Opinion of the Advocate General — ECLI:EU:C:1999:346
Date: 1999-07-01
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Competition;Agreements, decisions and concerted practices;Research and technological development;Industrial policy
Procedure: Action for annulment;Appeal - successful
Origin: Denmark;Spain;Finland;United Kingdom;Greece;Italy;Netherlands;Sweden;Norway;Provisional data

summary, they are to develop Europe's audiovisual capacity through the free movement of programmes, the promotion of the European high-definition television system and a policy of encouraging creativity, production and broadcasting so as to demonstrate the richness and diversity of European culture. (10) In adopting Decision 90/685, moreover, the Council took note of the Commission communication on media policy. In that communication, the Commission stated inter alia that EFDO was carrying out a first pilot project to promote cooperation between European distributors. Transfrontier distribution of films could thereby be brought into being in an attempt to create a large internal market for film productions. EFDO also contributed to the creation of co-distribution networks by fostering cooperation between companies which were previously operating in isolation on their national territory. When account is also taken of the fourteenth and fifteenth recitals in the preamble to Decision 90/685, according to which the European audiovisual industry was to overcomefragmentation of the markets and small and medium-sized undertakings and countries in Europe with smaller audiovisual capacity were to be given special attention when adapting market structures, the outstanding significance of the creation of co-distribution networks becomes clear. 20. It follows from those considerations - as the Court of First Instance held - that an essential objective of the MEDIA programme lies in the promotion of contacts and cooperation between distributors in the various European countries. It also follows that the MEDIA programme was intended to promote new developments in the European film production market and in particular the creation of new forms of cooperation between participants in the European market. 21. That objective is also to be found in the EFDO guidelines, where they provide that at least three different distributors from at least three different EU countries or from countries with which cooperation contracts exist must agree to exhibit a film theatrically. 22. Thus one of the essential aims of the MEDIA programme may be identified as the creation of co-distribution networks by promoting cooperation between companies which previously carried on their distribution businesses in isolation on their national territory. 23. If, as in this case, it is necessary to interpret the assistance criteria and grounds for refusal in the EFDO guidelines in the light of the objectives of the MEDIA programme, the Court of First Instance correctly proceeded on the legal basis that the Commission has a discretion in so doing. That is so especially because, under Article 7(1) of Decision 90/685, the Commission is responsible for implementing the programme. Such a responsibility implies that in making its decisions the Commission must always have the objectives of the programme in mind. To that extent, it cannot be deprived of the power to choose a formulation of the programme that is suitable for implementing those objectives. 24. It follows that in carrying out the tasks assigned to them the Commission and EFDO have a discretion with regard to the interpretation of individual criteria. In order to ensure the effectiveness of the assistance programme, that discretion must relate in particular to the interpretation of the assistance criteria, the list of priorities and the grounds for refusal, so as to ensure a sensible and appropriate distribution of the limited funds available. 25. The Court of First Instance was therefore right, in paragraphs 91 and 93 of the contested judgment, to proceed on the basis that the Commission and the EFDO have a discretion in the interpretation of the assistance criteria and the grounds for refusal. (b) Substitution of reasoning 26. In this ground of appeal, the appellants argue that the Court of First Instance erred in law by substituting its own reasoning for that of the Commission in the rejection decision. This ground relates to the refusal of assistance for the film Nostradamus. The reasoning for that was that the Commission had not yet decided what the future status of UIP in Europe was to be, and that it was not possible to decide otherwise without prejudging the legal procedure concerning the exemption. Arguments of the parties 27. The appellants argue that in paragraph 100 of the contested judgment the Court of First Instance found that the assistance criteria for the distribution of the film Nostradamus were fulfilled. In that respect, the Commission testified in the proceedings before the Court of First Instance that the reason for refusal ultimately lay in the uncertain financial situation of UIP. The as yet uncompleted procedure for exemption under Article 81(3) EC did not lead directly to the refusal of the applications. The Court repeated that line of argument in paragraph 101 of the contested judgment. In contradiction therewith, however, it then stated in paragraph 119 of the contested judgment that an entity such as UIP, being a party to a proceeding under the competition rules, could not benefit directly, or indirectly through its subsidiaries, from a loan within the context of the MEDIA programme. 