61998CC0210_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
1. The present appeal against the judgment of the Court of First Instance of 31 March 1998 in Case T-129/96 Preussag Stahl v Commission concerns the interpretation of the fifth Steel Aid Code (hereinafter the fifth Code). At issue are in particular the provisions establishing a procedural timetable for the notification, the approval and the payment of regional investment aid for steel undertakings located in the territory of the former German Democratic Republic. The two main questions as regards that category of aid are in my view whether or not the notification time-limit in Article 6(1) of the fifth Code is mandatory and preclusive and whether Article 5 of the fifth Code must be interpreted as laying down an approval deadline. A further issue is whether at the appeal stage the Court may raise of its own motion pleas relating to matters of public policy and if so in what circumstances.
Legal background
2. Under Article 4(c) of the ECSC Treaty (hereinafter the Treaty) aids and subsidies with regard to steel products covered by the Treaty granted by States in any form whatsoever are incompatible with the common market for coal and steel and are accordingly to be abolished and prohibited within the Community.
3. Since the express exception to that absolute prohibition in Article 67(2) of the Treaty applies only in rare cases (it allows, essentially, Commission authorisation for aid intended to counterbalance other State measures having a harmful effect) and since there was concern about putting the steel industry in an unfavourable position in comparison with other industries, the need was felt for legislation on further limited exceptions to Article 4(c) of the Treaty.
4. The Commission therefore adopted several successive general Decisions (so-called Steel Aid Codes) establishing rules authorising the grant of aid to the steel industry in certain cases expressly provided for.
5. The rules relevant to the present proceedings are to be found in the fifth Code. Its legal basis is Article 95 of the Treaty which in all cases not provided for in the Treaty allows for the taking of decisions necessary to attain one of the objectives set out in Articles 2, 3 and 4 of the Treaty. As required by Article 95, the Commission adopted the Code after consulting the Consultative Committee and with the unanimous assent of the Council.
6. According to Article 9 of the fifth Code its rules were to enter into force on 1 January 1992 and to apply until 31 December 1996. The fifth Code replaced the fourth Code which expired on 31 December 1991. The currently applicable scheme is contained in the sixth Code which entered into force on 1 January 1997 and will expire on 22 July 2002 in order to cover the period remaining until the expiry of the Treaty.
7. Under Article 1(1) of the fifth Code [a]id to the steel industry ... may be deemed Community aid and therefore compatible with the orderly functioning of the common market only if it satisfies the provisions of Articles 2 to 5.
8. Article 5 provides with regard to investment aid for undertakings located in the territory of the former German Democratic Republic:
Aid granted to steel undertakings for investment under general regional aid schemes may until 31 December 1994 be deemed compatible with the common market, provided that the aided undertaking:
...
- is located in the territory of the former German Democratic Republic and the aid is accompanied by a reduction in the overall production capacity of that territory.
9. Article 6 contains procedural rules:
1. The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid of the types referred to in Articles 2 to 5. ... The notifications of aid plans required by the Article must be lodged with the Commission at the latest by 30 June 1994 as regards aid covered by Article 5 and 30 June 1996 as regards all other aid.
...
3. The Commission shall seek the views of the Member States on plans ... for regional investment aid when the amount of the aided investment ... is in excess of ECU 10 million, and on other major aid proposals notified to it before adopting a position on them. ...
4. If, after giving notice to the interested parties concerned to submit their comments, the Commission finds that aid in a given case is incompatible with the provisions of this Decision, it shall inform the Member State concerned of its decision. The Commission shall take such a decision not later than three months after receiving the information needed to assess the proposed aid. Article 88 of the Treaty shall apply in the event of a Member State's failing to comply with that decision. The planned measures falling within paragraph 1 or 2 may be put into effect only with the approval of and subject to any conditions laid down by the Commission.
5. If the Commission fails to initiate the procedure provided for in paragraph 4 or otherwise to make its position known within two months of receiving notification of a proposal, the planned measures may be put into effect provided that the Member State first informs the Commission of its intention to do so. Where the Commission seeks the views of Member States under the provisions of paragraph 3, the abovementioned time period shall be three months.
6. All individual awards of the types of aid referred to in Articles 4 and 5 shall be notified to the Commission in accordance with the procedure provided for in paragraph 1. ...
10. Finally, Article 1(3) provides:
Aid coming within the terms of this Decision may be granted only after the procedures laid down in Article 6 have been followed and shall not be payable after 31 December 1996.
The deadline for payments of aid falling under Article 5 is 31 December 1994 with the exception of the special fiscal concessions (Investitionszulage) in the five new Länder as provided for in the German "Tax amendment law 1991", which may be payable up to 31 December 1995.
Factual background
11. Walzwerk Ilsenburg GmbH (hereinafter Ilsenburg) was formerly a State-owned steel mill established in Saxony-Anhalt in the former German Democratic Republic.
12. In 1992 it was acquired by Preussag Stahl AG (hereinafter Preussag Stahl) as a legally independent subsidiary.
13. In 1995 Ilsenburg merged formally with Preussag Stahl which henceforth held the rights previously vested in Ilsenburg.
14. In order to ensure the viability of Ilsenburg under the new market conditions, Preussag Stahl decided to carry out substantial rationalisation, including the transfer of production of heavy plates from its factory in Salzgitter in the former West Germany to the Ilsenburg site.
15. In order to finance the investment needed for that transfer, amounting to DEM 29 500 000, it was agreed that Saxony-Anhalt would grant aid comprising an investment subsidy of DEM 5 850 000 and a special fiscal concession (Investitionszulage) of DEM 950 500.
16. The aid was part of two general regional aid schemes approved by the Commission in accordance with the relevant provisions of the EC and ECSC Treaties, namely the Rahmenplan der Gemeinschaftsaufgabe Förderung der regionalen Wirtschaftsstruktur (Framework programme for the common task of improvement of regional economic structures) and the Investitionszulagengesetz (Law on special fiscal concessions as regards investments) respectively.
17. By fax dated 24 November 1994 the German Government notified the planned aid to the Commission; it was registered the following day by the Commission as proposed aid No 777/94.
18. The fax referred expressly to the notification, on 10 May 1994, of another proposal for investment aid of DEM 11 800 000 to the Ilsenburg mill for the reconversion of energy sources and the improvement of environmental protection (hereinafter proposed aid No 308/94)
19. By letter dated 1 December 1994 the Commission invited the German Government to withdraw the notification of proposed aid No 777/94 in order to avoid having to open a procedure solely on the ground of failure to observe the time-limit for notification, which had expired at the end of June 1994. The Commission noted that the fact that the time-limit had not been observed did not preclude examination of the planned aid, provided that the institution was still in a position to adopt a decision before the end of 1994. However, as proposed aid No 777/94 had only been notified on 25 November 1994, that is to say, just 17 working days before the Commission's last meeting in 1994, it considered that, even by expediting the procedure as much as possible, it would be unable to give a decision before the end of the year, since the views of the Member States had to be sought because of the level of the proposed investments.
20. By letter dated 13 December 1994 the Federal Government informed the Commission that it would not withdraw the notification of proposed aid No 777/94.
21. In the meantime, Preussag Stahl had sent a letter to Commissioners Van Miert and Bangemann on 7 December 1994, explaining that the delay in notification had been due to the protracted and detailed discussions made necessary by the impact which proposed aid No 777/94 would have on employment in the region concerned by the transfer of production at the Salzgitter site in Western Germany. For that reason Preussag Stahl asked the two Commissioners to ensure that the Commission still examined the proposed aid under the provisions of the Code.
