Judgment — ECLI:EU:T:1998:199
Date: 1998-09-15
Language of the case: English
Court formation: Second Chamber, Extended Composition
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: State aids;Competition
Concepts: Applications by natural or legal persons;Commission decision following a preliminary review or proceeding to the formal investigation procedure;Limitation periods
Procedure: Action for annulment - successful;Action for annulment - inadmissible
Origin: United Kingdom

Summary of the parties' arguments 94. So far as regards the third capital injection, the applicant submits that (a) theCommission infringed Article 92(1) of the Treaty by disregarding the links betweenthe three injections, in view of which the third injection could not be assessed inisolation; (b) in any event, the Commission infringed Article 92(1) of the Treatyinasmuch as a private investor operating in a market economy would not haveundertaken the third injection; and (c) accordingly, the Commission infringed theapplicant's rights as a party concerned by failing to open the procedure providedfor in Article 93(2) of the Treaty with regard to the third capital injection. The arguments adduced in the written procedure 95. As regards, first, the links between the first two capital injections and the third, theapplicant submits that the third capital injection must be regarded as forming partof a single process for the restructuring of EniChem, in which it is inextricablylinked to the first two capital injections. In those circumstances, it is artificial forthe Commission to argue that the first two capital injections constitute State aid,but that the third does not. In reality, there is a single State aid ofLIT 4 794 billion. 96. The applicant primarily relies on the fact that the Commission was unable toapprove the first two capital injections pursuant to Article 92(3)(c) of the Treatywithout a restructuring plan enabling the undertaking to recover long-term viabilitywithin a reasonable period having been drawn up (see Paragraph 3.2.2.(i) of theCommunity guidelines on State aid for rescuing and restructuring firms in difficulty,adopted on 27 July 1994 (OJ 1994 C 368, p. 12, hereinafter 'the Guidelines; andJoined Cases C-278/92, C-279/92 and C-280/92 Spain v Commission ('Hytasa)[1994] ECR I-4103). In the present case, there was only one restructuring plan -that submitted to the Commission in response to the letter of formal notice of 16March 1994 - the key element of which was the third capital injection. The factthat the first two capital injections are related to the third is also evident from theItalian Government's letter of 6 June 1994 to the Commission. 97. Secondly, even assuming that the third injection could be evaluated in isolation, theapplicant argues that, in its assessment of that injection, the Commission misappliedthe very strict criterion of the private investor operating in a market economy (CaseC-303/88 Italy v Commission ('ENI-Lanerossi) [1991] ECR I-1433, Case C-305/89Italy v Commission ('Alfa Romeo) [1991] ECR I-1603 and Hytasa, cited above). 98. According to the applicant, no such investor would have contributedLIT 3 000 billion to the restructuring of EniChem. In particular, no privateinvestor would have financed EniChem's restructuring plan without first insistingon precise objectives being met within strict deadlines. He would not haveproceeded with the third injection without first considering the possibility of puttingEniChem into liquidation; he would never have contemplated an investment wherethe present value of future cash flows just equalled the amount invested, as statedin the contested decision; and, in any case, he would not have taken his decisionon the basis of the less pessimistic of the two sets of financial forecasts, which,according to the Commission's defence, was the approach adopted in the presentcase. 99. Thirdly, the applicant argues that, by not opening the procedure provided for inArticle 93(2) of the Treaty, in respect of the third capital injection, the Commissionis in default of its procedural obligations in that it deprived the applicant of itsrights under that provision (Cook, cited above, paragraph 23). The Commissionshould either have extended the procedure already initiated to cover the thirdcapital injection, or it should have opened a new procedure, so as to be whollyconversant with all the facts of the case before taking its decision (see Case 84/82Germany v Commission [1984] ECR 1451, paragraph 13, and Cook, cited above,paragraph 29). 100. The United Kingdom adds to this that the Commission should have followed theviews of the Italian authorities, according to whom there was a necessary andindissoluble link between the three injections. Furthermore, the Italian authoritieswere constrained to present the three injections as a whole because the necessarycondition in law for approval of restructuring aid is that it must restore viability tothe recipient, as the Commission itself emphasised in Paragraph 3.2.2.(i) of theGuidelines. 101. The Commission emphasises, first of all, the limits applying to review by theCommunity judicature of decisions adopted by the Commission in the exercise ofits preventive review of State aid, and the necessarily broad discretion enjoyed bythe Commission when making economic and social appraisals in a Communitycontext (see, inter alia, Philip Morris Holland, cited above, paragraph 24, Matra,cited above, paragraph 24, and Hytasa, cited above, paragraph 51). 102. In the Commission's view, there is no link between the first two injections and thethird such that all three should have been considered together. The first twoinjections were evaluated quite separately from the third, since their purpose wasto cover losses incurred from past closures and their effect was in no waydependent on that injection. 103. In particular, the Commission points out that in applying the private marketeconomy investor test to the first two injections, account had to be taken of thecircumstances at the time when they were carried out (1992 and 1993), whereas thethird injection had to be appraised in terms of the situation at the time of thecontested decision (1994). The Commission contends that no return was to bereceived on the first two injections, since they were intended to compensate pastlosses, including those arising from certain restructuring measures which were notundertaken within the framework of a detailed restructuring plan. On the otherhand, the proposal for an injection of LIT 3 000 billion was based on a detailedand realistic restructuring plan for 1994 to 1997, with a view to restoring theundertaking to a viable profit level as from 1997. It does not follow from the factthat the restructuring plan advocated measures similar to those previously adoptedthat the first two injections are so closely associated with the third that they couldnot be evaluated without extending the procedure to that injection. 104. The Commission took the view that the first two capital injections and theconcomitant restructuring measures had restored the viability of EniChem up to alevel where private capital could be attracted on the capital market without,however, raising the company to such a level of profitability that long-term returnswould be provided on those injections. For a restructuring aid to be compatiblewith the common market, it is sufficient that it restores the viability of the recipientto a level where the latter can obtain from the capital market the private capitalnecessary for a return to profitability, if need be on the basis of a more detailedrestructuring plan. This was precisely what the first two capital injections achieved,given that on the third injection of LIT 3 000 billion a normal market rate of returnwas to be expected. 105. According to the Commission, although no detailed plan for the restructuring ofEniChem existed at the time of the first two capital injections, it was aware that anoverall plan for restructuring the group was being formulated in the context of alarge-scale operation to restructure Italian public undertakings, discussed with theCommission in the context of the EFIM case (OJ 1993 C 349, p. 2), which led tothe Andreatta-Van Miert Agreement. A general explanation of EniChem'srestructuring and privatisation plan was given in two official documents publishedby the Italian Treasury in November 1992 and April 1993. It became clear in thecourse of the Article 93(2) procedure that the injections were used to financerestructuring measures aimed at restoring profitability along the general linesdescribed by the Italian Government in those documents. Given that thosemeasures were following a coherent direction, which was finally expressed in detailin the restructuring plan submitted to the Commission in 1994, and that formulationof a restructuring plan is not a static exercise, the Commission reached theconclusion that the measures were 'bound to a restructuring programme designedto reduce or redirect EniChem's activities, within the meaning of the Hytasajudgment, cited above. 