Judgment — ECLI:EU:T:1998:207
Date: 1998-09-15
Language of the case: Italian
Court formation: Third Chamber, Extended Composition
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: State aids;Competition
Concepts: Statement of reasons;General;Formal investigation procedure;Legal certainty;Private investor/private creditor test;Principle of the protection of legitimate expectations;Beneficiaries of the aid to be recovered;Aid to undertakings in difficulty
Procedure: Action for annulment - unfounded
Origin: Italy

Summary of the J u d g m e n t 
1. Actions for annulment — Actionable measures — Measures producing legal effects — Deci­
sion initiating the inter partes procedure for reviewing the compatibility of aid with the com­
mon market 
(EC Treaty, Arts 93(2) and 173) 
2. State aid — Investigation by the Commission — Decision initiating the inter partes procedure 
for reviewing the compatibility of aid with the common market — Notice to the parties con­
cerned — Purpose — Commission's obligations 
(EC Treaty, Art. 93(2)) 
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SUMMARY — JOINED CASES T-126/96 AND T-127/96 
3. Acts of the institutions — Statement of reasons — Obligation — Scope — Decisions 
(EC Treaty, Art. 190) 
4. State aid — Recovery of illegal aid — Aid granted in breach of the procedure under Article 
93 of the Treaty — Limitation period — Legitimate expectations — Legal certainty — Excep­
tional circumstances — None 
(EC Treaty, Art. 93) 
5. State aid — Definition — Financial aid granted by a Member State to an undertaking — 
Criterion for assessment — Whether reasonable conduct for a private investor pursuing a 
medium or long term policy — Not reasonable — Commission's discretion —Judicial review 
— Limits 
(EC Treaty, Art. 92(1)) 
6. State aid — Prohibition — Derogations — Aid eligible for the derogation provided for by 
Article 92(3)(c) of the Treaty — Aid to an undertaking in difficulty — No restructuring 
programme designed to reduce or redirect activities — Regional aid — Reconciling objectives 
of free competition and Community solidarity — Commission's discretion 
(EC Treaty, Art. 92(3)(a) and (c)) 
1. A Commission decision initiating the 
intra partes procedure under Article 93(2) 
of the Treaty for review of the compat­
ibility of State aid with the common mar­
ket has legal effects if it involves the des­
ignation of the aid as existing or new and 
a choice of the applicable rules of proce­
dure. It thus constitutes an actionable 
measure within the meaning of Article 
173 of the Treaty. 
2. Under Article 93(2) of the Treaty, the 
Commission makes a decision on State 
aid only after giving notice to the parties 
concerned to submit their comments. 
Accordingly, the sole aim of the notice 
of initiation is to obtain from persons 
concerned all information required for 
the guidance of the Commission with 
regard to its future action. 
The Commission cannot, therefore, be 
criticised for generally calling in question, 
in that notice of initiation, the disputed 
aid measures and for not specifying the 
exact amount of aid before the final deci­
sion, when, in the absence of prior notifi­
cation of the aid and in the absence of 
any restructuring plan, the Commission 
could not, at the stage when the proce­
dure was initiated, have a clear view of 
the aid measures under consideration, but 
none the less gave a sufficiently informa­
tive description of the aid in question and 
thus duly put those concerned on notice 
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BFM AND EFIM ν COMMISSION 
that they should submit their observations 
in good time. 
3. The Community institutions' obligation 
under Article 190 of the Treaty to state 
the reasons on which a decision is based 
is intended to enable the Community 
judicature to exercise its power to review 
the legality of the decision and the person 
concerned to know the reasons for the 
measure adopted so that he can defend 
his rights and ascertain whether or not 
the decision is well founded. 
4. In the absence of any limitation period 
established by the Community legislature 
as regards action by the Commission in 
respect of non-notified State aid, a benefi­
ciary of aid cannot, in contesting a deci­
sion requiring the recovery of illegal aid, 
invoke the principle of legal certainty 
whereby limitation periods must in prin­
ciple be fixed in advance. 
Moreover, save in exceptional circum­
stances, a recipient cannot have a legiti­
mate expectation that aid was properly 
granted unless it was granted in accor­
dance with the provisions of Article 93 of 
the Treaty. Similarly, a Member State may 
not benefit in any way from its failure to 
comply with its obligation to notify 
under Article 93(3) of the Treaty. 
5. In order to determine whether investment 
by the public authorities in the capital of 
an undertaking, in whatever form, consti­
tutes State aid within the meaning of 
Article 92 of the Treaty, it is necessary to 
consider whether in similar circumstances 
a private investor might have provided 
injections of capital of such an amount. 