22. On 21 December 1994 Preussag Stahl received the following fax, confirmed by letter of the same date:
Martin Bangemann
Member of the European Commission
Thank you for your letter dated 7 December 1994.
My colleague Karel van Miert and I share your view as to the urgency of adopting a decision on the aid to undertakings situated in the new German Länder so that their economic development is not hindered by excessively long administrative procedures.
For that reason I am pleased to be able to inform you that the European Commission today approved the aid to the Ilsenburg mill, pursuant to your request. I wish your undertaking every success.
Yours sincerely,
Signed: Martin Bangemann.
23. By telex of the same day (21 December 1994) the Commission informed the German authorities of several planned aids in respect of which it had no objections, including proposed aid No 308/94.
24. The amount of the investment subsidy (DEM 5 850 000), which the Landesförderinstitut Sachsen-Anhalt had granted to Preussag Stahl by decision of 20 October 1994 subject to notification to the Commission, was paid into Preussag Stahl's bank account on 23 December 1994.
25. By letter of 1 February 1995 to the Federal Government, the Commission confirmed that certain planned regional aids, including proposed aid No 308/94, were compatible with Article 5 of the Code.
26. On 15 February 1995 the Commission decided to open the examination procedure pursuant to Article 6(4) of the Code with regard to proposed aid No 777/94. That decision was notified to the German authorities by letter dated 10 March 1995, subsequently reproduced in a notice published in the Official Journal of the European Communities.
27. In the letter the Commission pointed out that the extremely late notification of the planned aid had made it impossible to give a decision on its compatibility before 31 December 1994 and that, after that date, it was no longer competent to adopt a decision according to the wording of Article 5 of the Code itself. In addition, the Commission invited other Member States and interested parties to submit their comments on proposed aid No 777/94 within one month of the date of publication of the notice.
28. In the meantime, by letter dated 23 February 1995, Mr Bangemann had informed Preussag Stahl that the approval referred to in his letter dated 21 December 1994 concerned proposed aid No 308/94 and not proposed aid No 777/94.
29. The special fiscal concession relating to proposed aid No 777/94 was granted by two decisions of the Finanzamt Wolfenbüttel of 26 October 1995 and 9 January 1996, for DEM 428 975.70 and DEM 190 052 respectively, and was paid to the applicant on those dates.
30. By Decision 96/544/ECSC of 29 May 1996 concerning State aid to Walzwerk Ilsenburg GmbH (hereinafter the contested decision) the Commission found that the investment subsidy and the special fiscal concession constituted State aid incompatible with the common market according to Article 1(1) of the Code and prohibited by Article 4(c) of the Treaty. Furthermore, it ordered them to be repaid.
31. In the contested decision the Commission essentially held that owing to the delay in notification the Commission could not form a view of the notified aid before 31 December 1994. Furthermore, under Article 5 of the Code after 31 December 1994 the Commission had no authority to declare regional investment aid compatible with the common market regardless of whether the aid would have been authorisable had it been notified in time. Finally, the letter of 21 December 1994 could not have created legitimate expectations on the part of the German authorities. Thus the German authorities, when arranging for payment of the aid on 23 December 1994, had not acted in good faith.
32. That decision was notified to the Federal Government on 26 June 1996 and forwarded by it to Preussag Stahl on 9 July 1996.
Procedure before the Court of First Instance and the judgment under appeal
33. By application lodged at the Court of First Instance on 15 August 1996, Preussag Stahl brought an action for the annulment of the contested decision. The Federal Republic of Germany intervened in support of Preussag.
34. In the judgment under appeal the Court of First Instance dismissed the application, rejecting the seven pleas in law advanced by the applicant. The reasons it gave may be summarised as follows.
35. As regards the Commission's attitude between the notification of the aid and 31 December 1994, the applicant had argued in its second and fourth pleas that the aid obviously satisfied the Code's substantive criteria. Therefore, six weeks were sufficient for the Commission to take a positive decision. In its view, it had also been a victim of discrimination in that the Commission had authorised similar aids equally notified too late.
36. The Court of First Instance held in paragraphs 52 to 60 of the judgment that since the aid was notified after 30 June 1994 the Commission was not required to adopt a decision before 31 December 1994. The procedural rules of the Code were designed to give the Commission a period of six months in order to decide on the compatibility of the aid. In any event under Article 6(5) of the Code the Commission disposed of a period of three months to take a preliminary view. There was furthermore no proof of manifest negligence on the Commission's part. In paragraph 67 the Court of First Instance held that the other aids to which the applicant had referred were either notified earlier than the aid at issue or did not require consultation of the Member States.
37. In its first and third pleas the applicant had argued that nothing prevented the Commission from deciding after 31 December 1994 that regional investment aids referred to in Article 5 of the Code were compatible with the common market provided that the material conditions for their approval were satisfied.
38. The Court of First Instance held in paragraphs 38 to 47 and 63 that under the system of the Code aid could be put into effect only with the approval of the Commission. The deadline of 31 December 1994 laid down for payment of regional investment aid was therefore necessarily also the deadline imposed on the Commission by Article 5 of the Code for adopting decisions on the compatibility of that category of aid. After 31 December 1994 the Commission could not adopt a decision on the compatibility of the aid in question. As a result, the aid could no longer be deemed compatible with the common market on the basis of Article 1(1) of the Code and was thus prohibited pursuant to Article 4(c) of the Treaty.
39. In its fifth plea the applicant had argued that the payment of the aid in question was entirely a consequence of the Commission's administrative error in the letter of Commissioner Bangemann of 21 December 1994. The aid could not be recovered since the applicant was protected by its legitimate expectations created by the letter.
40. The Court of First Instance held in paragraphs 77 to 86 that owing to the circumstances of the case the letter of 21 December could not lead Preussag to entertain legitimate expectations.
41. The Court of First Instance also dismissed the applicant's sixth and seventh pleas alleging respectively an infringement of Article 6(5) of the Code and breach of the duty to state reasons.
The appeal
42. On 23 April 1998 Preussag Stahl was renamed Salzgitter AG (hereinafter Salzgitter).
43. By application lodged at the Registry of the Court on 5 June 1998 Salzgitter brought the present appeal.
44. Salzgitter claims that the Court should annul the judgment of 31 March 1998 in Case T-129/96 Preussag Stahl v Commission and annul Commission Decision No 96/544/ECSC of 29 May 1996.
45. In support of its appeal Salzgitter advances six pleas in law. It contends that the Court of First Instance
(1) erred in law in deciding that after 31 December 1994 the Commission could no longer adopt decisions on the compatibility of the category of aid at issue;
(2) erred in law in deciding that the Commission was not required to adopt a decision on the compatibility of aid No 777/94 before 31 December 1994;
(3) infringed Article 6(4) of the Code and the general principles of State aid law in rejecting its arguments to the effect that the aid in question complied with the substantive requirements of the Code and that Article 6(4) of the Code empowered the Commission to declare aid incompatible and to order its repayment only in the event of a substantive incompatibility of the aid;
(4) infringed the principle of non-discrimination in deciding that the Commission was entitled to differentiate between aid No 777/94 and other planned aids equally notified after 30 June 1994;
(5) infringed the principle of protection of legitimate expectations in deciding that the letter by Commissioner Bangemann could not have led Preussag to entertain legitimate expectations as to the approval of the aid; and
(6) infringed the duty to state reasons in deciding that the Commission's reasoning was sufficient.
