61997CC0441_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
I - Introduction
1. The present Opinion concerns separate appeals against the judgments of the Court of First Instance in Case T-243/94 British Steel v Commission and Case T-244/94 Wirtschaftsvereinigung Stahl and Others v Commission. The proceedings are principally concerned with the degree to which the Commission, having adopted general rules or a code under Article 95 of the ECSC Treaty regarding the permissibility of certain types of State aid in the steel sector, was precluded from making individual decisions pursuant to the same article authorising the grant of aid outside the specified categories.
II - Legal and factual context
2. I will begin by summarising the different steps taken by the Commission and the Council and will then address the legal issues.
3. The first step was Commission Decision No 3855/91/ECSC of 27 November 1991 establishing Community rules for aid to the steel industry (hereinafter the Fifth Aid Code or the Aid Code) which was adopted on the basis of Article 95 of the ECSC Treaty. The first recital in the preamble to the Aid Code states:
Any aid in any form whatsoever and whether specific or non-specific which Member States might grant to their steel industries is prohibited pursuant to Article 4(c) of the Treaty.
Article 4(c) of the ECSC Treaty, thus recalled, provides:
The following are recognised as incompatible with the common market for coal and steel and shall accordingly be abolished and prohibited within the Community, as provided in this Treaty:
...
(c) subsidies or aids granted by States, or special charges imposed by States, in any form whatsoever;
... .
The fifth recital in the preamble to the Fifth Aid Code states:
The strict regime thus established, which now applies to the entire territory of the 12 Member States, has ensured fair competition in this industry in recent years. It is consistent with the objective pursued through the completion of the single market. It also conforms to the rules on State aid laid down in the Consensus on the steel industry concluded between the Community and the United States in November 1989, which is valid until 31 March 1992. It should therefore continue to be applied, albeit with a number of technical modifications.
4. Article 1(1) of the Fifth Aid Code provides:
Aid to the steel industry, whether specific or non-specific, financed by Member States or their regional or local authorities or through State resources in any form whatsoever 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.
5. Articles 2 to 5 of the Aid Code provide that, subject to certain conditions, aid for research and development, aid for environmental protection, aid for closures and aid granted under general regional aid schemes in Greece, Portugal and the territory of the former German Democratic Republic respectively may be deemed to be compatible with the common market. The Aid Code entered into force on 1 January 1992 and remained in force until 31 December 1996.
6. It is clear, however, in the light of the case-law of the Court, that neither the Aid Code nor the apparent comprehensive prohibition of aid can be considered in isolation from the Code's legal basis, Article 95 of the ECSC Treaty (hereinafter the Treaty), the first subparagraph of which states:
In all cases not provided for in this Treaty where it becomes apparent that a decision or recommendation of the High Authority is necessary to attain, within the common market in coal and steel and in accordance with Article 5, one of the objectives of the Community set out in Articles 2, 3 and 4, the decision may be taken or the recommendation made with the unanimous assent of the Council and after the Consultative Committee has been consulted.
7. After the adoption of the Fifth Aid Code, the deterioration of the economic and financial situation of the steel industry prompted the Commission to prepare a restructuring plan in 1992 which, along with an independent expert report, formed the basis for a Commission programme of voluntary capacity reduction and accompanying social measures, the broad outlines of which were welcomed by the Council in its Conclusions of 25 February 1993.
8. At the Council meeting of 17 December 1993, global agreement was reached for the approval of grants of State aid to six public steel undertakings intended to accompany the restructuring or privatisation of the public undertakings concerned. A joint statement by the Council and the Commission was entered in the minutes of that meeting which included the following: In giving its unanimous consent to the current Article 95 proposals, the Council [reaffirmed] its commitment to a strict application of the Steel Aid Code [...] and, in the absence of authorisation under the Code, Article 4(c) of the ECSC Treaty. Without prejudice to the right of any Member State to request a decision under Article 95 of the ECSC Treaty, and in accordance with the Council conclusions of 25 February 1993, the Council [declared] its firm commitment to avoid any further Article 95 derogations in respect of aid for any individual companies.
9. On 22 December 1993 the Council gave its assent in accordance with the first paragraph of Article 95 of the Treaty to the decisions to grant the abovementioned aid. On 12 April 1994, the Commission adopted six ad hoc decisions on the basis of Article 95 of the Treaty. These derogate from Article 4(c) of the Treaty by authorising the grant of State aid which does not meet the criteria permitting derogation established by the Fifth Aid Code. They included Commission Decision 94/258/ECSC of 12 April 1994 concerning aid to be granted by Spain to the public integrated steel company Corporación de la Siderurgia Integral and Commission Decision 94/259/ECSC of 12 April 1994 concerning aid to be granted by Italy to the public steel sector (Ilva group) (hereinafter referred to collectively as the contested Decisions). Those authorisations were made subject, in accordance with the Council's assent, to obligations regarding the reduction of capacity on the basis of the Commission's Communication to the Council and the European Parliament of 13 April 1994.
10. For the purposes of the appeal against the Wirtschaftsvereinigung judgment, it is useful to refer to the content of Decision 94/259/ECSC. The second point in the preamble to that Decision refers to aid which was authorised for previous restructuring efforts at Ilva, but which had not been sufficient to restore it to viability. The first indent in the fourth point in the grounds, in order to demonstrate the necessity for the Decision, states:
The sharp deterioration in the Community steel market since mid 1990 has created serious difficulties in the steel industry in several Member States, including Italy. The aim of providing the Italian steel industry with a sound and economically viable structure contributes to achieving the objectives laid down in the ECSC Treaty, and in particular those set out in Articles 2 and 3. The Commission considers that, in terms of compliance with the specific conditions dictated by the Community's common interest ... and set out in this Decision, the public assistance to be granted by Italy is necessary and proportionate to achieving these aims.