In that regard, although the conduct of a 
private investor with which the inter­
vention of a public investor pursuing eco­
nomic policy aims must be compared 
need not be the conduct of an ordinary 
investor laying out capital with a view 
to realising a profit in the relatively 
short term, it must at least be the conduct 
of a private holding company or a private 
group of undertakings pursuing a 
structural policy — whether general or 
sectoral — and guided by prospects of 
profitability in the longer term. 
Thus, a private shareholder may reason­
ably subscribe the capital necessary to 
secure the survival of an undertaking 
which is experiencing temporary difficul­
ties but is capable of becoming profitable 
again, possibly after a reorganisation. 
Similarly, a parent company may also, for 
a limited period, bear the losses of one of 
its subsidiaries in order to enable the lat­
ter to close down its operations under the 
best possible conditions. However, when 
injections of capital by a public investor 
disregard any prospect of profitability, 
even in the long term, such provision of 
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SUMMARY — JOINED CASES T-126/96 AND T-127/96 
capital must be regarded as aid within the 
meaning of Article 92 of the Treaty. 
Moreover, the Commission's consider­
ation of the question whether a particular 
measure may be regarded as aid within 
the meaning of Article 92(1) of the Treaty 
where the State has allegedly not acted 'as 
an ordinary economic agent' involves 
a complex economic appraisal. The 
Commission has a wide discretion when 
adopting a measure involving such 
appraisals and judicial review must 
accordingly be restricted to determining 
whether the Commission complied with 
the rules governing procedure and the 
statement of reasons, whether the facts on 
which the contested finding was based are 
accurate and whether there was any 
manifest error of assessment or misuse of 
powers. In particular, the Court is not 
entitled to substitute its own economic 
assessment for that of the author of the 
decision. 
When exercising its wide discretionary 
powers the Commission is not obliged to 
mitigate the negative conclusion which it 
reaches by taking into account a few signs 
and prospects of an improvement which 
could be regarded as insignificant, or 
even artificially created, in comparison 
with the general financial and economic 
situation of the recipient undertaking. 
In the absence of a restructuring plan 
intended to make an undertaking prof­
itable, contributions made by a State to 
the capital of an undertaking whose 
overall economic and financial situation is 
precarious constitute aid within the 
meaning of Article 92(1) of the Treaty. 
6. In order to be declared compatible with 
Article 92(3)(c) of the Treaty, aid to 
undertakings in difficulty must be linked 
with a restructuring programme designed 
to reduce or redirect their activities. Con­
sequently, State aid granted to an under­
taking which is used to offset losses and 
does not form part of a satisfactory 
restructuring programme is of such a 
nature as to preclude the application to it 
of the derogation from the prohibition on 
aid laid down in that provision. 
Article 92(3)(a) and (c) of the Treaty 
introduces two derogations from free 
competition in favour of regional aid 
based on the aim of Community soli­
darity, a fundamental objective of the 
Treaty, as may be seen from the pre­
amble. In exercising its discretion, the 
Commission has to ensure that the 
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BFM AND EFIM ν COMMISSION 
aims of free competition and Commu­
nity solidarity are reconciled, whilst 
complying with the principle of propor­
tionality. In this context, the Commission 
is under a duty to evaluate the sectoral 
effects of the planned regional aid, even 
where regions likely to fall within 
paragraph 3(a) are concerned, in order to 
avoid a situation in which, as a result of 
an aid measure, a sectoral problem is 
created at Community level which is 
more serious than the initial regional 
problem. Thus, the criterion of viability is 
relevant even in this analysis. Fur­
thermore, the Court has stressed that the 
difference in wording between Article 
92(3)(a) and Article 92(3)(c) cannot lead 
to the conclusion that the Commission 
should take no account of the Commu­
nity interest when applying Article 
92(3)(a), and that it must confine itself to 
verifying the regional specificity of the 
measures involved without assessing their 
impact on the relevant market or markets 
in the Community as a whole. 
Accordingly, the Commission has not 
committed a manifest error in refusing to 
apply the derogation in question to an 
undertaking which, although established 
in an area eligible for regional aid under 
Article 92(3)(a) of the Treaty, is obviously 
not viable and is operating in a sector in 
which there is overcapacity. Where such 
an undertaking receiving illegal aid is 
only able to remain on the market 
because of that aid, such aid cannot be 
regarded as being to promote the 
economic development of the region. 
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