Admissibility
46. According to the Commission the appeal must be declared inadmissible in its entirety or at least in part. In its view, first, with regard to all six pleas in law Salzgitter merely repeats pleas and arguments already submitted to the Court of First Instance. Even if those pleas or arguments are reformulated, relabelled or reordered, they do not, contrary to what is required by the case-law, contain any new legal arguments specifically directed against the judgment of the Court of First Instance. Secondly, the second, fourth, fifth and sixth pleas in law challenge in reality the Court of First Instance's appraisal of facts, which falls outside the scope of the Court's review.
47. Since the Commission's first objection is made in respect of all six pleas in law, it is appropriate to discuss it at this stage of the analysis.
48. The Commission relies on judgments in which the Court has held that an appeal is inadmissible where it ... confines itself to repeating or reproducing word for word the pleas in law and arguments previously submitted to the Court of First Instance, including those based on facts expressly rejected by that Court; in reality, such an appeal amounts to no more than a request for a re-examination of the application submitted to the Court of First Instance, a matter which falls outside the jurisdiction of the Court ....
49. I consider that that formula must be applied cautiously. It follows from the case-law that it is intended only to ensure that an appeal is formulated correctly and that the appeal does not aim in reality at a retrial of the case. The repetition of several arguments already used at first instance does not of itself imply that the appeal fails to comply with those requirements. That is particularly true in cases such as the present one where the Court of First Instance upholds decisions of a Community institution on the basis of the same interpretation of Community law as the defending institution. If in such a case an appellant could not rely in its appeal on arguments already used when challenging the initial decision, the appeal procedure would be deprived of its meaning. In the Glencore Grain cases the Court therefore held that the simple fact that arguments were also raised at first instance could not entail their inadmissibility. The only requirement is that the appeal must clearly state which aspects of the contested judgment are criticised and the legal arguments which specifically support the appeal.
50. Since in the present case the appeal fulfils those requirements and since other grounds for its inadmissibility are not apparent, the appeal taken as a whole is admissible.
Substance
51. Salzgitter's first two pleas are essentially concerned with the relationship between the time-limits applicable to notification, approval and payment of investment aid for steel undertakings located in the territory of the former German Democratic Republic and the consequences which failure to comply with them might entail.
52. For the category of aid in question three dates in the fifth Code are of particular relevance.
53. The third sentence of Article 6(1) establishes a notification time-limit. Notifications of aid plans falling under by Article 5 must be lodged with the Commission at the latest by 30 June 1994.
54. The second subparagraph of Article 1(3) contains payment time-limits. Aid falling under Article 5 must be paid before 31 December 1994 with the exception of special fiscal concessions (Investitionszulagen), which may be paid up to 31 December 1995.
55. Finally, Article 5 itself states that the aids to which it applies may until 31 December 1994 be deemed compatible with the common market.
56. The arguments of the parties before the Court of First Instance and on appeal have essentially focused on the nature of the third date, contained in Article 5, and particularly on the question whether or not the Commission continued after 31 December 1994 to be competent to decide on the compatibility of investment aids for steel undertakings located in the territory of the former German Democratic Republic.
57. By contrast, the parties agree that the payment time-limits contained in Article 1(3) are of a strict nature.
58. As to the nature of the notification time-limit contained in Article 6(1), none of the parties seems to attach great significance to the fact that Germany notified the planned aid only on 25 November 1994 and thus about five months after the expiry of the time-limit in question.
59. In that regard, the appellant and the German Government have consistently argued that the notification time-limits in the Code were not preclusive and that aid notified after 30 June 1994 could in principle be authorised by the Commission. That was confirmed, in their view, by the Commission's practice. It is common ground that the Commission authorised several other aid plans notified after the expiry of the time-limit in question.
60. The Commission explicitly adopted the same position in its letter of 1 December 1994 where it stated that the notification time-limit in Article 6(1) of the fifth Code was not preclusive but merely administrative. Its only function was to permit the Commission to deal with notified aid plans in time before the end of the year. Therefore, notification after the expiry of the time-limit was not as such an obstacle to approval as long as the Commission had sufficient time to examine and to take a decision on the planned aid before the end of the year.
61. Before the Court of First Instance the Commission adopted a more guarded position on the interpretation of Article 6(1) of the Code. The judgment under appeal summarises that position as follows:
... even if the deadline for notification of aid which expired on 30 June 1994 was not mandatory, the extent to which it was exceeded by the German Government meant that it was no longer possible for [the Commission] to adopt a decision before the 31 December 1994. ...
62. The judgment under appeal does not deal explicitly with the nature of the notification time-limit. The reasoning of the Court of First Instance on the nature of the Commission's obligations in respect of belatedly notified aid presupposes, however, that the Commission had the right to authorise such aid and was not precluded from doing so by Germany's failure to respect the notification time-limit.
63. The absence of any discussion of the nature of the notification time-limit is somewhat surprising since the Court of Justice held in Germany v Commission that the corresponding notification time-limits contained in the Second Steel Aid Code were mandatory. It is also apparent from the pleadings before the Court of First Instance that the parties referred to the case-law in question.
64. When organising the oral procedure on the present appeal the Court therefore invited the parties to address the issue of the relevant part of the judgment in Germany v Commission.
65. At the hearing Salzgitter and the German Government argued mainly that Germany v Commission concerned the Second Steel Aid Code and was thus not relevant for the interpretation of the Fifth Steel Aid Code.
66. The Commission, first, repeated its guarded position on the nature of the notification time-limit. Then it stated that it was not so much the expiry of the notification time-limit but the expiry of the time-limit for a Commission decision which had made the approval of the aid impossible. Consequently, the nature of the notification time-limit was not relevant for the outcome of the case.
67. I do not agree with the Commission. In my view, the nature of the notification time-limit is decisive for the correct solution of the case. I consider that if the notification time-limit in Article 6(1) of the fifth Code was indeed mandatory and preclusive the contested decision was illegal.
68. If a notification time-limit is mandatory the Commission is precluded from authorising aid notified after its expiry (with a possible exception in cases of force majeure). In the contested decision, however, the Commission assumed that it was entitled to authorise that aid and that the time-limit was merely administrative. That is evidenced by the way the Commission argues in the contested decision that as a matter of fact (and not as a matter of law) it could not adopt an approval decision before 31 December 1994. The Commission stated as follows:
... This deadline was set in order to give the Commission sufficient time to assess the proposed aid measures before 31 December 1994.
It is true that the Commission has adopted decisions in cases that had been notified after 30 June 1994, but only where it was possible to take them before 31 December 1994. ...
[In the present case t]he time between 25 November 1994 (the date of receipt of the notification) and 21 December 1994 (the Commission's last session before 31 December 1994) ... was not sufficient ... to take a final decision.
69. The Commission's assumption that the notification time-limit was not mandatory also had an impact on the contested decision.
70. The Commission's argument to the contrary might be paraphrased as follows. Where, in reaching a negative decision, an authority has a choice of grounds available to it, it may select the ground which it considers appropriate. The Commission was therefore free to rely on the expiry of the approval time-limit instead of relying on the expiry of the notification time-limit. Ultimately the Commission found the proposed aid unlawful, albeit on different grounds. Consequently, the legality of the contested decision was not affected by its assumption on the nature of the notification time-limit.
71. It is true that where an aid is incompatible with the common market on several independent grounds the Commission can choose freely on which grounds to rely. For example the Commission might rely in a negative decision on the incompatibility of an aid with the substantive requirements of the Code, instead of relying on belated notification.
72. In the present case, however, the grounds in question are not independent of each other.
73. Instead of relying on belated notification, the Commission based the contested decision on two other elements. The Commission concludes, first, that owing to lack of time it was not obliged to approve the aid before 31 December 1994. Secondly, after that date the Commission was no longer competent to approve the aid.
