ORDER OF THE COURT OF FIRST INSTANCE (First Chamber)
22 April 2009 (*)
(Intervention – No interest in the result of the case – Rejection)
In Case T‑54/07,
Vtesse Networks Ltd, established in Hertford, Hertfordshire (United Kingdom), represented by H. Mercer, Barrister, and J. Ballard, Solicitor,
applicant,
v
Commission of the European Communities, represented by N. Khan and H. van Vliet, acting as Agents,
defendant,
supported by
British Telecommunications plc, established in London (United Kingdom), represented by G. Robert and C. Berg, Solicitors,
and
United Kingdom of Great Britain and Northern Ireland, represented by V. Jackson, acting as Agent, C. Vajda, QC, and T. Morshead, Barrister,
interveners,
ACTION for annulment in part of Commission Decision 2006/951/EC of 12 October 2006 on the United Kingdom’s application of the tax on non-domestic property to telecommunications infrastructure in the United Kingdom (OJ 2006 L 383, p. 70),
THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (First Chamber),
composed of V. Tiili (Rapporteur), President, F. Dehousse and I. Wiszniewska-Białecka, Judges,
Registrar: E. Coulon,
makes the following
Order
Background to the dispute
1        On 12 October 2006, the Commission adopted Decision 2006/951/EC on the United Kingdom’s application of the tax on non-domestic property to telecommunications infrastructure in the United Kingdom (OJ 2006 L 383, p. 70) (‘the contested decision’).
2        In the contested decision, first, the Commission states that it received a complaint from Vtesse Networks Ltd (‘Vtesse’), an undertaking whose activity consists in offering ‘fibre to the business’ services by offering high capacity retail leased lines to large corporate users in the United Kingdom. In its complaint, Vtesse claimed that British Telecommunications plc (‘BT’), the incumbent telecommunications operator with which Vtesse competes in the area of high capacity leased lines, benefited from preferential treatment in respect of property tax which amounted to State aid.
3        Second, the Commission states that it is clear from the Local Government Finance Act 1988, which regulates property tax in England and Wales, that ‘the base of this tax, the so-called rateable value, is the hypothetical annual rent at which the hereditament might reasonably be expected to be let from year to year in an open market transaction at a certain valuation date’. The valuation of this property tax is carried out by the Valuation Office Agency (VOA), an executive agency of the Inland Revenue, and is levied on telecommunications infrastructure as on other non-domestic properties.
4        In that context, the Commission finds that there are different methods for calculating the hypothetical annual rent. Thus, it first notes that the property tax applicable to BT is assessed under the ‘Receipt and Expenditure’ method consisting, in essence, for properties that are seldom let or are difficult to replicate, in valuing the maximum rent that the undertaking would be prepared to pay having regard to its receipts and expenses. BT’s property tax is calculated by the VOA every five years.
5        Next, the Commission notes that the property tax paid by Kingston Communications (Hull) plc, now KCOM Group plc (‘KCOM’), the incumbent telecommunications operator in the Hull region, is calculated under the Receipt and Expenditure method so far as concerns the local access network owned by that operator, whereas its subsidiary, Torch Communications Ltd, which operates a fibre backbone network outside the Hull region, pays the property tax calculated under the ‘rental’ method consisting, in essence, of seeking direct and actual evidence of the rent of the property at issue or of making a comparison with the rental evidence of other comparable properties.
6        Finally, the Commission notes that the other telecommunications operators, such as Vtesse, are taxed on the basis of the rental method. The property tax that Vtesse must pay is, like that of Torch Communications, revised each time the latter rents and lights a new fibre.
7        Third, the Commission points out that it formed the view, in the decision to initiate the formal examination procedure under Article 88(2) EC, that the application of the property tax, first, to BT and, second, to KCOM, could confer an advantage on those two undertakings to the extent to which they appeared to benefit from a reduction of the property tax base as compared with their competitors. In that context, the Commission observed that, while BT pays property tax of 2% of its revenues, Vtesse and the other competitors of BT have to pay a tax in the range of 7% of their revenues and possibly increasing to 20% to 30% of those revenues. The Commission also points out that it criticised, in the decision to initiate the formal examination procedure, the method used with regard to BT for revisions of the rateable value.