The first indent of the fifth point states:
So as to limit the impact on competition to the minimum, it is important that the Italian public steel sector should make a crucial contribution to the structural adjustment still necessary in that sector, through capacity reductions carried out in return for the aid exceptionally approved.
The first indent of the sixth point of the grounds states that the granting of operating aid must be limited to what is strictly necessary, while the first indent of the seventh point states that the implementation of the Decision requires strict monitoring.
11. As a result, Article 1(1) of Decision 94/259/ECSC authorised certain maximum aid payments by way of a capital injection, State coverage of indebtedness and coverage of restructuring and liquidation expenditure. Article 1(2) to (5) provided that no further aid would be possible if viability was not attained by the end of 1994, that the aid could not be used for unfair competition practices, that the undertakings concerned were to be wholly privatised by the end of 1994 and that all further loans and debts were to be treated by the State on commercial terms. Article 2 provided for specific plant closures or capacity reductions for various steel products. Article 3 set out conditions for a non-discriminatory privatisation process, to be undertaken without additional State aid or the grant of tax credits for past losses and to be subject to conditions regarding the group's debt levels. Articles 4 to 6 of the Decision set out the monitoring process and the consequences of non-compliance with the conditions provided for by the Decision.
III - The contested judgments
12. Wirtschaftsvereinigung Stahl, Thyssen Stahl AG, Preussag Stahl AG and Hoogovens Staal BV (hereinafter Wirtschaftsvereinigung) applied to the Court of First Instance under Article 33 of the ECSC Treaty for the annulment of Decision 94/259/ECSC. In a separate action, British Steel plc (hereinafter British Steel) sought the annulment of both the contested Decisions. The Court of First Instance permitted interventions in favour of the Commission by the Council, the Italian Republic and Ilva in both cases and by the Kingdom of Spain in the British Steel case. SSAB Svenskt Stål AB and Det Danske Stålvalseværk A/S were given leave to intervene in favour of the applicant in the British Steel case.
13. In support of their action for annulment, Wirtschaftsvereinigung relied on seven pleas in law, of which two form the basis of its appeal, viz. those alleging, respectively, breach of the exhaustive terms of the Fifth Aid Code and breach of Article 95 of the Treaty, through non-observance of the requirement that the aid be necessary to the attainment of the objectives set out in Articles 2 to 4 of the ECSC Treaty.
14. In its action, British Steel relied on four pleas in law, of which two also form the basis of its appeal, viz. those alleging, respectively, lack of competence of the Commission to adopt the contested Decisions and breach of the principle of the protection of legitimate expectations.
15. The Court of First Instance rejected all of the arguments presented by the applicants in the two cases and dismissed both applications, for the reasons summarised below.
A. Wirtschaftsvereinigung: Breach of the Fifth Aid Code;
British Steel: Lack of competence
16. In their respective pleas of breach of the Fifth Aid Code and lack of competence, Wirtschaftsvereinigung and British Steel considered that the Aid Code constituted an exhaustive and binding legal regime of general application. In particular, Article 1 of the Code expressly prohibited all operating and investment aid other than that provided for therein. The Commission could not attempt to evade the procedure prescribed by the applicable basic decision - the Aid Code - as this was itself adopted by the Commission on the basis of Article 95 of the Treaty. Thus, the Aid Code constituted a definitive assessment of what was necessary to achieve the objectives of the Treaty, unless it was itself amended pursuant to that article by a decision of general application.
17. The Commission took the view that the prohibition of aid derived directly from Article 4(c) of the Treaty and was thus subject to further derogation by way of individual decision adopted on the basis of Article 95 of the Treaty. It was entitled to examine the compatibility with the Treaty of other forms of aid not provided for by the Aid Code itself in circumstances where the steel market was experiencing a serious crisis. The Council, Italy and Ilva argued that the Aid Code and the contested Decisions were legal measures of the same rank adopted on the same legal basis with different material scope. The discretionary power conferred on the Commission by Article 95 of the Treaty was not exhausted by the adoption of the former measure, which identified only those measures which it then identified as compatible with the Treaty. As that power was designed to deal with unforeseen exceptional situations, the Commission was not competent to limit in advance its exercise of that discretion in other circumstances.
18. The Court of First Instance described Wirtschaftsvereinigung's plea as being, essentially, that by authorising the aid in question in the contested individual decision the Commission used the powers conferred on it by the first and second paragraphs of Article 95 of the Treaty in order to evade the conditions laid down by the Aid Code, which is of general application. It interpreted British Steel's plea as being, essentially, that the two contested decisions run counter to the Aid Code and thereby contravene the principle that an act of general application cannot be amended by an individual decision. It rejected both pleas by an identical process of reasoning.
19. The Court of First Instance first observed that Article 95 of the Treaty conferred power on the Commission to adopt any general or individual decision necessary for the attainment of the objectives of the Treaty, including one authorising the grant of aid by way of derogation from Article 4(c) of the Treaty, subject to its assessment of which kind of decision was more appropriate to that end. The problem, therefore, was to determine the respective object and scope of the Aid Code and of the contested individual Decisions.