28. The appellants see that as an infringement by the Court of First Instance of Article 173 of the EC Treaty (now, after amendment, Article 230 EC) and Article 253 EC (ex Article 190). Under Article 173 of the EC Treaty, the function of the Court is to review the legality of acts of the Commission and set them aside in appropriate cases. It did not, however, have the power to substitute the reasoning for a decision. Under Article 253 EC, it is for the Commission to state reasons for its decisions. That power cannot be conferred on the Community judicature, since otherwise the addressees of such a decision could not be guaranteed effective legal protection. 29. The Commission acknowledges that the Court's interpretation of the disputed part of the refusal decision is not exactly the same as the interpretation put forward by the Commission in the course of the proceedings before the Court. The Commission referred to the exemption proceedings only insofar as they cast doubt on the UIP subsidiaries' ability to repay the loan, whereas the Court based its reasoning essentially on the uncertain legal status. That did not, however, constitute a substitution of the Commission's reasoning. The Court's conduct could not be regarded as an infringement of Article 173 of the EC Treaty, as the interpretation it selected was entirely possible. Nor was there any question of an infringement of the principle of the protection of legitimate expectations, since the appellants had argued against the Commission's interpretation and thus did not rely on a particular interpretation which subsequently appeared to be invalid. Assessment 30. The Court stated in paragraph 101 of the contested judgment that the main reason for the rejection of the applications was that the Commission had not yet decided what UIP's future status in Europe would be, and that no other decision was possible without prejudging the outcome of the court proceedings concerning the exemption. The Court then adds its view that it was indeed the uncertain status of UIP and its subsidiaries that lay at the root of the rejection of the loan applications. As is apparent from paragraph 105 et seq. of the contested judgment, the Court is thereby carrying out an interpretation of the Commission's reasoning of its decision. The Court begins by examining the Commission's submission before it that UIP's involvement in an exemption renewal procedure under Article 81(3) of the Treaty had not led EFDO to reject the applications, and that it was rather uncertainty as to the ability of the UIP subsidiaries to make the necessary repayments which had justified the rejection. 31. The Court interprets the answer of the Member of the Commission with responsibility for competition matters, Mr Van Miert, as meaning that, from the specific standpoint of Community competition law, the absence at that stage of any decision on UIP's exemption renewal application under Article 81(3) EC did not preclude the possible grant of the subsidy requested, given that the latter would, if granted, have no impact on the application of the competition rules. 32. For the Court, the factual starting-point in the context of this problem was as follows. At the time the refusal decision was taken, UIP was uncertain as to whether its exemption would be renewed. There was, however, no doubt that the future of UIP's subsidiaries depended on that of their parent company, which could not itself continue to exist without renewal of the exemption under Article 81(3) EC. In those circumstances, it was recognised that those subsidiaries would no longer be able to pursue their activity if the Commission did not renew UIP's exemption. (11) The Court concluded therefrom that, at that time, the situation of UIP and its subsidiaries was entirely uncertain and precarious, since an exemption was necessary in order to render permissible an agreement which could be contrary to Article 81(1) EC. 33. Following that interpretation which it had carried out, the Court could not find any error of assessment by the Commission or EFDO in refusing the assistance. 34. It should be stated at the outset that, in exercising the jurisdiction conferred upon it, the Court is required to examine the legality of the actions of the institutions. In carrying out such an examination in the present case, it inevitably has to interpret the disputed Commission decision. In so doing, as has beenestablished in point 24 of this Opinion, the Court correctly proceeded on the basis that the Commission and EFDO have in principle a discretion when deciding upon the award of assistance. That discretion has been recognised, exercised and not clearly exceeded. The question whether the Court correctly interpreted the disputed passage in the refusal decision is to be determined according to whether what was carried out was merely an improvement on the reasoning which is unobjectionable in Community law, or whether it constituted the introduction of essential new determining factors. 