8        Fourth, the Commission finds that, while BT, KCOM, the United Kingdom of Great Britain and Northern Ireland and the Office of Communications (OFCOM), the independent regulator and competition authority for the national telecommunications sector, submitted comments during the administrative procedure to the effect that the property tax does not confer any advantage on BT and KCOM, the Commission received comments from interested parties stating, in substance, that the property tax applied to those operators could confer an advantage on them. Vtesse, in particular, claims in this context that, unlike itself, BT benefits from an advantage to the extent to which it is not ‘taxed marginally’, that is to say, that it is not taxed each time it rents or lights new optic fibres. This lack of marginal taxation has the consequence, in essence, that, where BT and Vtesse compete for the provision of backbone and access telecommunication links to their customers, the property tax that Vtesse has to pay in relation to that offer is clearly higher than that paid by BT.
9        Fifth, the Commission examines whether, first, the reliance on the Receipt and Expenditure method, to which BT and KCOM are subject rather than the rental method, to which their competitors such as Vtesse are subject, is justified and correctly applied and, second, whether the application of that method to BT and KCOM gives them an advantage over their competitors.
10      In that regard, the Commission observes first that the reliance on the Receipt and Expenditure method, rather than on the rental method, for both BT and KCOM is appropriate since, with regard to each of those two undertakings, ‘there was not enough rental evidence to assess’ their networks.
11      Next, the Commission finds that the Receipt and Expenditure method was applied, both to BT and to KCOM, in accordance with the relevant rules relating to the Receipt and Expenditure method of valuation for non-domestic rating.
12      The Commission also finds that there is no clear evidence that the Receipt and Expenditure method applied to BT and KCOM resulted in a general under-valuation of the rateable value of their hereditaments compared with their competitors which have to pay property tax calculated in accordance with the rental method.
13      Finally, the Commission states, with regard to the question whether the Receipt and Expenditure method provides an advantage in terms of marginal taxation, that that question concerns only BT, and not KCOM, whose subsidiary Torch Communications is, like Vtesse, taxed for the rental and lighting of new optic fibres under the rental method. The Commission finds that ‘the fact that there is no evidence of the existence of an advantage at the level of the overall valuation of [BT’s] hereditament does not necessarily exclude the possibility that marginal taxation, i.e. on the rating of newly lit fibres, does grant an advantage to this firm’. In this regard, the Commission explains as follows:
‘[W]hen a telecoms operator to which the rental method is applied connects and lights a new fibre, its rateable value is increased by the rateable value of this new fibre. The opposite takes place when it switches off and disconnects a fibre: the fibre’s rateable value is then deducted. Telecommunication operators that are assessed under the Receipt and Expenditure method are not subject to this type of precise adjustment. In the case of BT, the annual revisions are based on a market adjustment mechanism: changes in BT’s market shares are supposed to reflect changes in the value of its network. The question is therefore whether the different way of taking into account changes in the networks, such as the lighting of new fibres, is likely to confer an advantage on BT.’
14      The Commission thus takes the view, after an examination of Vtesse’s arguments, that BT does not benefit from an advantage in that respect.
15      Article 1 of the contested decision is worded as follows:
‘Article 1
The application by the United Kingdom of the tax on non-domestic property to [BT] and [KCOM] from 1995 until the end of 2005 does not constitute aid within the meaning of Article 87(1) [EC].’
Procedure
16      By application lodged at the Registry of the Court of First Instance on 19 February 2007, Vtesse brought an action for annulment in part of the contested decision, in so far as the Commission wrongly stated in Article 1 of that decision that the property tax applied to BT did not constitute State aid.
17      By letters lodged at the Court Registry on 14 May, 25 May and 1 June 2007, BT, KCOM and the United Kingdom respectively applied for leave to intervene in support of the form of order sought by the Commission.
18      By letter lodged at the Court Registry on 25 May 2007, Onifas Ltd, which operates in the area of public house, bar and restaurant management, applied for leave to intervene in support of the form of order sought by Vtesse.
19      In its observations lodged at the Court Registry on 3 July 2007, Vtesse raised objections relating to KCOM’s application to intervene. By contrast, the Commission did not lodge observations relating to that application to intervene within the time-limits set.
20      In its observations lodged at the Court Registry on 16 July 2007, Vtesse expressed that it was in favour of Onifas’ application for leave to intervene being allowed. By contrast, in its observations lodged at the Court Registry on 2 August 2007, the Commission raised objections to that application for leave to intervene.
21      By order of 7 September 2007, the President of the Third Chamber of the Court of First Instance granted the United Kingdom leave to intervene.