74. Whilst the second element has no direct connection with the notification time-limit, the first element presupposes that the Commission had the right to approve aid notified after 30 June 1994 and thus that the time-limit was not preclusive. Consequently, the decision is based on reasoning incompatible with a preclusive notification time-limit.
75. It follows that if the Commission's assumption was wrong the contested decision was illegal.
76. A further reason to examine the nature of the notification time-limit is to establish the correct basis for the decision (in view of possible further proceedings). If the Commission's decision is annulled on the ground that the notification time-limit was mandatory there would be no basis for the Commission to approve the aid. If however the decision were to be annulled on another ground, it might be possible for the Commission to take a new decision approving the aid.
77. Consequently, before addressing the six pleas of the appellant, I will deal with the preliminary issue of the notification time-limit.
78. Two questions arise.
(1) Since none of the parties has sought to address the issue of the nature of the notification time-limit, may the Court in appeal proceedings raise the issue of its own motion and if so under what conditions?
(2) Is the notification time-limit in Article 6(1) of the Code preclusive or merely administrative?
79. Logically question (1) is prior. Since however the answer to question (1) depends on the characterisation of the notification time-limit, I will deal first with question (2).
The nature of the notification time-limit in the third sentence of Article 6(1) of the Code
80. Invited to state at the hearing their viewpoint on the relevance of Germany v Commission, Salzgitter and the German Government advanced three arguments why, in their view, the time-limit in Article 6(1) of the fifth Code is not mandatory. First, they claim that under the general principles of administrative law notification time-limits are mandatory only if this is clearly expressed, which is not the case with regard to Article 6(1) of the fifth Code. Secondly, the Court's judgment in Germany v Commission is not relevant for the interpretation of the fifth Code, in particular in view of the important differences between the second and the fifth Code. Thirdly, the Commission is bound by its own practice of treating the notification time-limit as purely indicative. I will discuss those three arguments in turn.
The nature of the notification time-limit in the light of the general principles of administrative law
81. It is true that the Court once held that [t]he principle of legal certainty ... requires that a provision laying down a preclusive period ... should be clearly and precisely drafted so that the Member States may be made fully aware of the importance of their complying with the time-limit. The Court decided in that case that the time-limit in question was not preclusive.
82. However, the formula quoted must, first, be seen in the light of the special circumstances of the case. Preclusion by the time-limit would have had the effect of depriving a Member State of the payment of financial aid its application for which ha[d] been approved and on the basis of which it ha[d] already incurred considerable expenditure ....
83. Secondly, in a recent judgment in a similar case the Court relied on the same formula in order to achieve exactly the opposite result, namely that the application time-limit in question was mandatory. The case concerned rules governing the European Regional Development Fund. They required Member States to apply for final payment of sums committed by 31 March 1995 in respect of projects approved by the Commission before 1989, in order for the Commission to conclude the projects by 30 September 1995. The Court held:
If ... the Commission had a discretion enabling it, depending on its workload and its ability finally to conclude the projects by 30 September 1995, to alter the 31 March deadline, it would have been impossible for the Member States to ascertain the date on which their requests for final payment were to be submitted so as to avoid the risk of the preclusive period being relied upon against them.
84. I propose therefore to follow the Court's usual case-by-case approach when it is called upon to decide on the nature of a time-limit. The Court does not normally rely on any general principle but takes into account a number of criteria such as the wording of the provision, its place in the system, the margin of appreciation of the Commission in that area, the objective of the time-limit in the light of the legislation's objectives and the consequences of the two possible interpretations for the principle of legal certainty.
85. In the present case the wording of the third sentence of Article 6(1) of the fifth Code is not conclusive since it merely states that notifications of aid plans must be lodged with the Commission at the latest by 30 June 1994. Nor does the Code indicate any specific sanction for failure to comply with the time-limit. One has thus to analyse the objectives of the time-limit within the system of the Code.
86. The fifth Code lays down exceptions to the general rule of Article 4(c) of the Treaty. It is intended to continue the strict regime already established by the third and fourth Codes and to introduce merely technical amendments. The exceptions granted by the Code must therefore be interpreted restrictively.
87. The preamble shows that such a restrictive approach is particularly necessary with regard to regional investment aid the approval of which is - due to its character - entirely exceptional.
88. Three important objectives of the Code with regard to regional investment aid are its early phasing out within three years, an efficient control by the Commission, and preliminary consultation of other Member States on important investment aid projects.
89. In my view, the attainment of those three objectives could be gravely endangered by considering the time-limit for notification to be merely a guideline. The six months between the notification time-limit of 30 June 1994 and the payment time-limit of 31 December 1994 is a relatively short period for the complex approval procedure laid down in Article 6 of the Code. During those six months and depending on the circumstances the Commission might have to
- ask the notifying Member State for further information on the notified aid,
- seek the views of the Member States under Article 6(3) (this involves translations),
- initiate a procedure under Article 6(4) by giving notice to the interested parties concerned to submit their comments (publication in the Official Journal and further translations might be necessary), and
- after receiving those comments and assessing the case take, as a collegiate body, a final decision which, if positive, must allow the Member State concerned to grant the aid before the payment time-limit expires.
90. In my view, the three objectives mentioned above are realistically achievable only if the Commission has in all cases at least six months between notification and 31 December 1994.
91. Against that view, it might be objected that the decisive time-limit for the protection of competition is not the time-limit for notification but the time-limit for payment on 31 December 1994. Such an approach would, however, necessarily imply tolerating payment of aid on the basis of hastily concocted approvals or even before any approval. In both cases the abovementioned second objective of effective ex ante control would be jeopardised.
92. Another objection might be that it can make no real difference whether the aid is notified on 30 June or some days later.
93. Here a further objective of the time-limit in question comes into play. Procedural time-limits for notification, approval and payment of aids were introduced for the first time in the second Code with the expressly stated purpose of ensuring that all aids from which the steel industry may benefit are treated uniformly within a single procedural framework. Uniform treatment is, however, equally endangered if the notification deadline is considered to be merely a guideline. The present case is a perfect illustration of the questions which necessarily arise if one takes a lenient approach as regards notification time-limits. What are then the limits of that leniency, who determines those limits and according to what criteria? Another connected problem is the difficulty of guaranteeing equal treatment. It is therefore not surprising that legal certainty and equal treatment play a prominent role in the Court's case-law on the nature of certain procedural time-limits.
94. It must also be emphasised that preclusive time-limits for notification, while furthering legal certainty, do not always work to the disadvantage of Member States. That is well illustrated by the position which the German Government adopted in Germany v Commission. There it argued with regard to steel aid granted by other Member States that the notification time-limit in Article 8(1) of the second Code was of a mandatory nature.
95. That leads me to the second group of arguments on the interpretation of Article 6(1) of the fifth Code, namely arguments concerning the relevance of the Court's case-law on the notification time-limit in Article 8(1) of the second Code.
The relevance of the judgment in Germany v Commission
96. In that judgment Germany sought the annulment of several Commission decisions authorising aid to steel undertakings granted by other Member States.
97. Article 8(1) of the then applicable second Code stated in terms almost identical to Article 6(1) of the fifth Code that [t]he Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aids as referred to in Articles 3 to 7. Notification pursuant to this Article must be made to the Commission no later than 30 September 1982. ...
98. The fifth indent of Article 2(1) of the second Code laid down the two other relevant time-limits. Aid granted to the steel industry could be considered compatible with the common market provided that it was approved not later than 1 July 1983 and did not lead to aid payments after 31 December 1985.
99. Article 12(1) of the second Code provided as follows:
If in the light of the market trend and of the level of prices for iron and steel products, the Commission considers it necessary to amend the time-limits laid down in Articles 2 ... and 8(1), it shall seek the unanimous assent of the Council.