20. Whereas those various measures had the same legal basis, namely the first and second paragraphs of Article 95 of the Treaty, and derogated from the general prohibition of aid laid down by Article 4(c) of the Treaty, the Court of First Instance took the view that their scope was different: the Code refers in general to certain categories of aid which it regards as compatible with the Treaty and the contested decision authorises, for exceptional reasons and on one occasion only, aid which could not in principle be regarded as compatible with the Treaty. The Court of First Instance continued:
In that light, the applicant's view that the Code is binding, exhaustive and definitive cannot be upheld. The Code constitutes a binding legal framework only for the types of aid enumerated by it which are compatible with the Treaty. In relation thereto, it establishes a comprehensive system intended to ensure uniform treatment, in the context of a single procedure, for all aid within the categories which it defines. The Commission is only bound by that system when assessing the compatibility with the Treaty of aid covered by the Code. It cannot therefore authorise such aid by an individual decision conflicting with the general rules established by that code.
21. Conversely, aid which did not fall within the scope of the categories of derogations authorised generally by the Aid Code could benefit from an individual derogation from the prohibition in Article 4(c) of the Treaty. The Court of First Instance stated:
The Commission is not competent under the first and second paragraphs of Article 95 of the Treaty, which are concerned only with cases not provided for by the Treaty (see Netherlands v High Authority, cited above ...), to prohibit certain categories of aid, since such a prohibition is already imposed by the Treaty itself, in Article 4(c). Aid not falling into categories which the Code exempts from that prohibition thus remains subject exclusively to Article 4(c). It follows that, where such aid nevertheless proves necessary to attain the objectives of the Treaty, the Commission is empowered to rely on Article 95 of the Treaty in order to deal with that unforeseen situation, if need be by means of an individual decision.
22. The Commission was not entitled to relinquish this power through the adoption of an exhaustive aid code. As the operating aid and restructuring aid permitted by the contested Decisions manifestly fell within none of the categories of aid governed by the Fifth Aid Code, those decisions could not be regarded as unjustified derogations from the Aid Code, or as attempts to favour undertakings by covertly modifying that Code.
23. Although the pleas respectively of breach of the Fifth Aid Code and lack of competence, which are in substance the same argument, are the most central to this appeal, I must also refer to other arguments presented to the Court of First Instance in support of the two applications, which form the basis of distinct pleas in the two appeals under consideration.
B. British Steel: Legitimate expectations
24. British Steel considered that, in this case, the principle of protection of legitimate expectations was contravened in so far as it had anticipated that the Commission would comply with the Aid Code and if necessary amend it, or even replace it, if it wished to depart from it. The Aid Code was a legislative measure expressly designed to prohibit all forms of subsidy with the exception of those which it treated as compatible with the Treaty. Accordingly, any measure contrary to that code should be annulled to the extent to which, in the absence of an overriding public interest, it brought about an unforeseeable change in the situation created by the Code to the detriment of an operator who had acted reasonably (and made investments) in the expectation that the situation brought about by that legislative measure would continue.
25. According to the Commission, a measure of general application such as the Fifth Aid Code could not validly give rise to a legitimate expectation. Changing conditions justified the adoption of additional measures. Any legitimate expectation would, in any event, have been vitiated by the Commission's warnings, made in its correspondence with British Steel, that recourse to Article 95 of the Treaty could not be excluded, even during the period of application of the Aid Code.
26. The Court of First Instance held that British Steel's argument was based on the mistaken idea that the existence of the Aid Code gave the undertakings concerned reason to believe that no specific decision authorising State aid outside the categories covered by the Code would be adopted in special circumstances. However, as the Court had already stated, the Aid Code did not pursue the same object as the decisions at issue, which were adopted to deal with an exceptional situation. The Aid Code was not, therefore, in any way capable of giving rise to legitimate expectations as to the possibility of granting individual derogations from the prohibition of State aid, on the basis of the first and second paragraphs of Article 95 of the Treaty, in an unforeseen situation such as that which prompted the adoption of the contested Decisions.
27. The Court of First instance added that traders cannot have a legitimate expectation that an existing situation which is capable of being altered by the Community institutions in the exercise of their discretionary power will be maintained. The constant adjustments in response to fluctuations in the economic situation precluded economic operators from claiming a vested right to the maintenance of the legal situation existing at a given time. A prudent and discriminating trader could foresee the adoption of specific measures intended to deal with clear crisis situations, with the effect that the principle of the protection of legitimate expectations could not be relied upon. In particular, British Steel, as a substantial operator which participated on the ECSC Consultative Committee, should have realised that the overriding need to safeguard the position of the European steel industry might justify the adoption of ad hoc decisions by the Commission, such as that already adopted outside the framework of the Aid Code, to deal with the exemption of the Dutch and Danish steel industries from taxes on carbon dioxide emissions.
C. Wirtschaftsvereinigung: Breach of Article 95 of the Treaty
28. Wirtschaftsvereinigung questioned both the compatibility with the Treaty of the objectives pursued by Decision 94/259/ECSC and whether the Decision was in fact indispensable to the achievement of those objectives. In respect of the former point, it argued, inter alia, that the objective of providing the Italian steel industry with a sound and economically viable structure was inconsistent with objectives regarding the common market and the Community steel industry as a whole, as it related to a single Member State and, indeed, to a single undertaking, while undertakings in other Member States had to reduce their capacity by their own endeavours. As regards the criterion of indispensability, the Commission had already authorised the grant of a total of ECU 14 150 million in aid to Ilva between 1980 and 1989, without restoring it to viability. This precedent showed that additional aid might be used by Ilva simply to increase its market share through undercutting its unsubsidised competitors' prices.