106. In the Commission's view, the return to 'viability following a restructuring aidmust be understood in the sense explained in paragraph 3.2.2.(i) of its Guidelines,that is to say, the undertaking must be capable 'of covering all its costs, includingdepreciation and financial charges, and generating a minimum return on capital. That was EniChem's position after the first two injections: it could survive on themarket with no need for any further aid. 107. Secondly, regarding the private investor test, the Commission makes thepreliminary point that, at paragraph 21 of the ENI-Lanerossi judgment, cited above,the Court of Justice acknowledged that in applying that test, account may be takenof the special situation of a holding company. However, the Commission states inits pleadings (for example, in its rejoinder, paragraph D.8) that it did not need torely on ENI-Lanerossi, because it was entirely satisfied as to the profitability of thethird capital injection. 108. The restructuring plan submitted under cover of the Italian Government's letter of18 May 1994 contained exhaustive information on all points, including financialforecasts presented in the form of income statements, balance sheets and cash-flowstatements for the years 1993-98. A second, less pessimistic set of financialforecasts was also projected, based on a higher level of plastic materials prices anda slightly increased level of polyethylene production. 109. The Commission maintains that it checked the coherence, reasonableness andfeasibility of the restructuring plan. It concluded that the two financial forecastsput forward in the plan were realistic and prudent. The Commission thenevaluated the figures given in the financial forecasts in order to ascertain whetherthe return on the capital injection of LIT 3 000 billion was sufficient to make suchan investment attractive to a private investor operating in market economyconditions. 110. At the time of the third capital injection, ENI was faced with the choice of eitherrecapitalising and restructuring, or taking no action and thereby automaticallyallowing EniChem to go bankrupt. Although there was no immediate risk thenthat, without an injection of LIT 3 000 billion and the consequent restructuring,EniChem would be declared bankrupt, the losses normally recorded by EniChemat that time would have absorbed its equity capital in the space of one or twoyears, giving rise to the need for further capital, failing which the company wouldhave had to be put into liquidation. 111. The evaluation of the additional cash flows due to the choice of restructuringtherefore had to start from the comparison between EniChem's financial evolutionunder the liquidation alternative and the financial forecasts under the restructuringalternative. The Commission undertook just such a comparison. 112. At the time when ENI decided to invest more capital in its subsidiary, rather thanput it into liquidation, EniChem's equity capital stood at LIT 1 950 billion. Thatfigure was arrived at by deducting from LIT 2 952 billion - the estimated equity atthe end of 1993 - LIT 1 001 billion, the January-July proportion (i.e. 7/12) of thetotal losses forecast for 1994. The resulting figure of LIT 1 950 billion thereforerepresented ENI's existing investment in EniChem. Although it is difficult to arriveat a reliable estimate, it is not unreasonable to assume that the final cost ofliquidating EniChem would have been higher than this amount. 113. In evaluating the financial effects of the restructuring option, it therefore seemedprudent to assume that ENI's existing investment in EniChem (LIT 1 950 billion)was already nil, because liquidation would certainly have caused the total loss of theexisting level of equity as well as additional losses arising from the cost ofliquidation. 114. The Commission therefore decided that the liquidation option would havecompletely erased ENI's existing investment in its subsidiary, EniChem. Thus theanalysis of the return on the investment of LIT 3 000 billion was made on thetotality of the figures of the financial plan provided by EniChem. In this way, theevaluation took into account all positive and negative flows arising from theimplementation of the restructuring plan, because they were additional to thealternative solution of liquidation. 115. For the purposes of the private investor test, the capital injection ofLIT 3 000 billion therefore represented the initial investment. Since the investorwas EniChem's 100% shareholder, the return on the third capital injection wasexpressed by the flow of net profits which EniChem would provide to ENI. 116. Taking the less pessimistic financial forecast of EniChem's financial situation, theflow of net profits that EniChem would provide to ENI over a period of 10 yearswas discounted at an annual rate of 12%. On that basis, the present value offuture cash flows just equalled the investment of LIT 3 000 billion, as stated in thedecision. The investment would therefore have been acceptable to a prudentinvestor operating in normal market conditions and accordingly did not constituteState aid. 117. Lastly, as regards the question whether the Commission should have opened theprocedure provided for in Article 93(2) of the Treaty, the Commissionacknowledges that if, after a preliminary examination of the third injection, it hadentertained any doubts as to whether State aid was involved, it would have beenunder a duty to open a formal investigation or to ask the Italian Government forfurther information (see Case 84/82 Germany v Commission, cited above, and CaseC-301/87 France v Commission ('Boussac) [1990] ECR I-307, and Joined CasesC-324/90 and C-342/90 Germany and Pleuger Worthington v Commission [1994] ECRI-1173). Since the Commission had no such doubts, it was neither obliged norentitled to open that procedure. 118. The Italian Republic, ENI and EniChem support the Commission's arguments. Moreover, the Italian Republic emphasises that the re-formation of the EnteNazionale Idrocarburi as a limited company took place in 1992 as part of a large-scale privatisation programme, under which the use of public undertakings as aninstrument of general policy was permanently abandoned. Accordingly, since 11July 1992, ENI had been subject to the provisions of the Italian Civil Codeapplicable to limited companies, and all State powers to issue directives to ENI hadbeen abolished. The company's operations were to be governed by the criteria ofeconomic efficiency and profitability. No capital injection was made by the Stateto the Ente Nazionale Idrocarburi before it was re-formed as a limited companyor, thereafter, to ENI. The management decisions taken by ENI were attributableto the company alone and not to the State, which bears the risks of a shareholderand does not act in the exercise of public authority. 119. According to the Italian Government, the third capital injection was part of a wide-ranging restructuring plan approved by ENI's Board of Directors on 27 January1994, providing in particular for a reduction of overcapacity, to complete the policyof rationalising production and reducing fixed costs, for the re-focusing of activitieson the sectors most closely linked to the shareholder's core business, for aconsiderable reduction of indebtedness and financial recovery, and for arrival atbreak-even point in 1997, and then profits permitting a proper return to theshareholders. That plan was partially financed by EniChem's own funds accruingfrom its reduction of non-strategic activities and was capable of restoring EniChemto a high level of competitiveness in a relatively short space of time with positiveeffects both direct (profits) and indirect (synergies) for shareholders. 120. ENI and EniChem contend that the Commission could have concluded that noneof the capital injections were granted 'through State resources, since ENI used itsown funds without causing a loss of return on, or loss of value of, the Treasury'sinvestment in it. But for those three injections, ENI risked losing its substantialinvestment in EniChem, as well as synergies between EniChem and ENI's activitiesin the energy sector, and the Italian Government's privatisation scheme for ENIwould have been jeopardised. Besides, by that time ENI was no longer a publicentity, nor was it subject to the directives of the Italian Government. Furthermore,the first two capital injections were no more than the implementation of a jointdecision taken by the Ente Nazionale Idrocarburi and Montedison SpA in May1989 to increase Enimont's capital by LIT 2 000 billion to the extent that thecompany's profits did not reach that level during the period from 1989 to 1991. 