22      Following a change in the composition of the Chambers of the Court, the Judge-Rapporteur was assigned to the First Chamber and this case was consequently assigned to that chamber.
23      By order of 4 October 2007, the President of the First Chamber of the Court of First Instance granted BT leave to intervene.
24      In accordance with the third subparagraph of Article 116(1) of the Rules of Procedure of the Court of First Instance, the President of the First Chamber referred the applications of Onifas and KCOM to intervene to that chamber.
Law
25      Under Article 115 of the Rules of Procedure, an application to intervene must be made within a fixed time-limit and fulfil certain conditions. In the present case, as the notice in the Official Journal of the European Union referred to in Article 24(6) of the Rules of Procedure was published on 14 April 2007, the applications of Onifas and KCOM to intervene were lodged within the six-week period provided for in Article 115(1) of those Rules.
26      Under the second paragraph of Article 40 of the Statute of the Court of Justice, applicable to the procedure before the Court of First Instance in accordance with the first paragraph of Article 53 thereof, any person establishing an interest in the result of any case, save in cases between Member States, between institutions of the Communities or between Member States and the institutions of the Communities, has the right to intervene in that case. An application to intervene must be limited to supporting the form of order sought by one of the parties.
27      It is settled case-law that an interest in the result of the case for the purposes of that provision must be defined in the light of the actual subject-matter of the case and must be construed as a direct, existing interest in the grant of the order as sought and not an interest in relation to the pleas in law put forward. The ‘result’ of a case is to be understood as the final decision sought from the court before which the case has been brought, as it would be laid down in the operative part of the judgment. It is necessary, in particular, to ascertain whether the intervener is directly affected by the contested measure and whether his interest in the result of the case is established (see order in Case T-15/02 BASF v Commission [2003] ECR II-213, paragraph 26, and order of 8 November 2006 in Case T-273/04 Brandt industries v Commission, not published in the ECR, paragraph 31 and the case-law cited).
28      Moreover, it is necessary to make a distinction between prospective interveners establishing a direct interest in the ruling on the specific act whose annulment is sought and those who can establish only an indirect interest in the result of the case by reason of similarities between their situation and that of one of the parties (orders of the Court of Justice in Case C-76/93 P Scaramuzza v Commission [1993] ECR I-5715 and I‑5721, paragraph 11; orders of the Court of First Instance in Joined Cases T-97/92 and T-111/92 Rijnoudt and Hocken v Commission [1993] ECR II-587, paragraph 22; Case T-87/92 Kruidvat v Commission [1993] ECR II‑1363, paragraph 12; Case T-191/96 CASSucchi di Frutta v Commission [1998] ECR II-573, paragraph 28; and BASF v Commission, cited in paragraph 27 above, paragraph 27).
29      In light of the foregoing, it is necessary therefore to examine whether, in the present case, Onifas and KCOM both have an interest in the result of the case.
Onifas’ application for leave to intervene
Arguments of the parties
30      Onifas claims, in essence, that it has a clear interest in the result of the case. First of all, it observes that, following a complaint it had lodged with the Commission criticising the fact that the rateable value of public houses was calculated according to a method different from that applied to bars and restaurants, the Commission sent it a letter on 17 October 2006 in which the latter expressed the view, in essence, that the application of the property tax system to public houses, bars and restaurants did not constitute State aid within the terms of Article 87 EC. In that letter, the Commission in particular justified that conclusion by observing that ‘the assessment [set out in the contested decision] is based on arguments which are relevant for the [case which is the subject of Onifas’ complaint] as well’.
31      Furthermore, Onifas claims, first, that although the factual background to the complaint that it lodged with the Commission is very different from that of fibre optic cables, the essential issue, that is to say, the lawfulness of the use of special methods of valuation to determine the rateable value, is similar and, second, that, until the contested decision is annulled, the Commission will not change the position which it took in its letter of 17 October 2006.
32      Vtesse states that it has no objections to the granting of the application by Onifas for leave to intervene.
33      The Commission contends, in essence, that that application for leave to intervene must be dismissed in so far as Onifas does not have a direct interest in the result of the case.
Findings of the Court
34      As a preliminary point, it must be noted that the aim of the main proceedings brought by Vtesse is the annulment of Article 1 of the contested decision, in so far as the Commission held that the application by the United Kingdom of the tax on non-domestic property to BT from 1995 until the end of 2005 did not constitute State aid within the meaning of Article 87(1) EC.
