (Case C-24/95 Alcan Deutschland [1997] ECR I-1591, paragraph 43). Recovery of the aid is required all the more when, as in the present case, the national authorities sought ex post facto approval of an allocation of the aid different from that initially notified to the Commission. Findings of the Court 176. It should first of all be recalled that the first paragraph of Article 1 of the contested decision must be annulled, in so far as the Commission declares the part of the investment grant made to the applicant in 1995 for investments in its cold-stretched wire rod facilities to be incompatible with the sixth code on aid to the steel industry and with the common market in coal and steel (see paragraph 135 above). 177. The obligation to recover aid which the Commission can impose on a Member State is the consequence of the aid's incompatibility with the common market. Recovery cannot be justified on the sole ground that the aid in question was not notified to the Commission (see, to that effect, Case C-301/87 France v Commission [1990] ECR I-307, paragraphs 11 to 22, Belgium v Commission, cited in paragraph 173 above, paragraphs 15 to 20, Case C-39/94 SFEI and Others [1996] ECR I-3547, paragraph 43, and Case T-49/93 SIDE v Commission [1995] ECR II-2501, paragraph 85). 178. Accordingly, the Commission is not justified in requiring the Federal Republic of Germany, in Article 2 of the contested decision, to recover the investment grant referred to in paragraph 176 above. 179. Second, as regards the other aid referred to in the first paragraph of Article 1 of the contested decision, it should be recalled that the Commission rightly declared the part of the investment aid granted to the applicant in 1995, for investments in its finishing workshop (see paragraph 89 above), incompatible with the sixth code on aid to the steel industry and with the common market in coal and steel. As regards the State guarantee of DEM 12 million granted to the applicant in 1997, the applicant and the interveners did not call into question during the procedure before the Court the finding made by the Commission in that provision of the contested decision that the aid element of that guarantee is incompatible with the sixth code on aid to the steel industry and with the common market in coal and steel (see paragraph 56 above). 180. Furthermore, the applicant does not deny having been aware, at the material time, of the elements of public aid contained in the investment grant and in the State guarantee referred to in the preceding paragraph. 181. In its answers to the written questions put by the Court, the applicant did not dispute that, as may be seen from the information in the communication of 18 February 1998 (see, in particular, the table on page 4) and in the contested decision (see, in particular, the summary table at the end of point II of the preamble), those aid elements were granted to it without first being notified to the Commission. The prior notification procedure is binding generally on Member States in respect of any proposed financial intervention by the public authorities in favour of steel undertakings (see, to that effect, order of the President of the Court of Justice in Case C-399/95 R Germany v Commission [1996] ECR I-2441, paragraphs 50 and 54). Having regard to the findings made in paragraph 80 above the Freistaat Sachsen's argument set out in paragraph 171 above must be dismissed. 182. According to settled case-law, undertakings to which State aid has been granted may not entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the appropriate procedure, something which a diligent businessman ought to be able to ascertain (Preussag Stahl v Commission, cited in paragraph 167 above, paragraph 77, and Case T-55/99 CETM v Commission [2000] ECR II-3207, paragraph 121). 183. The recipient of illegal aid may, in order to challenge its repayment, plead exceptional circumstances which legitimately give rise to a legitimate expectation that the aid was lawful (CETM v Commission, cited in the preceding paragraph, paragraph 16). 184. However, it must be pointed out that in the present case the applicant does not even rely on such circumstances. 185. Nor does the applicant maintain that the Commission gave it specific assurances of such a kind as to give rise to justified hopes on its part that the aid concerned was lawful. 186. In those circumstances, the applicant cannot criticise the Commission for not having balanced the requirements of the principles of legal certainty and protection of legitimate expectations, on the one hand, and the principle of legality, on the other (see, in that regard, Preussag Stahl v Commission, cited in paragraph 167 above, paragraph 84). 187. The Commission is therefore entitled to order repayment of the aid elements referred to in paragraph 179 above. 