If the Council fails to take a unanimous decision within two months of the Commission's request, assent shall be given by qualified majority ...
100. Germany had argued inter alia that Article 8(1) of the second Code had necessarily been infringed since the total amount of aid authorised in the contested decisions had been higher than the amount of aid notified to the Commission by 30 September 1982.
101. The Commission had argued that the notification time-limit laid down in Article 8(1) of the second Code constituted a purely procedural time-limit exclusively intended to promote effective action on the part of the Commission and, in particular, to ensure that the latter had sufficient time to consider whether the aid plans were compatible with the common market. The legal significance of the notification date had to be determined in the light of the object of Article 8(1) and of the significance of that date in relation to the other dates specified in the Code. The decisive time-limit, in its view, was 1 July 1983, the last date on which under Article 2(1) of the second Code aid could be approved.
102. Advocate General VerLoren van Themaat stated in his Opinion that even if the Commission's argument is accepted, namely that the time-limit for notification ... is not critical in the sense that even the slightest overstepping of the time-limit makes it impossible to approve aid plans notified too late, that time-limit must be stricter than the Commission claims. The fact that the Commission authorised on its own initiative substantial failures to observe the time-limit for notification had to be viewed as a major procedural flaw justifying annulment of the decisions in question.
103. With regard to the nature of the time-limit the Court went further than the Advocate General:
The Commission's argument on this point cannot be accepted. Article 12 of the Second Aids Code expressly provides that the time-limits laid down in Article 8(1) and Articles 2 ... may not be amended by the Commission unless it proves to be necessary to do so in the light of the market trend and the level of prices for iron and steel and unless the Council gives its consent.
Consequently the Commission was not entitled to authorise aid if the plans to grant or alter aid had not been notified to it by 30 September 1982.
104. None the less, the Court did not annul the Commission's decisions. In its view, the Member States concerned had notified sufficiently detailed plans in time before 30 September 1982. The increase in the amounts of aid after expiry of the notification time-limit did not in itself constitute a breach of Article 8(1) unless the increase had the effect of changing the nature of the notified aid.
105. Two years after the judgment in Germany v Commission the Court confirmed in Falck the mandatory nature of the notification time-limit in Article 8(1) of the second Code.
106. For the purposes of the present appeal Salzgitter and the German Government argue that the Court relied in Germany v Commission exclusively on Article 12 in the second Code. Since that rule was not retained in subsequent Codes the judgment cannot be authority for the interpretation of other Codes. Moreover, it was in the light of the Court's judgment that the Community legislature did not keep a rule such as Article 12 in subsequent Codes in order for the Commission to be able to treat flexibly notifications submitted after expiry of the time-limit.
107. In my view, one should not attach too much significance to the fact that the Court relied on only one argument in deciding that the time-limit in the second Code was mandatory. The only legitimate conclusion to be drawn is that in the Court's view that argument alone sufficed to counter all the Commission's arguments to the contrary. It cannot however be inferred therefrom that in doing so the Court implicitly rejected all other arguments which would have supported the same result.
108. A more serious underlying question is whether the differences between the second and the fifth Code are such as to preclude analogies.
109. In that regard, both Codes are in many respects similar. They are exceptions to the general prohibition of aids under the Treaty, have the same legal basis in Article 95 of the Treaty, use in their respective Articles 1 the same method, namely the fiction of a system of Community aid, are structured very similarly and, contrary to the first Code, contain procedural rules with a precise timetable.
110. The wording and purpose of the time-limits in Article 8(1) of the second Code and in Article 6(1) of the fifth Code in so far as it concerns aid falling under Article 5 are also identical. Both provisions impose notification time-constraints on certain forms of aid with a view to their being quickly phased out. They pursue therefore not only a procedural but also a substantive objective. They are thus to be distinguished from other notification time-limits such as for example Article 6(1) of the fourth Code which require notification a certain time before expiry of the applicable Code. The latter category of time-limits might more readily be interpreted as being inspired mainly by practical reasons.
111. The only major difference between the two Codes is the presence in the second Code of Article 12, which does not have an equivalent in subsequent Codes. As already explained, Salzgitter and the German Government maintain that it was in the light of the Court's reasoning in Germany v Commission that the Community legislature did not keep a rule such as Article 12 of the second Code in the following Codes.
112. I find that line of argument unconvincing. Article 12 of the second Code allowed the Commission to amend the time-limits in Articles 2 and 8(1) if that proved to be necessary in the light of market developments and if the Council gave its assent. Under Article 12(1), subparagraph 2, it could do so - where necessary - with the assent by qualified majority of the Council. Legislative changes to the time-limits could thus be made more easily than changes to the rest of the Code, which under the general provision of Article 11(2), required unanimous assent. According to the preamble to the second Code the objective of Article 12 was to incorporate a measure of flexibility in the matter of time-limits.
113. Since there is no provision such as Article 12 in the subsequent Codes all amendments to the Codes including amendments of the time-limits must be made under the strict regime of Article 95 of the Treaty, namely by the Commission with unanimous assent of the Council.
114. According to my understanding of Germany v Commission the Commission was not empowered to amend the notification time-limit without the assent (whether unanimous or by a qualified majority) of the Council. In my view, the same must apply a fortiori with regard to the fifth Code where the Commission always needs the unanimous assent of the Council for any amendment of the time-limits.
115. There are other reasons for concluding that the fifth Code is intended to impose a regime at least as strict as that of the second Code.
116. First, the preambles to the third, fourth and fifth Codes do not mention flexibility with regard to time-limits. Secondly, they do not for example authorise operating aid. Thirdly, the third Code was adopted approximately two months after the judgment in Germany v Commission in which the Court declared that the notification time-limit in the second Code was a strict time-limit. In the circumstances the authors of the third Code would have had to indicate very clearly that the notification deadline was of a merely indicative nature.
117. Finally, there are two arguments drawn from the differences between the respective timetables of the second and the fifth Codes which support my view.
118. On the one hand, under the second Code the Member States had roughly one year between the entry into force of the Code in August 1981 and the expiry of the time-limit to notify aid plans in September 1982. Under the Fifth Code Germany had roughly two and a half years between its entry into force in January 1992 and the expiry of the notification time-limit on 30 June 1994. Delays in notifying are thus even less understandable in the context of the fifth Code.
119. On the other hand, under the second Code the Commission had roughly one year between notification and approval and Member States had another two and a half years for payment. Nevertheless the Court held that the notification time-limit was strict. Under the fifth Code the Commission has in principle only six months for the assessment of the aid, within which payment also has to be effected. Since the timetable is much tighter, early notification is more important.
120. Thus in two important cases which were governed by the more lenient regime of the second Code the Court required notification before the expiry of the deadline under Article 8(1). There is, in my view, no good reason to adopt in the present case a different interpretation of the notification time-limit in Article 6(1) of the fifth Code.
The Commission's practice and the principle of legitimate expectations
121. It is common ground that the Commission in its practice adopted a lenient attitude and treated the notification time-limit in Article 6(1) of the fifth Code as merely indicative. Salzgitter and the German Government claim that it is bound by that practice which in their view created legitimate expectations.
122. It is however well established that expectations created by illegal behaviour of the institutions are not in principle legitimate and can therefore not give rise to the acquisition of rights contra legem. In Lucchini the Court held, in the formulation of Advocate General Capotorti, that ... conduct of the authorities which is outside the normal application of the law to which it is itself subject cannot ... give rise to a legitimate expectation on the part of a person subject to those authorities. The underlying idea is that there is no right to be treated equally with a person who himself benefited from illegal treatment. One illegality cannot justify further illegality.