29. The Commission and Italy responded that the grant of aid was part of a global programme of capacity reduction by and restoration to viability of European steel undertakings and thus served the interests of the Community steel industry as a whole. Furthermore, it was necessary in order to facilitate the privatisation of Ilva in a crisis situation and further grants of aid under Article 95 of the Treaty were excluded.
30. The Court of First Instance held that Decision 94/259/ECSC was intended to safeguard the common interest, in accordance with the objectives of the Treaty. The continuation or aggravation of the crisis in the steel sector was liable to give rise to extremely serious disturbances in the economies of the Member States concerned. The Decision, together with the five other individual decisions authorising State aid which were adopted on the same day, formed part of a comprehensive programme for restructuring of the steel industry on an enduring basis and reduction of production capacity in the Community. Thus, the measure's aim was not simply to ensure the survival of the beneficiary undertaking - which would be contrary to the common interest - but to restore its viability while keeping to a minimum the impact of the aid on competition.
31. Having concluded that Decision 94/259/ECSC did pursue objectives set out in Articles 2 to 4 of the Treaty, the Court of First Instance cited the ruling of the Court of Justice in Germany v Commission that the Commission was under no circumstances entitled to authorise the granting of State aid which was not necessary to attain the objectives of the Treaty and would be likely to give rise to distortions of competition on the common market in steel. However, having referred to the conditions set out in Article 33 of the Treaty for the review of Commission decisions of an economic character and to the Commission's wide discretion regarding economic and social assessments in the Community context, it concluded that its review was limited to verifying that the facts are materially accurate and that there has been no manifest error of assessment. The Court of First Instance held that the assertion that the ineffectiveness of aid in the past implied the inevitable failure of any attempt to restore Ilva's viability by means of further State aid was not supported by any specific evidence and constituted a purely speculative conjecture. Such an extrapolation from past experience could not be a substitute for detailed examination of the specific conditions imposed by the Decision in order to achieve the reorganisation and viability of the beneficiary undertaking. The antecedents of the Decision and the statement of reasons on which it was based indicated that the Commission had undertaken a thorough analysis of the sectoral crisis and of the means of resolving it, as well as of the specific requirements to be imposed for the return to viability of Ilva and for keeping to a minimum the impact of the aid on competition. Thus, no evidence had been adduced to show that the Commission had committed a manifest error of assessment by considering that the aid in question, on the terms laid down in Decision 94/259/ECSC, was necessary to achieve certain objectives of the Treaty.
IV - The appeal
32. Wirtschaftsvereinigung and British Steel have appealed against the respective judgments of the Court of First Instance in Case T-244/94 and Case T-243/94 pursuant to Article 49 of the Protocol on the Statute of the Court of Justice of the ECSC, seeking the annulment of the judgment in each case, and of Decision 94/259/ECSC and the contested Decisions respectively, and the payment by the Commission of the costs of the actions. The Court dispensed with the oral hearing in the British Steel case, pursuant to Article 120 of the Rules of Procedure. At the oral hearing in the Wirtschaftsvereinigung case, Hoogovens Staal BV was represented separately from the other appellants.
33. Wirtschaftsvereinigung relies upon four grounds of appeal: (i) breach of the Fifth Aid Code; (ii) breach of the principle of necessity; (iii) unlawful pursuit of a purely national policy; and (iv) breach of Article 4(c) of the Treaty. British Steel relies upon two grounds of appeal, lack of competence to adopt the contested Decisions and breach of the principle of protection of legitimate expectations. British Steel's application is supported by Det Danske Stålvalseværk A/S. Both appeals are opposed by the Commission, with the support of the Italian Republic and the Council, while the Kingdom of Spain also supports the Commission in the British Steel case.
34. I shall summarise and analyse seriatim the grounds of appeal and the other parties' responses thereto in the text which follows. However, Wirtschaftsvereinigung's first and fourth grounds of appeal may be discussed together, along with British Steel's first ground of appeal, by reason of their essential similarity.
A. Wirtschaftsvereinigung: (i) and (iv) Breach of the Fifth Aid Code and of Article 4(c) of the Treaty
British Steel: (i) Lack of competence
(1) Arguments
35. Wirtschaftsvereinigung contends that the Court of First Instance erred in law in finding that the Aid Code was binding on the Commission only as regards the types of aid the grant of which was specifically regulated by the Code. It states that the Court of First Instance failed to cite in full the statement in the third sentence of the fourth recital in the preamble to the Aid Code that its rules prohibit the grant of any other operating or investment aid, and to draw the necessary conclusion from the third recital, which states that the rules cover aid, whether specific or non-specific, financed by the Member States in any form whatsoever or from the similar terms of Article 1(1) of the Aid Code. It also cites the statement in the third recital in the preamble to the Second Aid Code that all aid should be treated uniformly within a single procedural framework and that a comprehensive Community aid scheme was an indispensable element of the Community's overall policy for the recovery of the steel industry and the following statement in the sixth recital in the preamble to the Third Aid Code:
The comprehensive set of Community rules ... established [by recourse to Article 95 of the Treaty] means that any subsidies in any form whatsoever, and whether specific or non-specific, which Member States might grant to their steel industries, other than aid expressly provided for and duly authorised by this Decision, could not in any circumstances be justified under Article 67 of the Treaty and would have to be regarded as prohibited by Article 4(c) thereof.