35. On that point, it has to be said that the Court is not strictly bound to the wording of the provisions to be interpreted, but rather has to enquire into the actual will of the decision maker. That is precisely what the Court did in this case, in that it began by enquiring into the aims of the MEDIA programme, then related the facts of the case to those aims, and finally came to the conclusion that, because of the legal uncertainties, financial problems might arise in the form of doubtful ability to repay loans. Even if the Commission laid the emphasis of its reasoning on the financial difficulties, its intention to refuse the grant of assistance on the ground of those difficulties is also discernible in the interpretation by the Court. The motive for the refusal - the fact that a decision was outstanding concerning an exemption - is found both in the Commission's interpretation and in that of the Court. Only the legal analysis of the factual findings differs. That does not imply, however, that the interpretation chosen by the Court was clearly wrong or arbitrary, or ran counter to the Commission's intention. 36. There is therefore no question of there being a substitution of reasoning in this case, since the Court merely interpreted the Commission's decision in the context of its review jurisdiction, merely improving the reasoning of that decision without adding any essential new determining factors. Since no new reasoning was thereby introduced, and the content of the decision also remained unchanged, the applicants cannot claim that there has been an infringement of their defence rights or the principle of the protection of legitimate expectations. (c) Article 81 EC, Regulation No 17/62 and the objectives of the MEDIA programme Arguments of the parties 37. In this ground of appeal, the appellants allege an error in the reasoning of the contested judgment. Even if - contrary to the appellants' view - the Court proceeded on the basis that the Commission had a discretion in taking its decision and interpreted that decision in a lawful manner, the appellants still maintain that the reasoning of the judgment is legally defective. They maintain that co-distribution networks were always capable of falling within the scope of Article 81(1) EC, with the result that until a decision on an exemption the objectives of the MEDIA programme could not be implemented. Article 81 EC in conjunction with Regulation No 17/62 do not, they submit, support the conclusion that structures which are potentially incompatible with the competition rules and do not as yetbenefit from an exemption decision are in a wholly uncertain legal position and hence cannot be supported. In the first place, the undertakings concerned are not under any duty of notification pursuant to Article 81(1) EC, and, secondly, Regulation No 17/62 provides merely for an a posteriori control. If the Court's findings were correct, applicants would be obliged, in order to obtain assistance, to obtain an exemption for co-distribution networks even before their creation. That would, however, create a link between the two procedures which inherently could not exist. Along those lines, the Member of the Commission responsible for competition, Mr Van Miert, had already stated in a letter to UIP that there was no link between the exemption procedure and the procedure concerning the grant of subsidies by EFDO. The Commission itself proceeded before the Court on that basis. 38. The reasoning of the Court forced applicants to conclude the exemption procedure in order to enjoy subsidies. In addition, the appellants emphasise that the Commission does not take action after each notification under Article 81(3) EC and that the average duration of the proceedings is between several months and more than two years. All in all, the manner of proceeding approved by the Court would jeopardise precisely the essential aim of the MEDIA programme, namely the creation of co-distribution networks. These were always capable of falling within the scope of Article 81(1) EC, with the result that until a decision on an exemption the objectives of the MEDIA programme could not be implemented. 39. The Commission begins by pointing out that agreements between undertakings which fall under Article 81(1) EC and have not been exempted under Article 81(3) EC are to be regarded as unlawful and therefore void. Undertakings entering into such agreements therefore found themselves in a legally precarious position. The Court was right to proceed on the basis that such facts might also be taken into account by the Commission in the case of a grant of funds, as in the present case. The letter from Mr Van Miert could also be interpreted along those lines. That letter suggested that the absence of a decision in the exemption proceedings did not preclude the granting of funds in principle. If, nevertheless, no funds were granted to the applicants, that would not jeopardise the objectives of the MEDIA programme, since those could also be achieved by supporting other applicants in a legally secure position. Moreover, the simple fact of cooperation in the context of the MEDIA programme did not imply an infringement of Article 81(1) EC, so that in that respect also, the Commission submits, the appellants' arguments are beside the point. The Commission concludes that this ground of appeal should also be rejected as unfounded. Assessment 40. The question to be examined here amounts to whether the Court was right in law to proceed on the basis that the Commission was entitled to refuse thesubsidies applied for on the ground that the applicants were in a legally precarious position through lack of an exemption. 