121. So far as concerns the evaluation of the third injection from the point of view ofa market economy investor, ENI and EniChem emphasise that the Commission'spolicy - in accordance with the judgments in ENI-Lanerossi and Alfa Romeo, citedabove, and with Article 222 of the Treaty - is to take account of the wide marginof appreciation enjoyed by investors and the long-term policy considerations ofundertakings controlling a large group (see points 27 to 31 of the Commission'sCommunication to the Member States of 28 July 1993 on the application ofArticles 92 and 93 of the EEC Treaty; see also Article 5 of Commission Directive80/723/EEC to public undertakings in the manufacturing sector, OJ 1993 C 307, p.3, hereinafter 'the Communication on public undertakings). In the present case,the Commission was able to establish that, independently of those considerations,an adequate return was to be expected. Considering the normal life of theinvestment to be 10 years, the Commission discounted the expected future resultsat a rate of 12%. However, that rate is considerably higher than both ENI's costof capital (the weighted average interest rate payable on its long-term debt was8.5% in 1994) and the chemical industry's average return on investment (9.3% in1992). If a lower discount rate had been used - which, according to theinterveners, would have been justifiable - the present value of future cash flowswould have exceeded the initial investment. 122. ENI and EniChem state that it was reasonable to estimate the value of ENI'sinvestment in EniChem before the third injection at LIT 1 950 billion. However,under the liquidation alternative, ENI would have had to reimburse EniChem'sdebt (LIT 8 676 billion), because of the repercussions that default by EniChemwould have had on the ENI Group as a whole. ENI also took into account - inaccordance with point 36 of the Communication on public undertakings, citedabove - the impact that EniChem's liquidation would have on the ENI Group,including the loss of synergies, damage to the Group's reputation and credit rating,and the derailing of ENI's privatisation. The interveners add that the activitiesactually disposed of by EniChem were sold at more favourable prices than if thesale had taken place under threat of liquidation (see point 20 of theCommunication on public undertakings, cited above). Lastly, ENI and EniChemcontend that the 1994-97 restructuring plan was manifestly successful, and set outEniChem's financial statistics in detail so as to demonstrate that the resultsexpected for 1997 had already been achieved in 1995. The arguments adduced after the end of the written procedure 123. By way of measures of organisation of procedure, the Court of First Instance askedthe Commission, by letter of 21 May 1997, to produce the calculations in its fileconcerning the question whether the third capital injection of LIT 3 000 billionwould have been acceptable for a private market economy investor and, inparticular, those relating to the 'net present value of future cash flows fromEniChem, according to the two sets of forecasts (one less pessimistic than theother) referred to in its defence and rejoinder. The arguments put forward by theparties after the end of the written procedure concern solely the calculationsproduced by the Commission. - The Commission's observations of 30 June 1997 124. Annexed to its observations of 30 June 1997, the Commission produced TablesQI/1, QI/2, QI/3 and QI/4, stating that these were the documents requested by theCourt. 125. According to those observations, Table QI/1 - dated 1 July 1994 - is the calculationmade by the Commission of the return on the capital injection of LIT 3 000 billion. 'The net present value of future cash flows from EniChem is given in line 5 ofthat table (entitled 'Cumulated equity value) according to which, in the year 2005,EniChem's cumulated equity value was to be LIT 2 966 billion. 126. Again according to those observations, Table QI/2 sets out the calculation madeby the Commission of ENI's cost of capital. Table QI/3 contains its calculation ofthe average return on equity of the major chemical companies, used as a basis forcomparison. Table QI/4 contains the forecasts of developments in the business andfinancial situation, which served as a basis for the calculation of the return on thecapital injection. This is a document entitled 'Analisi di Sensitivitá (IpotesiMigliorative di Scenario), prepared on 13 April 1994 and provided by the ItalianGovernment during the administrative procedure. - The hearing on 23 September 1997 127. At the hearing on 23 September 1997 the applicant and the United Kingdom madea number of criticisms of the calculations set out in Table QI/1. In particular, theymaintained that the Commission should have based its calculations on future cashflows in the strict sense, not on the flow of net profits. The initial investment ofLIT 3 000 billion should have been entered in line 4 ('Cumulated discountedflow) as a negative value: the net present value of future cash flows would thenhave been, not minus LIT 34 billion, but minus LIT 3 034 billion. Line 5, in whichthe cumulated discounted profits are added to the initial investment ofLIT 3 000 billion, is vitiated by a fundamental error in that, as all the parties agree,the sum of LIT 3 000 billion was in fact paid to EniChem's creditors for thepurpose of reducing its debts and improving its net results; consequently, that sumwould not have been available at the end of the investment's lifetime, in 2005. Furthermore, line 5 is no more than a self-fulfilling prophecy: if the Commission'smethodology is adopted, EniChem's residual value will always equal the initialinjection, whether the amount contributed is LIT 2 000 billion orLIT 10 000 billion. 128. The Commission replies, in particular, that line 4 of Table QI/1 shows how greatthe flow of results would have to be for the investor to recover his initial outlay atthe end of the investment's normal lifetime, when a discount rate of 12% is appliedto the flow. Line 5 then shows that the level of results is such that the investorrecovers his initial investment at the end of that period (LIT 2 966 billion), havingmeanwhile enjoyed a 12% return. 129. In reply to questions put by the Court of First Instance at the hearing, Mr Spagnolli- the DG IV official in charge of the file - confirmed that he had made asubstantial contribution to the preparation of Table QI/1. He explained that,because EniChem's equity stood at LIT 1 950 billion at the time of the thirdinjection, the results given in Table QI/1 derived from the LIT 4 950 billion ofequity available after that injection was made. However, before deciding whetheror not to contribute LIT 3 000 billion to EniChem, a shareholder would haveneeded to know how much he would obtain by way of a return on that particularinjection. It was therefore necessary to determine what the third injection wouldadd to the situation of the undertaking. The answer is that the third injection madeit possible for EniChem to avoid bankruptcy, which would have wiped out itsexisting equity of LIT 1 950 billion. That is why the calculations set out in TableQI/1 were made without taking the pre-existing equity into account. 130. Mr Spagnolli added that if the applicant's approach is adopted - that is to say, ifthe third injection is entered in line 4 of Table QI/1 as minus LIT 3 000 billion inJuly 1994 - that minus figure would have to be counterbalanced by adding theundertaking's residual value as a positive figure in 2005. In fact, line 5 of TableQI/1 shows that, during the period between July 1994 and 2005, EniChem's equityrose and fell according to its results. Nevertheless, initially the equity stood atLIT 3 000 billion and in 2005 it was still LIT 3 000 billion, a discount rate of 12%having been applied to the flow of results. 131. ENI and Enichem contend, in particular, that the rigorous nature of theCommission's approach is evident from the fact that, in Table QI/1, it takes intoaccount Enichem's estimated losses for the years 1994 to 1996, after quoting thesame losses as a reason for leaving EniChem's equity in July 1994 out of thecalculation. According to ENI and EniChem, this is a case of double counting, inthat EniChem's losses have been counted twice. 