123. The argument based on legitimate expectations is no stronger where the author of an individual act is also the author of the act of general application on which the individual act is based. It is a consequence of the hierarchy of Community legal acts that an act of general application such as the fifth Code cannot implicitly be altered by subsequent individual decisions based on that same act of general application. Moreover, to accept the contrary argument would allow the Commission to circumvent the requirements of Article 95 of the Treaty, namely unanimous assent of the Council, in order to obtain amendments of the fifth Code.
124. I accordingly conclude that the notification time-limit for aid to steel undertakings in the former German Democratic Republic in Article 6(1) of the fifth Code is mandatory and preclusive.
Should the Court raise of its own motion the issue of the mandatory nature of the notification time-limit?
125. The Court of First Instance did not address the issue of the nature of the notification time-limit. Before the Court of Justice the parties have argued that the time-limit is not preclusive or that in any event it is not relevant for the solution of the case. Moreover, they did so only after being expressly invited to comment on the issue.
126. However, none of the legal questions raised in the appellant's pleas would have arisen if the Commission had respected the mandatory nature of the notification time-limit. I have also argued above that the contested decision is based on the assumption that the notification time-limit was merely administrative. The contested decision was thus taken in breach of Article 6(1) of the fifth Code.
127. In that situation of tension between, on the one hand, the reluctance of the parties (and of the Court of First Instance) to address the issue, and, on the other hand, the Court's role as guardian of the rule of law, the question is whether the Court may or must raise the issue of its own motion.
128. That question arises here in appeal proceedings. To my knowledge the Court has not yet defined for such proceedings the limits on raising new pleas in law of its own motion. In the national legal orders the possibility of doing so is sometimes more restricted at the appeal stage than in the courts below.
129. It is well established that, in principle, grounds of appeal not raised by the parties cannot be upheld by the Court. None the less, there must, in my view, be an exception as regards pleas in law involving matters of public policy (moyens d'ordre public).
130. That is, first, because the Court has the task under Article 31 of the Treaty of ensuring that in the interpretation and application of Community rules the law is observed. The appeal procedure is an important channel through which the Court exercises that function. In other procedures it is settled case-law that the two Community Courts may or even must raise pleas in law involving matters of public policy of their own motion. There is no reason why at the appeal stage that possibility should be excluded altogether.
131. Secondly, several elements of the Court's case-law point in that direction. The Court recently held that the Community judicature must raise matters of public policy of its own motion. As regards more particularly appeal proceedings the Court has already examined an objection of admissibility of its own motion. Moreover, in a number of appeal cases it has been assumed that there was nothing in the nature of appeal proceedings which would prevent the Court from raising matters of public policy of its own motion.
132. Finally, the Court clearly attaches importance to the fact that national appeal courts should be able to raise certain points of Community law of their own motion. It would be inconsistent if the Court were to exclude that possibility altogether with regard to its own appeal procedures.
133. The question is thus not so much whether the Court has the power to raise pleas in law involving matters of public policy of its own motion but whether in the present case the Commission's disregard of the notification time-limit is a matter of public policy.
134. It is difficult to define matters of public policy. Which points a court may raise of its own motion ultimately depends on the fundamental values of the legal order concerned, on the respective roles of the parties and the court under the applicable rules of procedure, on the branch of the judiciary which is called upon to apply the concept, and on the level at which the proceedings take place.
135. As regards the Community legal order it has been argued that a distinction between the different grounds of annulment is of relevance. Under Article 33(1) of the Treaty, decisions of the Commission may be declared void on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the Treaty or any rule of law relating to its application, or misuse of power. According to the theory in question, pleas invoking the first two grounds which concern the so called légalité externe of an act may be raised by the Court of its own motion, whilst pleas based on the remaining two pleas concerning the légalité interne may not.
136. A recent judgment seems to confirm that distinction. In the context of Article 173 of the EC Treaty (now Article 230 EC) the Court stated, with regard to pleas alleging respectively an infringement of Article 190 of the EC Treaty (now Article 253 EC) and a manifest error of assessment, as follows:
It must, however, be remembered that these are distinct pleas, each of which may be raised in proceedings under Article 173 of the Treaty. The first, alleging absence of reasons or inadequacy of the reasons stated, goes to an issue of infringement of essential procedural requirements within the meaning of that article and, involving a matter of public policy, must be raised by the Community judicature of its own motion .... By contrast, the second, which goes to the substantive legality of the contested decision, is concerned with infringement of a rule of law relating to the application of the Treaty within the meaning of Article 173, and can be examined by the Community judicature only if it is raised by the applicant.
137. In my view, it would be unwise to place much reliance on that distinction (which in any event was made by the Court in a situation where it had no direct consequences for the outcome of the case). First, the distinction between different grounds of annulment is in itself formalistic and uncertain. It must be borne in mind that the third ground of annulment encompasses the first two, since lack of competence and infringement of an essential procedural requirement always constitute breaches of Community law. Secondly, in the light of the Court's role as the guardian of the rule of law, it would be unacceptable if the Court were precluded from raising of its own motion a manifest and grave substantive illegality, for example an infringement of a fundamental right or of Article 85 of the EC Treaty (now Article 81 EC), whilst being able to raise of its own motion infringements of certain procedural rules.
138. I prefer therefore to follow an approach which the Court has adopted in other cases, where the Court has raised a plea of its own motion without looking into its theoretical classification. In the words of the Court the question is whether it appears to be inappropriate to allow doubts as to the legality of [an act] to persist.
139. Is the Commission's disregard of the preclusive nature of the notification time-limit a breach sufficiently important to be raised by the Court of its own motion? What are the criteria for deciding the question whether or not it is inappropriate for the Court to allow doubts as to the legality of an act to persist? Is the preclusive nature of the notification time-limit in the present case a matter of public policy?
140. Three general criteria seem relevant to answer those questions.
141. First, it must be determined whether the rule infringed is designed to serve a fundamental objective of the Community legal order and whether it plays a significant role in the achievement of that objective.
142. Secondly, it must be established whether the rule infringed was laid down in the interest of third parties or the public in general and not merely in the interest of the persons directly concerned.
143. Thirdly, the breach of the rule should be manifest, meaning that both the Court and third parties can easily detect the breach and identify it as such. Where a breach of Community law is evident the authority of the rule of law is most endangered. At the same time the Court can be more confident of reaching the right result.
144. I consider that in the present case those three conditions are fulfilled.
145. First, I have argued above that Article 6(1) of the fifth Code is part of a scheme which serves to achieve four objectives with regard to regional investment aid for steel undertakings located in the former German Democratic Republic. Those objectives are to contribute to the early phasing out of that aid within three years, to allow an efficient control by the Commission, to involve other Member States in the decision-making process through preliminary consultation on important investment aid projects and to guarantee uniform treatment and legal certainty. Ultimately, the scheme is designed to protect competing steel undertakings located in Germany and in other Member States against unfair competition arising out of unjustifiable investment subsidies in Eastern Germany and thus serves to achieve a fundamental purpose of the Treaty. I have also explained why the notification time-limit plays such an important role within that scheme.
146. Secondly, contrary to what the Commission seems to assume (openly in Germany v Commission and more implicitly in the present case), the notification time-limit in Article 6(1) was not adopted only to promote effective action on the part of its own services and thus only in the interest of one of the parties to the proceedings; it follows from what has been stated above that it serves most of all the interests of other Member States, of competing steel undertakings and, ultimately, of the Community consumer and taxpayer.