41. The first thing to be said is that, in the context of the refusal decision, the Commission used its discretion. On that point, the Court correctly stated that the Commission did not exceed its discretion. That means that the Commission has not distorted or obviously misassessed any facts, or committed a misuse of powers or abuse of process. (12) Judicial review is therefore limited to the question whether the action of a Community authority reveals an obvious error or misuse of powers, or whether it clearly exceeded the bounds of its discretion. (13) 42. As already shown in paragraphs 30 to 36 of this Opinion, it was permissible in principle for the subsidies to be refused on the ground of UIP's uncertain legal status. The appellants are right to the extent that the procedures under Article 81(3) EC (exemption) and the EFDO guidelines on the granting of subsidies are independent of each other. That does not mean, however, that in taking that decision the Commission was entitled to disregard the particular provisions of the Treaty, especially concerning competition law. It would run counter to the sense and purpose of the Treaty if, by the award of subsidies, the Commission were to support structures potentially incompatible with the common market under Article 81(1) EC. According to the twenty-fourth and twenty-fifth recitals in the preamble to Decision 90/685, the MEDIA programme was also designed to create an internal market for film productions. The latter is, however, also based on undistorted competition, as protected by Article 81(1) EC. That objective would, however, not be achieved if the Commission were to award subsidies conferring advantages on undertakings which had made agreements incompatible with the common market. In taking its decision on the granting of the funds, the Commission was thus not entitled to overlook the danger arising from certain undertakings of competition in the common market being affected. 43. In that respect, the Court stated in paragraph 105 of the contested judgment that granting the loan would have been hard to reconcile with the reasonable condition that the Commission could not support structures that were potentially incompatible with the competition rules. The Court also refers to the essential aim of the MEDIA programme of encouraging the development of a powerful European audiovisual industry capable of meeting all challenges. In this case, because of limited resources, (14) granting the loans to the applicants would have had the result of denying all Community financing to other undertakings whoseactivity was clearly compatible with the competition rules and which were willing and able to create or develop a distribution network. 44. It must therefore be held that the reasoning of the Court in the contested judgment does not contain any infringement of Article 81 EC and Regulation No 17/62. The Court correctly recognised that, in granting subsidies for the promotion of films, the Commission is required to pay particular attention to the competition provisions of the Treaty. It was thus lawful for the Commission, in the discretionary determination it undertook in this case, to refuse the subsidies. The third ground of appeal should therefore also be dismissed. 45. The appeal should therefore be dismissed as unfounded in its entirety. Costs 46. Under Article 69(2) of the Rules of Procedure, which is applicable to the procedure on appeal pursuant to Article 118, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. The Commission has pleaded that the appellants should be ordered to pay the costs. Since the latter have been unsuccessful, they must be ordered to pay the costs. E - Result 47. On the basis of the above considerations, I propose that the Court should rule as follows: 1. The appeal is dismissed. 2. The appellants are ordered to pay the costs of the proceedings. 1: Original language: German. 2: Joined Cases T-369/94 and T-85/95 DIR International Film and Others v Commission [1998] ECR II-357. 3: In the case of the fourth appellant it was uncertain at the time the refusal decision was made whether the hitherto existing exemption would be renewed. It was clear, however, that the future of the subsidiaries of UIP - the fifth to tenth appellants - depended on that of their parent company, which could not continue to exist without a renewal of the exemption under Article 85(3) of the EC Treaty. In such circumstances, it was obvious that those subsidiaries would not be in a position to continue their activity if the Commission did not renew UIP's exemption. 4: The original document in English refers to the 'Committee. Presumably the reference is to the Selection Committee referred to in paragraph 8 of the judgment. 5: The original document in English refers to the 'Committee. Presumably the reference is to the Selection Committee referred to in paragraph 8 of the judgment. 6: The pleas in law were that, by its actions, the Commission infringed the selection criteria laid down in the EFDO guidelines, that the contested decision was incompatible with the philosophy and aims of the MEDIA programme, and that the reasons for it were insufficiently stated. 7: Council Regulation No 17 of 6 February 1962: First Regulation implementing Articles 85 and 86 of the Treaty (OJ, English Special Edition 1959-1962), p. 87). 8: Cited in point 3 of this Opinion, quoting paragraph 10 of the judgment. 9: See point 3 of this Opinion, citing paragraph 2 of the judgment. 10: See the first recital in the preamble to Decision 90/685. 11: Paragraph 103 of the contested judgment. 12: On the concept of an error of assessment, see Case C-225/91 Matra v Commission [1993] ECR I-3203, paragraph 25. 13: Case C-120/97 Upjohn v Licensing Authority [1999] ECR I-0000, paragraph 34 and references therein. 14: See point 3 of this Opinion, citing paragraph 8 of the judgment.