132. ENI and EniChem add that, in order to show that there are several methods ofmaking these calculations, they have themselves computed the cash flows to beexpected from the third capital injection. According to their calculations, thepresent value of the future cash flows is LIT 7 195 billion. - The Commission's letters of 26 September and 16 October 1997 133. By letter of 26 September 1997 the Commission informed the Court of FirstInstance that Table QI/1, albeit presented as being part of its file, had not actuallyexisted at the time when the contested decision was adopted. In that letter theCommission states that, although Table QI/1 bears the date of 1 July 1994, it is areconstruction prepared by Mr Spagnolli, the official responsible for the file, ofcalculations which he had made at the material time. The Commission admits thatit cannot be certain that the calculations set out in Table QI/1 are precisely thosecarried out prior to the adoption of the contested decision, but maintains thatcalculations of the same type were used as a basis for the measure at issue. Theoriginal calculations had been carried out on a computer which had meanwhilebeen replaced, owing to the State Aid Directorate changing its computer system,and no paper copy had been found. Those facts can be attested to by Mr Spagnolliand Mr Feltkamp, his head of division at the time, both of whom were present atthe hearing on 23 September 1997. 134. By letter of 16 October 1997 the Commission confirmed to the Court of FirstInstance that Tables QI/2 and QI/4 were copies of the original documents in its fileat the time when the contested decision was adopted. According to theCommission, Table QI/3 is not the original version which was in the case file at thematerial time. However, the Commission provided the Court of First Instance witha document which, it maintains, was the original version of Table QI/3, althoughTable QI/3 (provided to the Court on 30 June 1997) had been recreated oncomputer - for better comprehension - after the adoption of the contesteddecision. 135. In the same letter, the Commission adds that those facts can be attested byMr Spagnolli. Mr Feltkamp, his head of division, could confirm that tables of thesame type as Tables QI/2, QI/3 and QI/4 were used during the preparation of thecontested decision, although he does not recall the exact content of the tables used. Another official in DG IV, Mr Owen, could attest to being in Mr Spagnolli's officein July 1994 when he had prepared a spreadsheet to ascertain the present value ofthe cash flows relating to the third capital injection. The results indicated thatState aid was not involved, but Mr Owen does not remember the figures in detail. - The written question from the Court of First Instance of 13 October 1997 and theCommission's observations of 11 November 1997 136. By letter of 13 October 1997 the Court of First Instance asked the Commission tostate whether it continued to rely on the calculations set out in Table QI/1 insupport of the assertion in the contested decision that the third injection ofLIT 3 000 billion would have been undertaken by a private market economyinvestor, notably because 'the net present value of future cash flows just equals thisinvestment of LIT 3 000 billion. If not, the Commission was asked to specify, onthe basis of the reasoning in the contested decision and in its written pleadings,what calculations or other elements were relied on in support of that conclusion. 137. Annexed to its observations of 11 November 1997 the Commission produced twotables (Table A and Table B), explaining that it continued to rely on thecalculations set out in Table QI/1, but as amended in Table A. Mr Spagnolli, MrFeltkamp and Mr Owen could testify to the fact that Mr Spagnolli had created ona computer a spreadsheet of the type of Table QI/1, which had been used toascertain the present value of the results of the third capital injection, and whichshowed that no State aid was involved. 138. Table A is an attempt, based on the recollections of those involved, to recreatemore fully the calculations made at the time of the contested decision. Essentially,the new Table A introduces two factors which, according to the Commission,featured in the calculations made at the material time and reconstructed on thebasis of the recollections of the persons involved. 139. First, Enichem's equity, which stood at LIT 1 950 billion on 31 July 1994, was usedto offset EniChem's losses during the first three years of the plan. The sum ofLIT 1 950 billion remained in EniChem's accounts and, once the option of makingthe third capital injection had been chosen, had to be taken into account in thecalculation. 140. Secondly, EniChem's residual value in 2005 was included in the calculation at adiscounted value of LIT 1 531 billion. That value is based on the fact thatEniChem would continue to operate beyond the forecast period. According to theCommission, while it is certain that, in accordance with the Commission's consistentpractice in matters concerning State aid, a residual value was calculated at the time,Mr Feltkamp and Mr Spagnolli can no longer recall the precise calculation madeat the time of the contested decision. However, there is a simple but well-established method which it would have been usual to employ, which involvesmultiplying the gross operating margin (operating revenues minus operating costs)by a factor which varies according to the specific situation of the undertakingconcerned and the industrial sector. In the chemical sector, the normal range isbetween four and six, and in Table A a factor of three is used. 141. The elements added in Table A were not expressly set out in Table QI/1 but couldeasily be inferred from the figures contained in that table and in the restructuringplan (Table QI/4). The double counting of the losses and the disappearance of theequity may be ascribed to the negligence of the official responsible for preparingTable QI/1 and were not discovered until after the hearing. The three witnessesconfirm that this mistake was not made at the time of drafting the contesteddecision. Nor is there any double counting in the defence. 142. More generally, the Commission points out that its calculation was based onEniChem's net results (after tax). Table B provides the Court of First Instancewith a calculation made in accordance with the DCF (discounted cash flow) methodsuggested by the applicant, which shows future cash flows to be LIT 2 000 billionin excess of the initial outlay of LIT 3 000 billion. 143. However, the finding that the injection of LIT 3 000 billion would have been madeby a private market economy investor was not based solely on the Commission'scalculation of the expected return but also, as stated in its written pleadings, on thevalue and importance to ENI of EniChem continuing to operate in the context ofthe ENI holding, and on the other factors indicated in section 4 of the contesteddecision. - The parties' written observations following the Commission's letter of 11November 1997 144. In its written observations of 19 January 1998, the applicant points out that theCommission has not explained why Table QI/1 was dated, incorrectly, 1 July 1994. However, since Table QI/1, albeit erroneous, is more consistent than Table A withthe reasoning in section 4 of the contested decision, it is likely that Table QI/1represents the work done at the time, and that Table A was drawn up ex post factoin an attempt to make good the mistakes made at that time. Furthermore, TableQI/3 differs in several respects from the document submitted by the Commissionwith its observations of 16 October 1997. 145. Accordingly, the applicant asked the Court of First Instance to adopt measures ofinquiry to establish how and when Tables QI/1, QI/3 and A were created, and toexamine Mr Feltkamp, Mr Spagnolli and Mr Owen as witnesses. 146. As regards the substance, the applicant submits that the Commission no longerrelies on Table QI/1. Table A reflects a fundamentally different approach which,moreover, cannot be discerned either in the contested decision or in theCommission's written pleadings. Given the Commission's inability to producecalculations from its file to sustain the finding in the contested decision that thepresent value of future cash flows just equalled LIT 3 000 billion, that measuremust be annulled. 147. The Commission has implicitly accepted the force of the criticisms made by theapplicant at the hearing on 23 September 1997 to the effect, first, that EniChem'sfuture cash flows (as given in Table QI/1, line 4) would not be minus LIT 34 billionbut minus LIT 3 034 billion and, second, that Enichem's cumulated equity value (asgiven in Table QI/1, line 5) had no bearing on the calculation of the present valueof EniChem's future cash flows. In Table A, line 4 shows the correct figure -minus LIT 3 034 billion - and even though the old line 5 is still included, it playsabsolutely no part in the calculation of the return to the investor. 