Wirtschaftsvereinigung also cites the Commission's practice, when refusing to authorise aid, of stating that the only possible exceptions to the prohibition contained in Article 4(c) of the Treaty are those provided for explicitly and restrictively in the Aid Code.
36. Wirtschaftsvereinigung submits that the general regime set out in the Fifth Aid Code occupies a place in the hierarchy of norms superior to that of any individual measure. At the oral hearing, it claimed that the Code is comprehensive, definitive and exhaustive. Thus, a decision such as Decision 94/259/ECSC cannot derogate from it even if adopted by the same body. This conclusion is required by the principle of equality before the law, breach of which on the facts of the present case resulted in different treatment of public and private steel undertakings. Furthermore, this analysis is not affected by the use of a common legal basis, as this was also the case in Ballbearings. Respect for the principle of the subordination of individual measures to those of general application is all the more important because of the lack of effective parliamentary supervision of the procedure under Article 95 of the Treaty.
37. Thus, the sole circumstance in which individual derogating measures may be deemed lawful is where the general measure expressly provides for this possibility, as was the case in Article 12 of the Second Aid Code. Such a legal basis for individual derogations was deliberately excluded from the Fifth Aid Code. Wirtschaftsvereinigung invokes as an additional example the Court's rulings that any aid which did not comply with the binding rules adopted by the Council under Article 92(3)(e) of the EC Treaty (now, after amendment, Article 87(3)(e) EC) regarding the grant of State aid in the field of naval construction was ipso facto incompatible with the EC Treaty. Counsel for Wirtschaftsvereinigung submitted at the oral hearing that it was overly formalistic to argue that the Commission's competence under Article 95 of the Treaty was restricted, in the field of State aid, to making specific exceptions to Article 4(c) of the Treaty, and would deprive the Ballbearings judgment of its useful effect.
38. In support of its fourth ground of appeal, that of breach of Article 4(c) of the Treaty, Wirtschaftsvereinigung cites the order of the Court in Case C-399/95 R Germany v Commission to the effect that the Fifth Aid Code established strict rules regarding the grant of aid in the sensitive steel sector without prejudicing the general rules applicable to it under the ECSC Treaty. The contested judgment does not explain why an individual decision authorising further aid could be permitted to prejudice these general rules.
39. The Commission, the Council and Italy contest Wirtschaftsvereinigung's submissions. Its references to statements in the aid codes and other secondary measures do not affect the finding of the Court of First Instance that the Commission was not competent under Article 95 of the Treaty to adopt a general prohibition of aid not expressly covered by the Fifth Aid Code, as such a prohibition was already provided for by Article 4(c) of the Treaty. In any event, having regard in particular to the joint statement entered in the Council minutes of 17 December 1993, the recitals and provisions of secondary law relied upon by Wirtschaftsvereinigung either make clear that the general prohibition of aid derives directly from Article 4(c) of the Treaty, or can be construed as referring only to the specific types of aid addressed by the Aid Code in question, or can be interpreted as being merely declaratory of the Commission's inability, acting alone, to approve other types of aid in the absence of additional measures based on Article 95 of the Treaty.
40. As Decision 94/259/ECSC was different in scope from the Fifth Aid Code, the Court of First Instance's statement that derogations from the terms of the Aid Code could only be adopted through general amending measures was obiter. By the same token, there was clearly no need for the Fifth Aid Code to provide expressly for the possibility of derogating decisions. The circumstances of Ballbearings were entirely different, as that case involved the imposition of a sanction under Article 113 of the EC Treaty (now, after amendment, Article 133 EC) when the requirements in a secondary general measure for non-imposition of a sanction had been satisfied. There is in fact no hierarchy as between general and individual measures adopted by the Commission on the basis of Article 95 of the Treaty, each with the unanimous approval of the Council. The present case does not involve a distinction between basic normative acts such as the Aid Code, which have, according to Wirtschaftsvereinigung, the character of an abstract general rule, and delegated executive acts, adopted by the Commission alone, implementing or derogating from such acts. The principle of equality does not pose an obstacle to the adoption of individual decisions under Article 95 of the Treaty, because that procedure is specifically designed for use in exceptional situations. Indeed, the agent for Italy went so far as to question the appropriateness of the use of Article 95 to adopt measures as general in their scope as the Aid Codes. He stressed the emergency character of action envisaged in the article. For the same reason, the Commission cannot tie its hands regarding future recourse to that provision of the Treaty in cases not provided for in a general measure. To do this would deprive it of the capacity to respond to new circumstances which Article 95 was supposed to assure. The approach to State aid for naval construction under the EC Treaty is irrelevant because of the different scheme of competences to approve aid under the two Treaties; in any event, the Council could have authorised further aid on the basis of Article 93 of the EC Treaty (now Article 88 EC) in exceptional circumstances, just as under Article 95 of the ECSC Treaty.
41. They submit that these contentions are not undermined by the order in Case C-399/95 R Germany v Commission, as that case did not relate to the adoption under Article 95 of the Treaty of an additional Commission decision on aid outside the scope of the Fifth Aid Code. The Court of First Instance explained at paragraph 34 of the Wirtschaftsvereinigung judgment that Article 4(c) of the Treaty did not prevent the authorisation, by way of derogation, on the basis of Article 95, of aid intended to deal with unforeseen situations. In so far as it is not identical with the first ground of appeal, this ground constitutes an inadmissible new argument.