35      Next, Onifas, the activity of which consists in public house, bar and restaurant management, is neither an undertaking in competition with those referred to in the contested decision nor, as is apparent from recital 4 in the preamble to the contested decision, a party interested in the administrative procedure which led to the adoption of the contested decision.
36      Furthermore, even if one were to assume, as Onifas argues, that the contested decision deals with the question of the lawfulness of the use of special methods to calculate the rateable value of non-domestic property in the United Kingdom, which would concern Onifas, it must, however, be held that Onifas adduces no evidence that it is affected directly by the contested decision, which concerns the taxation of the non-domestic property of undertakings which are active only in the area of telecommunications, and that it also does not adduce any other evidence to establish that it has a direct and existing interest in the outcome of Vtesse’s claims seeking annulment of the contested decision only to the extent that the Commission wrongly held that the application by the United Kingdom of the tax on non-domestic property to BT did not constitute State aid.
37      It must accordingly be held that Onifas does not have an interest in the result of the case for the purposes of the second paragraph of Article 40 of the Statute of the Court of Justice and the case-law cited in paragraphs 27 and 28 above.
38      The arguments raised by Onifas cannot invalidate that conclusion.
39      First of all, it is necessary to reject the argument that Onifas has an interest in the result of the case in so far as the Commission will not change the position it adopted in its letter of 17 October 2006 until the Court has ruled on the contested decision. Even assuming that the Court were to uphold Vtesse’s claims in the context of the main proceedings by holding that the Commission was wrong to take the view that BT did not benefit from State aid, the fact nonetheless remains that the annulment of the contested decision would not be such as to oblige the Commission to alter the position which it adopted in its letter of 17 October 2006, which has no direct connection with the contested decision.
40      Next, the argument that Onifas has an interest in the result of the case because there are similarities between the question raised in the main proceedings and that underlying the position adopted by the Commission in its letter of 17 October 2006 cannot be accepted. It is necessary to note in this regard, as is apparent from the case-law cited in paragraph 28 above, that the mere fact that there may be similarities between the situation of the applicant for leave to intervene and the parties to the main proceedings indicates only an indirect interest in the result of the case.
41      It follows that Onifas’ application for leave to intervene must be rejected.
KCOM’s application for leave to intervene
Arguments of the parties
42      KCOM contends, in essence, that it has an interest in the result of the case to the extent to which the issues raised in the main proceedings are fundamental to the manner in which the United Kingdom calculates the property tax that KCOM must pay. If the contested decision were to be annulled by the Court, that would inevitably affect KCOM’s legal and economic position and could, in principle, result in its tax liability being increased by several million euros.
43      Vtesse opposes that application for leave to intervene on the ground, in essence, that KCOM does not have a direct interest in the result of the case.
Findings of the Court
44      In the present case, first, it should be noted that, as was stated in paragraph 34 above, Vtesse applies, in the context of the main proceedings, to obtain the annulment of the contested decision only in so far as the Commission is alleged to have erred in holding in Article 1 of that decision that the application of the tax on non-domestic property to BT from 1995 to 2005 did not constitute State aid. In this regard, it should also be noted that, as is apparent from the pleas raised by Vtesse in its application, the latter does not contest the Receipt and Expenditure method in principle, but claims that the marginal taxation, that is to say, the property tax on the newly lit optical fibres referred to in paragraph 13 above, which it must pay, confers an advantage only on BT and not on KCOM, which is not affected by marginal taxation.
45      Second, it should be noted that, although the contested decision is drafted and published in the form of a single decision and is addressed to a single recipient, namely the United Kingdom, and its wording shows that it concerns the application of the tax on non-domestic property of undertakings in the area of telecommunications in the United Kingdom, that decision must, however, be understood as constituting two separate decisions finding that the application of property tax on non-domestic property, first, to BT, and, second, to KCOM, confers on neither of them an advantage within the meaning of Article 87(1) EC (see, to this effect, orders of the Court in BASF v Commission, cited in paragraph 27 above, paragraph 31, and in Case T‑14/00 Coöperatieve Aan- en Verkoopvereniging Ulestraten, Schimmert en Hulsberg and Others v Commission [2004] ECR II-497, paragraph 14).