148. In those circumstances, in order to find, by other means, over LIT 3 034 billion inpresent value terms, the Commission has introduced two new elements in Table A. First, it has used 'the existing level of equity in its calculations and, secondly, ithas assigned a residual value to EniChem at the end of the lifetime of theinvestment. However, that approach is inconsistent with both the contesteddecision and the Commission's written pleadings. 149. In any event, Table A's use of EniChem's existing equity to offset its losses until1996 is a financial nonsense which confuses investment appraisal and corporateaccounting, two entirely separate disciplines. No independent expert would beprepared to certify that this method is a generally accepted component of a presentvalue calculation. As for the method used in Table A to calculate EniChem'sresidual value, it is neither normal nor well-established. 150. The applicant also submits that the details of the calculation of net results in TableA are vitiated by a number of errors. It also criticises Table B, while pointing outthat the Commission has conceded that no analysis along those lines was carriedout at the time of the contested decision. 151. In its observations of 19 January 1998 the United Kingdom primarily submits thatthe contested decision should be annulled on the ground that it is wholly uncertainwhat calculations the Commission actually made to justify its conclusion that theinvestment would have been made by a market investor. 152. In their observations of 19 January 1998, ENI and EniChem contend that thelegality of an act of an institution must be assessed on the basis of the factual andlegal situation existing at the time of its adoption, and the information thenavailable (Case T-115/94 Opel Austria v Council [1997] ECR II-39, paragraph 87). Consequently, a measure cannot be annulled on the ground that a Communityinstitution has fallen short of its duty to keep a full copy of the file on record afterthe measure was adopted or is unable to submit original supporting documents tothe Court upon request. In any event, the Commission has remedied the situationin its observations of 11 November 1997 by offering a clear, first-hand andconvincing reconstruction of the analysis made and the reasoning followed at thetime of the contested decision. Consequently, its inability to submit to the Courtcertain original documents relied upon in preparing the contested decision cannothave any effect on the legality of that measure. 153. In particular, the new Table A avoids the risk of double counting identified by ENIat the hearing on 23 September 1997. Because the losses over the first three yearsare offset by the existing equity of LIT 1 950 billion, they are no longer deductedagain from the injection of LIT 3 000 billion. Moreover, Table A completes TableQI/1 by adding an extremely conservative residual value. Given the complexity ofthe issues raised, the Commission must enjoy a broad discretion as to the choiceof method and assumptions made in the calculation. 154. Even if it were assumed that the method used in Table A was inappropriate, thatwould not vitiate the contested decision because the second method, used in TableB, shows that the capital injection cannot be equated with State aid. Othermethods confirm that the Commission adopted the contested decision on soundgrounds, since they also establish that the injection did not amount to aid. ENI andEniChem submit calculations to the Court of First Instance, in which the samediscounted cash flow method has been used as in Table B, but which are based onslightly different assumptions. These calculations show that the third capitalinjection would produce a significant return. - The hearing on 17 March 1998 155. At the hearing on 17 March 1998 the Commission informed the Court of FirstInstance that there was a possibility that the document submitted in annex to itsletter of 16 October 1997 was not, as then indicated, the original version of TableQI/3 which existed at the time when the contested decision was adopted. Nevertheless, that did not affect the fact that 12% was a reasonable rate for theCommission to apply in its calculations. 156. As to the merits, the Commission emphasised in particular that the reference tofuture cash flows made in section 4 of the contested decision must be read in thelight of paragraph 35 of the Communication on public undertakings, cited above,where it is stated that cash flows may comprise 'expected future cash flows fromthe intended project (accruing to the investor by way of dividend payments and/orcapital gains ...). Given that, under the liquidation alternative, EniChem's existingassets would have been lost on account of the liquidation costs, theLIT 1 950 billion at issue represented 'capital gains within the meaning of thatCommunication. The private market economy investor principle also requires theLIT 1 950 billion value to be taken into account, since the capital injection enablesthat value to be conserved for the future, whereas under the liquidation option, itwould be lost. Even though that particular component of the calculation was notexpressly reproduced in the contested decision, it is settled law that there is noneed to set out all the details of the reasoning adopted. 157. Also, even though no express reference was made in the contested decision to theresidual value, it is normally calculated in such an analysis, as the various workscited by the parties make clear. Given that there are at least four methods ofcalculating residual value, the fact that the Commission has opted for one method,whereas the applicant favours another, does not mean that the Commission hascommitted a manifest error of assessment. 158. The Commission added that section 4 of the contested decision states that, as from1998, the annual profits predicted in the restructuring plan should level out at anamount somewhat higher than the minimum return acceptable to a private investor. Following ENI-Lanerossi, cited above, the contested decision is justified on the basisof that statement alone. Other factors to be taken into account are ENI's long-term strategy, its future privatisation and group synergies. Furthermore,developments subsequent to the contested decision may be taken into account, atleast in order to show that the Commission did not commit a manifest error ofassessment (Case 234/84 Belgium v Commission ('Meura) [1986] ECR 2263,paragraph 12, and Joined Cases C-329/93, C-62/95 and C-63/95 Germany andOthers v Commission ('Bremer Vulkan) [1996] ECR I-5151, paragraph 34). 159. Lastly, the Commission asks the Court to base its deliberations on Table A, not onTable QI/1. It states that the calculation made at the time of the contesteddecision is that given in Table A - where both the existing equity and the residualvalue are taken into account - not the calculation given in line 5 of Table QI/1. II - Findings of the Court 160. In section 4 of the contested decision, the Commission stated that the third capitalinjection of LIT 3 000 billion did not constitute State aid within the meaning ofArticle 92(1) of the Treaty on the ground that it would have been undertaken bya private investor operating in a market economy. 161. The principle that a capital contribution cannot be regarded as State aid for thepurposes of Article 92(1) of the Treaty if, in similar circumstances, it would havebeen undertaken by a private investor in a market economy constitutes, accordingto the case-law, an appropriate test which ensures, inter alia, that a capitalcontribution is not regarded as aid solely because it was made by the publicauthorities (Meura, cited above, paragraphs 9 to 18; Boussac, cited above,paragraphs 38 and 39; Case C-142/87 Belgium v Commission ('Tubemeuse) [1990]ECR I-959, paragraphs 23 to 29; Alfa Romeo, cited above, paragraphs 17 to 24;ENI-Lanerossi, cited above, paragraphs 16 to 24; Hytasa, cited above, paragraphs20 to 26; and Bremer Vulkan, cited above, paragraphs 23 to 26). 162. It follows from the Commission's conclusion concerning the third capital injectionthat the State aid control regime provided for in Articles 92 to 94 of the Treatydoes not apply to that injection. Consequently, its compatibility with the commonmarket was not appraised in accordance with Article 92(2) and (3) of the Treaty. In fact, such an appraisal was carried out solely in the case of the first two capitalinjections, which account for only LIT 1 794 billion of the total sum ofLIT 4 794 billion invested. 