188. As regards, third, the aid element referred to in the second paragraph of Article 1 of the contested decision, contained in the State guarantees covering the operating loans of DEM 7.2 million and DEM 4.8 million granted to the applicant at the end of 1994, it should be observed that the Commission had authorised those guarantees in its letters of 1 March 1993 and 13 January 1995 (see paragraphs 140 to 166 above). In doing so, the Commission provided specific assurances at that time which allowed the parties concerned, in particular the applicant, to have justified hopes as to the lawfulness of the aid element in those guarantees (Unifruit Hellas v Commission, cited in paragraph 168 above, paragraph 51, and Preussag Stahl v Commission, cited in paragraph 167 above, paragraph 78). 189. In those circumstances, the principle of protection of legitimate expectations prevents the Commission from ordering recovery of that aid element, whose compatibility with the common market in coal and steel it re-examined several years after approving the guarantees in question, following information from external sources (see notice of 18 February 1998, p. 3), and which it found to be incompatible with the common market in coal and steel. 190. In that regard, the Commission's argument that the State guarantees in question were granted to the applicant before it had adopted a position in respect of the aid must be rejected. In the case of the State guarantee of DEM 7.2 million granted in the context of case N 351/92 (see paragraph 160 above), it follows from the very words of the second paragraph of Article 1 of the contested decision that that guarantee was granted to the applicant at the end of 1994, or subsequent to the letter of 1 March 1993 approving that case. In any event, that argument cannot override the fact that by approving the State guarantees in question on 1 March 1993 and 13 January 1995 the Commission gave the applicant precise assurances of such a kind as to give it legitimate expectations as to the lawfulness of the aid element in those guarantees, which prevent the Commission from ordering recovery after a subsequent finding that the guarantees are incompatible with the common market. 191. It follows that the Commission was not justified in requiring the Federal Republic of Germany, in Article 2 of the contested decision, to recover the aid element of the State guarantees covering the operating loans of DEM 7.2 million and DEM 4.8 million granted to the applicant at the end of 1994. 192. In the light of all the foregoing (paragraphs 176 to 191 above), Article 2 of the contested decision must be annulled, in so far as it orders the Federal Republic of Germany to recover the part of the investment aid granted to the applicant in 1995, for investments in its cold-drawn wire rod facilities, and also of the aid element of the State guarantees covering the operating loans of DEM 7.2 million and DEM 4.8 million granted to the applicant at the end of 1994. The remainder of the plea under consideration must be dismissed. Costs 193. Under Article 87(3) of its Rules of Procedure, where each party succeeds on some and fails on other heads, the Court may order that the costs be shared or that each party bear its own costs. In the present case, although, admittedly, the applicant has been unsuccessful in part, a significant part of the form of order which it sought has been granted. 194. The Court therefore decides, on a proper assessment of the circumstances of the case, that the applicant is to bear two thirds of its costs and that the Commission, in addition to bearing its own costs, is to pay one third of the applicant's costs. 195. Under Article 87(4) of the Rules of Procedure, the interveners must pay their own costs. On those grounds, THE COURT OF FIRST INSTANCE (Third Chamber, Extended Composition) hereby: 1. Annuls the first paragraph of Article 1 of Commission Decision No 1999/580/ECSC of 11 November 1998 concerning aid granted by Germany to ESF Elbe-Stahlwerke Feralpi GmbH, Riesa, Saxony, in so far as the part of the investment grant awarded to the applicant in 1995 for investments in its cold-stretched wire rod facilities is declared incompatible with Commission Decision No 2496/96/ESC of 18 December 1996 establishing Community rules for aid to the steel industry and with the common market in coal and steel; 2. Annuls the second paragraph of Article 1 of Decision No 1999/580, in so far as it states that the aid element of the guarantees covering the operating loans of DEM 7.2 million and DEM 4.8 million granted at the end of 1994 was not authorised; 3. Annuls Article 2 of Decision No 1999/580, in so far as the Federal Republic of Germany is required to recover from the applicant the part of the investment grant awarded to the applicant in 1995 for investments in its cold-stretched wire rod facilities and the aid element of the guarantees covering the operating loans of DEM 7.2 million and DEM 4.8 million granted at the end of 1994; 4. Dismisses the remainder of the application; 5. Orders the applicant to pay two thirds of its costs; 6. Orders the Commission, in addition to bearing its own costs, to pay one third of the costs incurred by the applicant; 7. Orders the interveners to bear their own costs. Azizi Mengozzi Lenaerts Moura Ramos Jaeger Delivered in open court in Luxembourg on 5 June 2001. H. Jung J. Azizi Registrar President 1: Language of the case: German.