46      As is apparent from the description of the contested decision in paragraphs 1 to 15 above, the Commission indeed examined in that decision to what extent the Receipt and Expenditure method is likely, by reason of its inherent nature, to confer an advantage on BT and KCOM over their competitors, such as Vtesse, which are taxed under the rental method. However, it was only after a separate and detailed examination of the application of that first method and its consequences for each of those two undertakings, in particular with regard to the question of marginal taxation which concerns only BT, that the Commission came to the conclusion that the property tax on non-domestic property did not constitute State aid with regard to either of the undertakings.
47      Third, it must be noted that, if a person individually concerned by a decision consisting of a bundle of individual decisions decides to bring an action for annulment, the matter to be considered by the Community judicature relates only to those aspects of the decision which concern that person. Unchallenged aspects concerning other persons individually concerned by that decision, on the other hand, do not form part of the matter to be tried by the Community judicature (judgment of the Court of Justice in Case C-310/97 P Commission v AssiDomän Kraft Products and Others [1999] ECR I‑5363, paragraph 53, and order in Coöperatieve Aan- en Verkoopvereniging Ulestraten, Schimmert en Hulsberg and Others v Commission, cited in paragraph 45 above, paragraph 15).
48      In light of the foregoing, it must therefore be held that KCOM has an interest in the rejection of Vtesse’s claims in the context of the main proceedings only to the extent to which the annulment of Article 1 of the contested decision, according to which BT did not benefit from State aid, would oblige the Commission to alter its conclusion that KCOM also did not benefit from State aid even though that latter conclusion was not the subject, and is no longer capable of being the subject, of an action brought by Vtesse or any other interested third party.
49      However, the Commission’s conclusion that that property tax applied to KCOM does not constitute State aid cannot be amended by a judgment of the Court which would annul the contested decision only to the extent to which the Commission wrongly held that BT did not benefit from State aid.
50      First, the Commission cannot alter its conclusion that KCOM did not benefit from any advantage for the period at issue since such an approach on the part of the Commission would conflict with the rule that the Community institutions must comply with the principle that they may not alter measures which they have adopted, so that the legal certainty of the persons affected by those measures may be ensured (Joined Cases T-80/89, T-81/89, T-83/89, T-87/89, T-88/89, T-90/89, T-93/89, T-95/89, T-97/89, T-99/89, T-100/89, T-101/89, T-103/89, T‑105/89, T‑107/89 and T-112/89 BASF and Others v Commission [1995] ECR II-729, paragraph 73; Case T-229/94 Deutsche Bahn v Commission [1997] ECR II-1689, paragraph 113; and Joined Cases T‑227/99 and T-134/00 Kvaerner Warnow Werft v Commission [2002] ECR II-1205, paragraph 92).
51      Second, even assuming that the Commission may alter its conclusion that KCOM did not benefit from any State aid for the period at issue, KCOM’s interest in intervening would constitute therefore, in any event, only an indirect and potential interest within the meaning of the case-law cited in paragraphs 27 and 28 above. In that regard, it must also be held that KCOM could always assert its arguments in the context of the action for annulment that it would thus be capable of bringing before the Court against such an unfavourable Commission decision.
52      In light of the foregoing considerations, KCOM’s application for leave to intervene must be rejected.
Costs
53      Under Article 87(1) of the Rules of Procedure, a decision as to costs is to be given in the final judgment or in the order which closes the proceedings. As the present order closes the proceedings with regard to Onifas and KCOM, a decision must be made on the costs relating to their respective applications for leave to intervene.
54      Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
55      First, concerning Onifas’ application for leave to intervene, since Onifas has been unsuccessful, it must be ordered to bear its own costs and to pay those of the Commission in accordance with the form of order sought by the latter. Vtesse, which has not applied for costs, must bear its own costs.
56      Second, concerning KCOM’s application for leave to intervene, the Commission did not submit any observations. Since KCOM has been unsuccessful, it must be ordered to bear its own costs. Vtesse, which did not apply for costs, must bear its own costs.
On those grounds,
THE COURT OF FIRST INSTANCE (First Chamber)
hereby orders:
1.      The applications for leave to intervene brought by Onifas Ltd and KCOM Group plc are rejected.
2.      Onifas is ordered to bear its own costs as well as to pay those of the Commission relating to its application for leave to intervene.
3.      Vtesse Networks Ltd and KCOM Group are ordered to bear their own respective costs.
Luxembourg, 22 April 2009.
E. Coulon
V. Tiili
Registrar
President
* Language of the case: English.