163. In the circumstances of the present case, the Court considers it appropriate first toconsider the applicant's third plea in law, which alleges that Article 93(2) of theTreaty was infringed in that the procedure provided for therein was not openedwith regard to the third capital injection. The plea in law alleging infringement of Article 93(2) of the Treaty in that theprocedure provided for therein was not opened with regard to the third capital injection 164. According to established case-law, the procedure under Article 93(2) is essentialwhenever the Commission has serious difficulties in determining whether an aid iscompatible with the common market. It follows that the Commission, when takinga decision in favour of an aid, may restrict itself to the preliminary examinationunder Article 93(3) only if it is able to satisfy itself after an initial examination thatthe aid is compatible with the Treaty. If, on the other hand, the initial review leadsthe Commission to the opposite conclusion or if it does not enable the Commissionto overcome all the difficulties involved in determining whether the aid iscompatible with the common market, the Commission is under a duty to carry outall the requisite consultations and for that purpose to initiate the procedure underArticle 93(2) (see, in particular, Case 84/82 Germany v Commission, cited above,paragraph 13; Cook, cited above, paragraph 29; Matra, cited above, paragraph 33;and Sytraval and Brink's France, cited above, paragraph 39). 165. The principle that the persons intended to benefit from the procedural guaranteesafforded by Article 93(2) of the Treaty may secure compliance therewith only ifthey are able to challenge, in proceedings before the Community judicature, adecision not to open the procedure also applies where the Commission takes theview that the very existence of aid must be discounted (Sytraval and Brink's France,cited above, paragraph 47). 166. In the view of the Court, it follows from that case-law and particularly from Sytravaland Brink's France, cited above, that the Commission may be required to open theprocedure provided for in Article 93(2) of the Treaty if an initial examination doesnot enable it to overcome all the difficulties raised by the question whether themeasure at issue constitutes aid for the purposes of Article 92(1) of the Treaty,unless, in the course of that initial examination, the Commission is able to satisfyitself that the measure at issue would in any event be compatible with the commonmarket, even if it were aid. 167. The situation before the Court in the present case concerns a series of three capitalinjections - worth, respectively, LIT 1 000 billion, LIT 794 billion andLIT 3 000 billion - made over a period of two years by the same publicundertaking (ENI) to one of its subsidiaries (EniChem). According to thecontested decision, the first two capital injections constitute State aid, whereas thethird is classed as an investment which would have been made by a private investor. 168. It is common ground that the Commission's conclusion that a private investorwould have undertaken the third capital injection is based essentially on the findingmade in section 4 of the contested decision that: 'Taken from the payment of the last injection of LIT 3 000 billion over a periodlong enough to take the normal lifetime of this investment into account, the netpresent value of future cash flows just equals this investment of LIT 3 000 billion. 169. It must be ascertained whether, in the present case, the assessments made by theCommission involved serious difficulties justifying the opening of the procedureprovided for in Article 93(2) of the Treaty (Matra, cited above, paragraph 34). Theapplicant submits that the Commission encountered two such serious difficulties:(i) whether the return expected on the third capital injection should be analysed inisolation from the return on the first two, and (ii) whether the present value offuture cash flows was such that a private investor would have made that injection. 170. As regards the first point, the mere fact that a public undertaking has already madecapital injections into a subsidiary which are classed as 'aid does not automaticallymean that a further capital injection cannot be classed as an investment whichsatisfies the private market economy investor test. Nevertheless, it is the Court'sview that in a case such as this, which concerns three capital injections made by thesame investor over a period of two years, the first two of which brought no return,the Commission must determine whether the third injection could reasonably besevered from the first two and classed, for the purposes of the private investor test,as an independent investment. 171. The Court considers the following considerations to be relevant in making such adetermination: the chronology of the capital injections in question, their purpose,and the subsidiary's situation at the time when each decision to make an injectionwas made. 172. As regards the chronology of the three injections, the documents before the Courtdisclose that: (a) the first injection of LIT 1 000 billion was made on 1 October 1992; (b) the second injection of LIT 794 billion was approved by ENI at a meetingon 2 December 1993 (see ENI's letter to the Italian Government of 23December 1993 in Annex 21 to the statement in intervention lodged by ENIand EniChem) and made in December 1993; (c) at the same meeting on 2 December 1993, ENI's Board of Directors studieda draft plan for the restructuring of EniChem, the main points of which hadalready been settled on 20 October 1993. That plan provided inter alia for'the rebalancing of the financial structure through 'interventions by theshareholder (see ENI's letter to the Italian Government of 23 December1993 in Annex 21 to the statement in intervention lodged by ENI andEniChem). It was noted that 'the details of the Plan are currently beingfinalised and will be available for presentation to the Commission at thebeginning of 1994; (d) the 1994-1997 restructuring plan was approved by ENI's Board of Directorson 27 January 1994. Paragraph 2.2 of that plan contains the followingstatement: 'the shareholders' intervention in capital account can be quantified asLIT 3 000 billion, which is an amount adequate to restore almost completelythe capital of EniChem to the amount set when the company was created(LIT 4 250 billion) but which has been reduced due to losses not covered. The implementation of the capital increase should take place in June 1994; (e) according to the Italian Government, the Commission was informed of itsintention to make the third injection in February 1994 under the terms ofthe Andreatta-Van Miert Agreement on the restructuring of certain Italianundertakings; (f) the restructuring plan was submitted to DG IV of the Commission at ameeting on 15 April 1994 and formally notified by letter from the ItalianGovernment of 18 May 1994; (g) by letter of 6 June 1994 the Italian Government confirmed to theCommission that EniChem's restructuring plan referred not only to theinjections covered by the investigation opened by letter of the Commissionof 16 March 1994 but also to the third capital injection. The ItalianGovernment also stated that its observations of 18 May 1994 referred to allthe transactions concerning EniChem's capital, including the third injection; (h) according to ENI the third injection was formally approved at a generalmeeting of EniChem's shareholders on 29 June 1994 and paid during thethree months following the contested decision of 27 July 1994. 173. As regards the purpose of the three capital injections in question, the contesteddecision states that the first two injections were intended to compensate lossesincurred as a result of the restructuring measures described in the decision, inparticular the closure of plants and entire sites. According to ENI and EniChem,they were also designed to bring EniChem's capital up to the level initially plannedin the agreement between the Ente Nazionale Idrocarburi and Montedison SpA in1989 (paragraph 120 above). As for the third injection, it is clear from therestructuring plan that it was also designed to increase EniChem's capital, erodedby losses, to the level existing at the time of its creation and to finance restructuringmeasures (paragraph 172(d) above). 174. According to the written pleadings of the Commission and the Italian Government,each of the three capital injections was made as part of a wide-ranging programmefor the restructuring of Italian public undertakings, discussed with the Commissionduring the EFIM case, cited above, which culminated in the Andreatta-Van MiertAgreement. The Italian Government's general approach to EniChem'srestructuring and privatisation was set out in two documents published by theItalian authorities in November 1992 and April 1993. In that context, theCommission explained to the Court that the restructuring measures financed by thefirst two capital injections followed a coherent direction, finally expressed in detailin the restructuring plan submitted to the Commission in 1994 which set out therestructuring measures still necessary to reduce or redirect EniChem's activities. The third injection was foreseen precisely as part of that restructuring plan. 175. The Commission's appraisal is endorsed by the Italian Government's letter of 6June 1994, according to which EniChem's restructuring plan and the ItalianGovernment's observations of 18 May 1994 referred not only to the first two capitalinjections but also to the third. 