42. Regarding its first ground of appeal, British Steel claims that the Court of First Instance accepted its principal point that the Commission is not competent to adopt individual decisions in fields which are governed completely by a general decision. The Commission maintains that this point is uncontested and uncontroversial, but irrelevant, as the Fifth Aid Code only regulates exhaustively the grant of those types of aid referred to in Articles 2 to 5 thereof.
43. British Steel submits that the Court of First Instance erred in law, at paragraphs 50 and 51 of the British Steel judgment, in holding that the scope of application of the Fifth Aid Code was confined to those categories of aid expressly permitted thereby. This is borne out, it says, by reference to (a) its preamble, (b) its text, (c) the history of the steel aid codes, (d) the Commission's own practice and (e) the writings of certain authors.
(a) British Steel submits that the reference in the first recital in the preamble to the Aid Code to the prohibition of any aid in any form whatsoever, and that in similar terms in the third recital, should be understood as extending to categories of aid not set out in the Code, such as operating aid and investment aid. This is confirmed by the reference in the fifth recital to conformity with the Consensus on the steel industry concluded with the United States, which prohibited such forms of aid. The Commission responds that the second recital in the preamble states that the aid codes since 1986 established rules authorising the grant of aid to the steel industry in certain cases expressly provided for, without prejudging the treatment to be accorded to other types of aid. The reference to the Consensus concluded with the United States merely confirmed that the Aid Code did not violate it; this did not prevent the approval of other types of aid in 1994, after the expiry of the Consensus in March 1992. At the oral hearing in the Wirtschaftsvereinigung case, the agent for the Commission viewed as hypothetical a question from the bench as to whether or not the Consensus would have impeded the adoption of a measure such as Decision 94/259/ECSC before its expiry at the end of March 1992.
(b) British Steel submits that Article 1(1) of the Fifth Aid Code should be understood as indicating that the Commission had exhaustively exercised its competence under Article 95(1) of the Treaty in providing for the compatibility with the Treaty of the categories of aid described in Articles 2 to 5 of the Aid Code. The Commission remarks that Article 1(1) of the Aid Code is not worded as a prohibition of all other types of aid and cannot be construed as such; whereas the adoption of the Aid Code, taken on its own, had the effect that all types of aid not covered by it remained prohibited, this resulted from the continued application of Article 4(c) of the Treaty rather than from Article 1(1) of the Aid Code, and therefore remained potentially subject to further derogation on the basis of Article 95(1) of the Treaty. The narrowing of the scope of the aid codes (the first and second codes having also covered operating aid and restructuring aid) should be construed merely as a limitation of the delegation of authority to the Commission to act in individual cases without having to seek the unanimous approval of the Council. The Council did not thereby intend to deprive itself of the power to approve such aid in cases where the Commission proposed to deem them compatible with the common market.
(c) British Steel takes a contrary view of the progressive narrowing of the scope of the aid codes, viewing it as indicating that the exhaustive regulation of the categories of potentially permissible aid was becoming stricter. The Commission replies that passages in the various aid codes which state that other types of aid are prohibited are merely reiterations of the prohibition in Article 4(c) of the Treaty, which remains subject to derogation pursuant to Article 95(1) of the Treaty, rather than being constitutive in themselves of an exhaustive prohibition, which the Commission would not, in any event, be competent to adopt under Article 95(1).
(d) British Steel cites as an example of the practice of the Commission a number of decisions either refusing to approve a grant of aid or requiring the reimbursement of aid already paid on the ground that it was not compatible with the Fifth Aid Code. The Commission replies that it was simply unable to approve such aid using the authority delegated to it by the Aid Code to approve certain categories of aid without seeking Council approval in individual cases. British Steel also adverts to the fact that a derogation for aid granted to the Dutch and Danish steel industries by way of an alleviation of tax liability for carbon dioxide emissions, which was not within the scope of Articles 2 to 5 of the Fifth Aid Code, was approved by way of an amendment to the Aid Code. The Commission states that this view is mistaken and that the measure in question, Commission Decision 92/411/ECSC of 31 July 1992, was, in fact, an individual decision confined in its effects to the particular cases concerned, which confirmed that this avenue remained open to the Commission under Article 95(1) of the Treaty. The 22nd Commission Report on Competition Policy was inaccurate to the extent that it stated the contrary.
(2) Analysis
44. Neither Wirtschaftsvereinigung nor British Steel expressly contested in their written pleadings the central element of the reasoning of the Court of First Instance in the contested judgments, that is, that the Commission is not competent to adopt measures under Article 95(1) of the Treaty which merely reiterate an existing prohibition of State aid provided for in Article 4(c) of the Treaty itself. As I indicated above, counsel for Wirtschaftsvereinigung criticised this position at the oral hearing in that case as formalist and as being inconsistent with the protective objectives of the judgment in Ballbearings. The appellants in both cases may also be understood as implicitly questioning this aspect of the contested judgments, by arguing that the Fifth Aid Code did in fact establish a general prohibition of aid falling outside the terms of Articles 2 to 5 thereof. However, this argument is, in my view, incorrect, for the reason given by the Court of First Instance in the contested judgments.