147. Finally, and this is perhaps the most serious element in the present case, the Commission's breach of the law was manifest. The breach was manifest, first, because compliance with a time-limit is a matter easily ascertainable by any interested party. Steps are taken either before or after it occurs. There is no room for intermediate, grey situations. (Those considerations may also be relevant where the Court raises of its own motion the time-limits for taking proceedings before the Court itself. ) Secondly, after the judgments in Germany v Commission and Falck it was evident that the Commission could no longer validly claim that the notification time-limits in the following steel aid codes were merely indicative. It undermines respect for the rule of law in the Community legal order if despite two Court judgments to the contrary an institution continues to consider admissible the authorisation of aid notified after the expiry of the relevant time-limit.
148. It follows from those considerations that the Court of First Instance should have raised the issue of its own motion as a matter of public policy. It follows also that at the appeal stage the Court must examine the issue despite the failure of the Court of First Instance to do so. One of the main functions of the appeal procedure, which is limited to points of law only, is precisely to ensure that the principle of legality is respected. Where the Court considers that the parties at first instance and the Court of First Instance failed to raise a crucial matter of public policy, the will of those same parties cannot determine whether the issue comes to light at the appeal stage. If it was inappropriate for the Court of First Instance to allow doubts as to the legality of [an act] to persist, then it would be even more inappropriate if the Court which within the Community legal order is the supreme guardian of the law were not to raise the issue.
149. Even if one adopts a restrictive attitude as to the issues which can be raised by the Court of its own motion, the issue of the time-limit is one which in my view may and must be raised.
150. First, the issue is limited to a point of law only. All the relevant facts as regards the belated notification of the aid are established and known to the Court. Secondly, to raise that new issue will not lead to a judgment ultra petita or to a prohibited change of the subject-matter of the proceedings. The mandatory nature of the time-limit will ultimately justify annulment of the contested Commission decision and thus the grant of the relief sought. To raise the issue is therefore to be distinguished from introducing a new claim for relief modifying the boundaries of the dispute as defined by the forms of order sought. Finally, the prohibition on the parties introducing new pleas in law at the appeal stage, established by the Court in Brazzelli Lualdi, cannot apply to issues in law involving matters of public policy which, by definition, must be raised by the Court itself.
Consequences for the outcome of the case
151. The views I have reached so far may be summarised as follows.
152. The notification time-limit of 30 June 1994 laid down in Article 6(1) of the fifth Code is preclusive. Since the contested decision is partly based on the assumption that the time-limit is merely administrative, the decision infringes Article 6(1) of the fifth Code. The preclusive nature of the time-limit is a matter of public policy. Therefore the Court must raise it of its own motion, even if neither the Court of First Instance nor the parties have addressed the issue.
153. As a first consequence the judgment of the Court of First Instance must be set aside because it failed to raise the mandatory nature of the notification time-limit of its own motion.
154. As a second consequence, since all the matters of fact and law are established, the Court can give final judgment. The contested decision should be annulled because it is based on a reasoning incompatible with the mandatory nature of Article 6(1) of the fifth Code. Under Article 34 of the Treaty the matter must be referred back to the Commission which has to take the necessary steps to comply with the judgment.
155. As to costs it must be recalled that at the hearing both parties objected to the solution I propose. The circumstances are therefore exceptional within the meaning of Article 69(3) of the Rules of Procedure. In my view each party should bear its own costs.
In the alternative: The Commission's competence ratione temporis to approve aid
156. I will nevertheless consider in the alternative the pleas advanced by the appellant.
157. In its first plea the appellant alleges that the Court of First Instance erred in law in deciding that after 31 December 1994 the Commission could no longer adopt decisions on the compatibility of investment aid granted under general regional aid schemes to steel undertakings located in the territory of the former German Democratic Republic.
158. It may be worthwhile to recall the essential facts. The German Government notified the aid on 25 November 1994. Germany paid the investment subsidy into the appellant's bank account on 23 December 1994. On 15 February 1995 the Commission decided to open the formal examination procedure pursuant to Article 6(4) of the fifth Code. The special fiscal concession (Investitionszulage) was granted by two decisions of the German tax authorities of 26 October 1995 and 9 January 1996.
159. In its contested decision of 29 May 1996 the Commission found that the investment subsidy and the special fiscal concession constituted state aid incompatible with the common market and prohibited under the Treaty and the Code, and ordered them to be repaid.
160. The Commission argued, first, that owing to the nature of the products and the location of the undertaking concerned, Article 4(c) of the Treaty and Article 5 of the fifth Code were in principle applicable. Then the Commission held as follows:
However, Article 5 of the [fifth Code] shows clearly that the Commission only has the authority to declare regional investment aid compatible with the common market for steel before 31 December 1994; it follows that it has no such authority after 31 December 1994.
As from 1 January 1995 the [fifth Code] makes no further provision for declaring regional investment aid for steel undertakings in Germany compatible with the common market for steel, since Articles 1(1) and 5 of the [fifth Code] do not admit of such compatibility with the common market after 31 December 1994, regardless of whether or not the aid would have been authorisable had it been notified in time.
...
Since Article 5 of the [fifth Code] provides that regional investment aid may only be declared compatible ... before 31 December 1994, and since the Commission could not form a view of the notified aid before that date, the State aid notified is incompatible with the common market according to Article 1(1) of the [fifth Code] and prohibited by Article 4(c) of the ECSC Treaty.
The aid in question has already been paid. Since it is incompatible with the common market and prohibited by the ECSC Treaty, it has to be recovered ...
161. The Court of First Instance confirmed that analysis and held at the end of paragraph 41 of the judgment under appeal that Article 5 of the Code imposes on the Commission a deadline for adopting decisions on the compatibility of the category of aid in question.
162. It is not easy to interpret the exact scope of that central statement. It seems to follow from paragraph 46 of the contested judgment that the statement relates more particularly to the Commission's competence to examine the substantive compatibility of an aid. That in turn implies that no approval of aid may be given after 31 December 1994, since the examination of an aid's substantive compatibility constitutes the necessary precondition for its approval. In the final analysis I consider that both the Commission decision and the Court of First Instance's judgment can be reduced to one basic proposition: Article 5 means that approval of aid has to take place before 31 December 1994 and that after that date the Commission has no competence to declare aid to steel undertakings in the five new Länder compatible with the common market for steel.
163. The issue is therefore whether Article 5 must be read as laying down an approval deadline.
Wording
164. Under Article 5 the aid in question may until 31 December 1994 be deemed compatible with the common market .... The Code does not say declared compatible, which might have suggested a time-limit for approval of the aid. Still less does the Code say: The Commission may until 31 December 1994 declare the aid compatible, which would clearly have governed procedure rather than substance. A comparison may be made with Articles 92 and 93 of the EC Treaty (now, after amendment, Articles 87 and 88 EC), on which the provisions of the Code were modelled. Article 92, setting out the substantive provisions on aid, provides in paragraph 3: The following may be considered to be compatible with the common market: ... (emphasis added). Article 93, dealing with procedure, provides in paragraph 3: If [the Commission] considers that any ... plan is not compatible ... Similarly, in Article 5 of the Code, the expression may ... be deemed compatible suggests rather a time-limit for compatibility of the aid rather than a procedural requirement. In fact it repeats the wording of Article 1(1): Aid ... may be deemed Community aid and therefore compatible with the orderly functioning of the common market ... Thus, Article 5 obliges a Member State seeking approval of aid to comply by 31 December 1994 with all the procedural and substantive requirements for the compatibility of the aid in order for it to be eligible for approval. It does not impose a time-limit on the Commission for approval of the aid. The German text of Article 5 is even clearer in that respect.