176. Lastly, as regards EniChem's situation at the time of the three capital injections,it is clear from its annual reports that its total losses amounted to LIT 1 542 billionfor the year ending 31 December 1992 and to LIT 2 677 billion for the year ending31 December 1993. Also, according to ENI's most optimistic forecasts, thecumulated losses predicted for the four years between 1994 and 1997 amounted toLIT 2 452 billion, even after the third injection of LIT 3 000 billion and theaccompanying restructuring measures (see the 'Analisi di Sensitivitá (IpotesiMigliorative di Scenario), prepared on 13 April 1994). It follows that EniChem'sactual losses, and those predicted at the time, for the six years between 1992 and1997 amounted to LIT 6 671 billion, even after the three injections totallingLIT 4 794 billion. 177. According to the Commission's written pleadings, the only other option open toEniChem after the first two injections was bankruptcy. The Commission states that'at the time of the injection of LIT 3 000 billion, EniChem's shareholder, ENI, hadjust two choices: either to recapitalise and restructure or to leave the situationunchanged and thereby automatically let EniChem go bankrupt (Defence,paragraph A.I.14) and that '... without the third injection and the consequentrestructuring, the level of losses normally produced by the company at that timewould have erased its equity capital within one or two years, and would thereforehave required new injections to be made or, in the alternative, the company to gointo liquidation (Rejoinder, paragraph D.15). 178. It follows that: - ENI's Board of Directors decided to make each of the three capitalinjections during a relatively short period between October 1992 and July1994. In particular, it should be noted that its decision in December 1993to make the second injection and its decision on 27 January 1994 toauthorise the third injection in the course of approving the restructuringplan were closely related in time; - each of the three capital injections was part of an ongoing programme forEniChem's restructuring and primarily for the closure or redirection ofcertain of its activities and for restoring its capital base after erosion bylosses. As the Commission contended before the Court, the third injectionwas no more than the next logical step after the measures already financedby the first two injections and the restructuring plan approved on 27January 1994 merely finalised the outstanding requirements in relation toa restructuring programme begun in 1992. Similarly, according to the letterof 6 June 1994 from the Italian Government, ENI's shareholder, therestructuring plan and its observations of 18 May 1994 concerned not onlythe first two injections but also the third; - after the first two capital injections, EniChem was still making significantlosses. According to the Commission, it was not even capable of survivingon the market on the basis of the first two injections alone and, without thethird injection, its liquidation was inevitable (paragraph 177 above). 179. The Court concludes from this that at the time there were serious grounds forbelieving that the three injections in question, albeit made on different dates in thecourse of a relatively short space of time (between October 1992 and October1994), had to be considered as, in reality, a series of related capital contributions,granted as part of a continuing restructuring process begun in 1992, the commonpurpose of which was to finance the restructuring measures necessary and torestore EniChem's capital base which had been eroded by losses. Similarly, thecircumstances referred to above should have raised doubts as to whether it wasonly by means of that series of injections, viewed as a whole, that the restructuringplan had a chance of restoring EniChem's viability. 180. In the particular circumstances of this case, the Court holds that the Commissionshould have had doubts as to the question whether the third injection wassufficiently distinct from the first two injections that it could be analysed in isolationfrom them. Accordingly, the Commission was not in a position to assess whetherENI's decision to make the third injection could be regarded as a decision whichwould have been taken by a private investor operating in a market economy. 181. Next, as regards the question whether, even supposing that the third injection couldbe separately assessed, the present value of future cash flows was such that aprivate investor would have made that injection, the Court points out first of allthat the Commission annexed to its observations of 30 June 1997 a calculation ofthe present value of EniChem's future cash flows. That calculation is presented inTable QI/1, dated 1 July 1994. EniChem's cumulated profits (or losses) for theperiod between August 1994 and 2005, discounted at a rate of 12%, are shown inline 4 of Table QI/1 as minus LIT 34 billion. According to the Commission'sobservations, the net present value of EniChem's cash flows is shown in line 5 ofTable QI/1 ('Cumulated equity value) as LIT 2 966 billion. This interpretationof Table QI/1 was confirmed at the hearing on 23 September 1997 by Mr Spagnolli,the official responsible for its preparation. 182. In the Commission's letter of 26 September 1997 informing the Court that, despitethe fact that Table QI/1 was dated 1 July 1994, it had not been prepared before thecontested decision, but was Mr Spagnolli's reconstruction of the calculations whichhe had made at the time, the Commission stated that Table QI/1 reproduced thetype of calculations which had in fact served as a basis for the contested decision. In its letter to the Court of 16 October 1997, the Commission stated inter alia thatit 'maintain[ed] in full its submission that the methods as described to the Courtin order to calculate the return on investment and the net present value of futurecash flow were applied in order to arrive at the Commission decision, and that[those] methods produced the results stated in the decision and explained to theCourt, including the results contained in Table QI/1 the original of which [could]no longer be found on the file. Both Mr Spagnolli and Mr Feltkamp, who werepresent at the oral hearing on 23 September 1997, [could] testify to [those] facts. 183. Subsequently, in response to a fresh question from the Court of 13 October 1997,the Commission produced, in a letter of 11 November 1997, new calculations of thenet present value of EniChem's future cash flows. Those calculations were inparticular set out in Table A, which differs from Table QI/1 in four relevantrespects. 184. First, EniChem's cumulated discounted profits (or losses) for the period between1994 and 2005 are given in line 4 of Table A as minus LIT 3 034 billion, insteadof minus LIT 34 billion as stated in line 4 of Table QI/1. 185. Secondly, in Table A that loss of LIT 3 034 billion is partially offset by calculatinga residual value of LIT 1 531 billion attributable to EniChem in 2005 (see the newcolumn 'residual value). That calculation does not appear in Table QI/1. 186. Thirdly, EniChem's cumulated loss of minus LIT 3 034 billion during the perioduntil 2005 is also partially offset by taking into account the value of EniChem'sequity as at July 1994. The new line 6 in Table A ('Existing equity at 31/7/94)shows that that equity (LIT 1 950 billion) was taken into account in order to cancelout EniChem's losses for the years 1994 to 1996, set out in line 3 of Table QI/1 andTable A, which amount to LIT 1 514 billion. That calculation does not appear inTable QI/1, which did not assign any value to that equity (see note 5 to TableQI/1). 187. Fourthly, the calculation of the cumulated equity in line 5 of Table QI/1 which,according to the Commission's observations of 30 June 1997, represents the netpresent value of EniChem's future cash flows, to which section 4 of the contesteddecision refers, plays no role in the calculations set out in Table A. 188. Also, it is clear from the Commission's letter of 11 November 1997 and from itsstatements at the hearing on 17 March 1998 that it viewed the calculations set outin Table QI/1 as incorrect and that it therefore abandoned them. However,according to the explanations given in its observations of 30 June 1997, at thehearing on 23 September 1997 and in its letters of 26 September and 16 October1997, it was those calculations that it had made at the time in order to support theconclusion reached in the contested decision regarding the attitude of a privateinvestor. 