45. In Netherlands v High Authority, the Court observed that [t]he only object of the first paragraph of Article 95 is to institute special rules for departing from the Treaty with the object of empowering the High Authority to meet an unforeseen situation. No such departure from the Treaty is involved in circumstances where the Commission is able to act using powers conferred by the Treaty and, thus, to apply the Treaty in circumstances covered by its provisions. That case concerned a Commission recommendation to the Member States which did not impose new obligations but merely specified their obligations under the Treaty itself. The Court found that the Commission was competent to do so under other provisions of the Treaty and that, as a result, Article 95 of the Treaty was not a permissible legal basis for such measures. The conclusion in that case that Article 95 of the Treaty was merely residual in character and was not the appropriate legal basis for the Commission action at issue is highly relevant to the circumstances of the present case, which also raises the question whether the Commission is empowered to use Article 95(1) of the Treaty merely to recall the obligations of the Member States under Article 4(c), which is also a concrete and binding provision. The enforcement of Article 4(c) of the Treaty cannot, by the same token, be construed as a case not provided for in the Treaty.
46. This view requires the Fifth Aid Code to be construed as establishing a positive list of types of aid which, when they comply with the conditions set out therein, may be deemed compatible with the common market by the Commission, without further recourse to the Council. This cannot foreclose recourse to additional measures, either general or individual, based directly on Article 95 of the Treaty, to approve (or regulate approval by the Commission alone) of types of aid on which the Fifth Aid Code is silent. The situation in the present cases is thus quite different from that under earlier Aid Codes, which contained general rules regarding approval of restructuring aid: during their period of application, a challenge to an individual decision on the basis of Article 95 of the Treaty approving restructuring aid on grounds not foreseen in those Codes would have required the Community judicature to address the possible application in the ECSC context of the Ballbearings judgment.
47. It is not, in my view, unduly formalist to interpret a secondary measure in the light of the limited competences of the adopting institution, or to preclude an institution from tying its hands regarding future acts in a way not provided for by the constituent authority. Once this point is established, the appellants' arguments regarding the proper interpretation of the Fifth Aid Code must fail. The Fifth Aid Code constitutes a limited grant of executive authority to the Commission, acting alone, to approve a limited range of types of aid in defined circumstances. The Fifth Aid Code could not lawfully contain, and should not, therefore, in case of ambiguity, be construed as containing, a general prohibition of types of State aid other than those which it expressly permits. As a result, it was always open to the Commission under Article 95 of the Treaty, as was reiterated in the joint statement of the Council and the Commission of 17 December 1993, to adopt additional measures, either general or individual, providing for the approval of aid of a type for which the Fifth Aid Code makes no detailed provision.
48. As the present case concerns such additional measures, it is not necessary to address the statement by the Court of First Instance that the Commission could not authorise aid which fell within one of the categories of aid defined by the Fifth Aid Code by an individual decision conflicting with the general rules established by that Code. The analysis set out in the immediately preceding paragraphs clearly obviates the need to discuss in this case a possible hierarchy of norms in the application of Article 95(1) of the Treaty in the field of State aid or the possible application of the Ballbearings judgment in an ECSC context. The Commission must, of course, comply with the terms of the Fifth Aid Code when deciding, on its own, upon whether to authorise aid which comes within its terms. On the other hand, it is free, as I have already said, subject to compliance with other Treaty rules, including the conditions in Article 95(1) itself, to seek the approval of the Council for any other proposed measure, general or individual, authorising the grant of aid in other circumstances. This is precisely what occurred in the case of the contested Decisions. It is not necessary for the Aid Code to provide for such derogations, because they are derogations from Article 4(c) of the Treaty rather than from the Aid Code and are based, as is the Aid Code, directly on Article 95(1). This also disposes of Wirtschaftsvereinigung's fourth ground of appeal - such individual derogations from the general rule set out in Article 4(c) of the Treaty are permitted provided they serve the attainment of the objectives in Articles 2 to 4 of the Treaty, a question which was the subject of extensive separate analysis by the Court of First Instance.
49. For the sake of completeness, I will now address the various interpretative arguments put forward in the two appeals, in the light of these conclusions of principle regarding the Commission's competence. I might add that, read on their own, the terms of the Fifth Aid Code confirm the foregoing conclusion of principle regarding its limited scope. Article 1(1) of the Fifth Aid Code should consequently be understood, when it states that aid whether specific or non-specific ... in any form whatsoever may be deemed to be Community aid only if it satisfies the provisions of Articles 2 to 5, merely as establishing in general terms the scope of the derogation from Article 4(c) of the Treaty and that the Commission possesses no additional power under the Aid Code to approve other types of aid. As the Commission pointed out, Article 1(1) of the Aid Code is not phrased in terms of a prohibition and does not, therefore, purport to exclude the adoption of other measures derogating from the prohibition in Article 4(c) of the Treaty.
50. As the agent for Italy pointed out at the oral hearing in the Wirtschaftsvereinigung case, the preamble of a measure cannot, on its own, alter its scope. Thus, the fact that the fourth recital in the preamble to the Aid Code states that the rules contained in the previous aid codes prohibited the grant of any other form of aid may be misleading, but that statement does not correspond to any actual provision of the Aid Code. In any event, the first recital in the preamble to the Fifth Aid Code clearly states that any aid in any form whatsoever ... is prohibited pursuant to Article 4(c) of the Treaty, which is more accurate, while the second recital indicates that the earlier aid codes established rules authorising the grant of aid to the steel industry in certain cases expressly provided for, which confirms that the Aid Code only creates a positive list of compatible aid. The reference immediately afterwards, in the third recital, to the rules covering aid, whether specific or non-specific, financed by Member States in any form whatsoever should, in my view, be read simply as indicating that the types of aid expressly provided for by Articles 2 to 5 of the Aid Code could take any form. The statement in the fifth recital that the Aid Code conforms to the Consensus concluded with the United States is not inconsistent with the analysis above - non-conformity would have arisen, if at all, only from further measures adopted on the basis of Article 95(1) of the Treaty authorising aid which did not fall within the scope of that Consensus.