Legislative history
165. The legislative history reinforces the impression that Article 5 does not lay down an approval deadline.
166. Article 2 of the second Code provided in an analogous context that [a]ids ... may be considered compatible ... provided that ... they are approved not later than 1 July 1983. That wording clearly suggested a time-limit for approval. That was confirmed by the preamble to Commission Decision No 1018/85/ECSC of 19 April 1985 amending the second Code which stated that Articles 2, 5 and 8 of [the second Code] have laid down deadlines for notifications, approvals and payments of aids.
167. In the subsequent Codes, however, the Community legislature replaced the formula of the second Code by may until ... be deemed compatible. Typical examples in that respect are Article 5 of the fifth Code and Article 5 of the sixth Code. If the Community legislature had intended Article 5 of the fifth Code to lay down a time-limit for approval of aid, it would be expected to have maintained the unambiguous formula used in the second Code.
Interpretation in the light of the scheme of the Code
168. The Court of First Instance relied exclusively, in the decisive paragraph 41 of the judgment under appeal, on a systematic interpretation of the Code, and in particular on the relationship between Articles 5, 1 and 6. After quoting extensively from those articles, the Court of First Instance held that:
... aid coming within the terms of the Code could be put into effect only with the prior approval of the Commission. To that extent, as is clear from the reference to Article 5 of the Code in the second paragraph of Article 1(3), the deadline of 31 December 1994 laid down for the payment of regional investment aids was necessarily the deadline imposed on the Commission by Article 5 for adopting decisions on the compatibility of that category of aid.
169. I find that reasoning unconvincing.
170. First of all, it is not clear why the Court of First Instance relies on the reference to Article 5 in the second paragraph of Article 1(3) which provides that [t]he deadline for payments of aid falling under Article 5 is 31 December 1994 .... In my view, Article 1(3) refers to Article 5 merely to define the scope of application of the special payment time-limit in issue. I do not see how that use of Article 5 for the purposes of the application of another Article of the Code should have repercussions on the interpretation of Article 5 itself.
171. As regards the two other elements of the reasoning in the passage cited, there seems to be a logical error.
172. The first paragraph of Article 1(3) states that aid may be granted only after the procedures laid down in Article 6 have been followed. Article 6(1) provides that the Commission must be informed of any plans to grant aid in advance and the last sentence of Article 6(4) states that the planned measures may be put into effect only with the approval of and subject to any conditions laid down by the Commission. Those three rules boil down to a first prohibition - and here I agree with the Court of First Instance - that a Member State is in principle not allowed to put aid into effect without prior approval of the Commission.
173. Under a second prohibition contained in the second paragraph of Article 1(3) aid falling under Article 5 must in principle not be paid after 31 December 1994 (with the exception of the special fiscal concessions).
174. If I am not mistaken the Court of First Instance's combined reading of those two prohibitions in paragraph 41 of the judgment under appeal might be glossed as follows. If approval has to precede payment and if payment has to take place by 31 December 1994, then there can be no approval after 31 December 1994.
175. That apparently attractive syllogism is however based on wrong premisses.
176. Under the scheme of the Code it is not the Commission which has an obligation to approve aid before a given payment date, but the Member State which has an obligation to wait for the Commission's approval before implementing the aid.
177. It follows that the scheme of the Code might generate undesirable effects even in situations where a Member State complies with all the requirements of the Code.
178. Suppose for example that a planned aid measure has been correctly notified in advance and that it complies with the substantive requirements of the Code. If in such a situation the Commission does not approve the notified aid before 31 December 1994, that aid cannot be granted without infringing at least one prohibition of the Code. Either the Member State infringes, as in the present case, the first prohibition by putting the aid into effect before approval, or it waits for approval and therefore risks infringement of the second prohibition by paying the aid after the expiry of the deadline laid down in the second paragraph of Article 1(3).
179. The decisive element, namely whether the Commission approves an aid before or after expiry of the payment deadline, depends entirely on its administrative ability and/or its willingness to adopt such a decision before 31 December 1994. That means in practice that through inaction the Commission can force a Member State to infringe the Code although that State has complied with all the requirements of the Code.
180. In the situation just described there can be no doubt that the Commission must approve the aid since the only irregularity affecting it is the result of its own delay. That implies in turn that in many instances the Commission will be obliged to take approval decisions after 31 December 1994. I have described above how difficult it might be for the Commission to decide within six months on notified aid plans. Those difficulties could be one reason why the modern steel aid codes no longer contain any approval deadlines.
181. It follows also from those considerations that the interpretation of Article 5 as an approval deadline would have unreasonable consequences. The Commission would be able to determine its own competence ratione temporis merely by choosing to decide on the aid at issue before or after 31 December 1994. A Member State's right to grant aid would ultimately depend on the administration's decision-making resources or - even worse - its goodwill. To interpret Article 5 as suggested by the Commission and the Court of First Instance would establish a time-limit the expiry of which would have grave consequences for parties who have no possibility of influencing compliance with that deadline. That may be a further reason why the second Code was the first and last Code to contain a true approval deadline.
182. It might be argued that Article 5 must be read as an approval time-limit at least in cases where the aid has been notified after 30 June 1994, and therefore after the expiry of the notification time-limit.
183. There is, however, nothing in the Code which suggests that Article 5 can be interpreted in two different ways depending on whether the aid was notified before or after a certain date. Indeed there would be even less justification for treating Article 5 as an approval time-limit where the timetable has been shortened by delay in notifying the aid. In my view, the Commission's postulation of an approval time-limit seems in reality an ill-conceived solution for the entirely different problem of belated notification.
Teleological arguments
184. According to the preamble to the fifth Code regional investment aids are exceptional in nature and there is no justification in maintaining them beyond the appropriate period for the modernisation of the steel plants concerned, which is set at three years. The aim of the Code as regards investment aid is thus that the aided investments in the modernisation of steel plants take place before the end of 1994. That is confirmed by the rules applicable to the special fiscal concession (Investitionszulage) which is granted under German tax law after the investment has taken place. The payment of that type of aid is allowed up to 31 December 1995 (Article 1(3)).
185. In order to achieve that aim it is important that Member States respect their obligations under the Code. They should notify the aid sufficiently in advance and in principle they should not grant aid after 31 December 1994.
186. However it makes no difference to the attainment of that objective if because of administrative difficulties for example the Commission approves the aid on 1 January 1995 instead of 31 December 1994. It is only the time when the investments are made which is material as far as the effects of the aid on competition are concerned and not the time at which the Commission decision on the compatibility of the aid is adopted.
187. I accordingly conclude that if the Court were not to agree with the solution proposed above it would have to uphold the appellant's first plea in law, set aside the judgment of the Court of First Instance and annul the contested decision. The Commission would in that event have to take the necessary steps according to Article 34 of the Treaty, and should be ordered to pay the costs.
188. Since I conclude that the appellant's first plea is well founded, it is unnecessary to examine the other pleas, which arise only in the further alternative.
Conclusion
189. I have argued mainly that the Court should rely on the Commission's failure to respect the preclusive notification time-limit in Article 6(1) of the fifth Code. The outcome of the case under that first line of reasoning seems to differ from the one proposed as the result of the alternative line of reasoning only in the decision on the award of costs. As I have suggested, however, the steps the Commission will have to take under Article 34 of the Treaty and thus the final outcome of the case will ultimately depend on the line of reasoning adopted.
190. I accordingly conclude that the Court should
- annul the judgment of 31 March 1998 in Case T-129/96 Preussag Stahl v Commission;
- annul Commission Decision No 96/544/ECSC of 29 May 1996;
- order the appellant and the Commission to bear their own costs; and
- order the German Government to bear its own costs.