189. As for the Commission's statement in its observations of 11 November 1997 thatthe contested decision was not based on the calculations set out in Table QI/1, buton those set out in Table A, the Court cannot discern in the Commission's writtenpleadings any trace of the approach adopted in Table A. The Court notes, inparticular, that, according to Table A, the profitability of the investment dependsinter alia on taking into account - in order to offset EniChem's losses during theperiod from 1994 to 1996 - the sum of LIT 1 950 billion which, according to TableA, represents the value, at the time, of EniChem's equity. However, contrary tothe approach adopted in Table A, the Commission stated in paragraphs 17 to 19of its defence that it seemed prudent to assume for the purposes of its calculations'that ENI's existing investment in Enichem at July 1994 was already nil. TableQI/1 is also based on that assumption, as note 5 thereto demonstrates. Furthermore, the approach in Table A was not relied on either in theCommission's observations of 30 June 1997 or, at the hearing on 23 September1997, by the official who had been responsible at the material time for thecalculations in question. 190. It should also be noted that, according to the Commission, Table A is based solelyon the 'recollections of the officials concerned, Mr Spagnolli, Mr Feltkamp andMr Owen. However, Table A is not consistent with Mr Spagnolli's explanations tothe Court at the hearing on 23 September 1997. Moreover, the Commission hadstated, in its letter of 16 October 1997, that neither Mr Feltkamp nor Mr Owencould recall the precise content of the tables used at the time of preparing thecontested decision. Furthermore, at paragraph 8 of its observations of 11November 1997, the Commission confirmed that nobody could remember the exactcalculation of EniChem's residual value. 191. It follows that the Commission has not succeeded in establishing that thecalculations reproduced in Table A were in fact made prior to the adoption of thecontested decision, in order to support the finding that the net present value offuture cash flows was such that the third capital injection would have been madeby a private investor operating in a market economy. Furthermore, it is commonground that the Commission no longer relies on the figures given in Table QI/1,and that neither the calculations reproduced in Table B, nor those relied on by ENIand EniChem in the course of the proceedings, were used at the time of theadoption of the contested decision. 192. The Court is therefore unable to ascertain what calculations the Commission madeat the material time in order to support its finding that a private investor wouldhave made the third capital injection. 193. In these circumstances, the Court holds that the Commission's production, in thecourse of the present proceedings, of contradictory calculations, and its inability toproduce the calculations which it made at the material time with a view toconcluding during the preliminary examination of the third capital injection that'the net present value of future cash flows just equals the investment ofLIT 3 000 billion and that, accordingly, the injection was one 'which would havebeen undertaken by a private investor in a market economy shows that, in thepresent case, there were serious difficulties as to whether, like the first two capitalinjections, that injection constituted State aid within the meaning of Article 92(1)of the Treaty. 194. That conclusion is not invalidated by the argument put forward by ENI andEniChem that, in accordance with the case-law (ENI-Lanerossi, cited above,paragraph 21), the finding in the contested decision that the last injection ofLIT 3 000 billion would have been undertaken by a private investor operating ina market economy may be justified, independently of its financial profitability, byspecial considerations peculiar to parent companies of a group investing in one oftheir subsidiaries. On that point suffice it to note that, as the Commission hasconceded (see paragraph 107 above), it did not use those considerations as a basisfor concluding in its decision that the third injection did not involve aid, bearing inmind that it had no doubts as to the profitability of that injection. 195. The same holds true of the Commission's argument at the hearing on 17 March1998 that a private investor would have made the third injection solely on the basisof the second sentence of the third paragraph of section 4 according to which'from 1998 profits would reach at their full level, somewhat higher than theminimum return acceptable to a private shareholder. It should again be notedthat that statement plays only a secondary role in the contested decision bycomparison with the calculation to which the third sentence of the third paragraphof section 4 refers. Furthermore, that argument disregards EniChem's losses forthe years 1994 to 1997, which exceed LIT 2 400 billion (see paragraph 176 above). 196. As regards the argument put forward by the Italian Republic, ENI and EniChemthat, in any case, the three injections were not made by the State or through Stateresources within the meaning of Article 92(1) of the Treaty, suffice it to note thatthe Commission did not use that argument in the contested decision. It cannottherefore be relied on in the context of a review of legality undertaken by theCourt. 197. It follows from all the above observations that the Commission was not in aposition at the end of an initial examination pursuant to Article 93(3) of the Treatyto overcome all the difficulties raised by the question whether the third injectionconstituted aid within the meaning of Article 92(1) of the Treaty. 198. The Court emphasises also that the procedure provided for in Article 93(2) of theTreaty was already under way in respect of the first two capital injections whichhad been classed as State aid. The serious doubts which the Commission shouldhave had regarding the third injection bear specifically on the question whether thatinjection should have been assessed together with the first two for the purposes ofascertaining whether it constituted State aid or an investment which satisfies theprivate market economy investor test. Furthermore, the third injection(LIT 3 000 billion) involved a considerably higher amount that the first two takentogether (LIT 1 794 billion), which were already under investigation. 199. It is common ground that, in the present case, the Commission never examinedwhether the third capital injection was compatible with the common market. 200. In view of those particular circumstances, it follows that the Commission, in closingits initial examination of the third capital injection pursuant to Article 93(3) of theTreaty, despite its inability to surmount the difficulties regarding the questionwhether that injection constituted State aid, and without examining whether theinjection was compatible with the common market, infringed the rights of theapplicant as a party concerned within the meaning of Article 93(2) of the Treaty. 201. The contested Decsion must therefore be annulled on that ground, there being noneed to reach a decision on the other pleas in law and arguments adduced by theapplicant. Costs 202. Under Article 87(2) of the Rules of Procedure the unsuccessful party shall beordered to pay the costs if they have been applied for in the successful party'spleadings. Under Article 87(3) of those Rules, where each party succeeds on someand fails on other heads, the Court may order that the costs be shared. In thepresent case, the Commission has been unsuccessful so far as concerns the thirdcapital injection, whereas the applicant has been unsuccessful so far as concerns thefirst two injections. In those circumstances, it is appropriate to order theCommission to bear, in addition to its own costs, two-thirds of the applicant's costs. 203. Pursuant to Article 87(4) of the Rules of Procedure, the United Kingdom, theItalian Republic, ENI and EniChem must bear their own costs. On those grounds, THE COURT OF FIRST INSTANCE (Second Chamber, ExtendedComposition) hereby: 1. Annuls the Commission's decision of 27 July 1994 regarding aid which Italyhas decided to grant to EniChem SpA in so far as it closes the examinationunder Article 93(3) of the Treaty of the capital injection ofLIT 3 000 billion to which it refers; 2. Dismisses the remainder of the application as inadmissible; 3. Orders the Commission to bear its own costs and to pay two-thirds of theapplicant's costs, and orders the applicant to bear one-third of its owncosts; 4. Orders the United Kingdom, the Italian Republic, ENI SpA and EniChemSpA to bear their own costs. Kalogeropoulos Briët García-Valdecasas Bellamy Potocki Delivered in open court in Luxembourg on 15 September 1998. H. Jung A. Kalogeropoulos Registrar President 1: Language of the case: English. ECR