51. I also agree with the Commission's argument that the progressive narrowing of the scope of the aid codes cannot be construed as establishing a wider legislative prohibition of aid. It should, instead, be understood as circumscribing the Commission's power to approve aid, subject to compliance with conditions defined in the Codes, without further recourse to the Council. Given the requirement of unanimity in the Council, this probably had the effect of reducing the amount of aid capable of being authorised.
52. The references in the preamble to the Second Aid Code to a single procedural framework and to a comprehensive Community aid scheme may perhaps be understood as referring to the wider ambit of the Codes preceding the Fifth Aid Code, but they cannot establish that the Commission had bound itself (or could bind itself) to abide by this ordinarily commendable policy when faced with unforeseen situations that required a special response. It may also be noted that the passage quoted by the appellants from the preamble to the Third Aid Code states that aid which was not expressly provided for in that comprehensive set of Community rules would have to be regarded as prohibited by Article 4(c) of the Treaty - thus opening the way to derogation from that Treaty provision, in appropriate circumstances, on the basis of Article 95(1) of the Treaty.
53. Finally, the Commission is clearly correct in stating that Decision 92/411/ECSC regarding Danish and Dutch aid in respect of environmental taxes was adopted as an individual decision rather than as an amendment of the Fifth Aid Code. Thus, to the extent that the practice of the institutions is relevant to the interpretation of other measures adopted by them, this measure does not support the appellant's case.
54. The immediately foregoing analysis of the terms of the Fifth Aid Code is entirely consistent with my view, supporting that of the Court of First Instance at paragraph 43 of the Wirtschaftsvereinigung judgment and at paragraph 51 of the British Steel judgment, regarding the proper interpretation of the Treaty itself and of the permissible scope of the Aid Code. I conclude, therefore, that Wirtschaftsvereinigung's first and fourth grounds of appeal should be rejected, as should British Steel's first ground of appeal.
B. Wirtschaftsvereinigung: (ii) Breach of the principle of necessity
55. The appellants criticise the Court of First Instance for transforming the circumstances in which Article 95 may be used to authorise State aid from absolutely exceptional cases (under no circumstances ... aid which was not necessary) to a general norm (whenever ... necessary). They contend that the Court of First Instance should have concluded that, in principle, restructuring aid cannot be necessary more than once. This point of principle is borne out by the Community Guidelines on State aid for rescuing and restructuring firms in difficulty, which state that restructuring aid should normally need to be granted only once, and is reiterated in several other measures.
56. The Commission submits that this ground is inadmissible, as it challenges the Court of First Instance's assessment of the facts regarding Ilva's receipt of earlier aid and the present necessity for further restructuring aid at the time of adoption of Decision 94/259/ECSC. There is no suggestion of error on the part of the Court of First Instance in assessing the Commission's appreciation of the situation other than recourse to policy statements under the EC Treaty which are not cast in absolute terms. An absolute principle, one time, last time, would be impermissible in the light of the complex assessment which must be undertaken pursuant to Article 95 of the Treaty, in the light of the objectives set out in Articles 2 to 4 of the Treaty. The dicta of the Court of Justice and the Court of First Instance compared by the appellants are identical in meaning.
57. There does not appear to me to be any merit in Wirtschaftsvereinigung's argument regarding the terminology used by the Court of First Instance. The common requirement in the Court of First Instance's judgment and the Court's earlier case-law is that aid should only be authorised when it is shown to be necessary; it is notable, indeed, that the Court of First Instance actually cited the passage from the Court's judgment in Case 214/83 Germany v Commission, relied upon by Wirtschaftsvereinigung. The more general argument of principle that aid can only be necessary on one occasion to safeguard the viability of an enterprise fails, in my view, to take into account the changing nature of business conditions, to which the Commission is enabled to respond by Article 95(1) of the Treaty. To take an extreme case, it can hardly be suggested that aid granted to Community steel undertakings in the 1950s, after the establishment of the Coal and Steel Community, would, in principle, have been sufficient to enable them to face all the competitive challenges of the 1990s and would have precluded the Commission, in the latter case, from authorising additional aid which it deemed necessary for the pursuit of objectives set out in Articles 2 to 4 of the Treaty. The policy slogan one time, last time may be a useful expression of the need to be scrupulous in examining successive requests for authorisation of the granting of aid to the same undertakings, but it cannot be elevated into a binding principle which precludes the examination by the Commission of the requirements of the public interest in the circumstances of each individual case. Once this argument of principle is rejected, so too must be this ground of appeal - as the Commission has stated, Wirtschaftsvereinigung has not taken issue with the Court of First Instance's concrete examination, summarised at paragraph 31 above, of the Commission's assessment of the necessity for aid to be granted in the light of the concomitant reductions in capacity and other obligations imposed on Ilva.
C. Wirtschaftsvereinigung: (iii) Unlawful pursuit of a purely national policy
58. The appellants submit that the contested judgment does not take into account the grave error of appreciation of the Commission, demonstrated in the fourth point, first indent, second sentence of the grounds of Decision 94/259/ECSC, in making the reinforcement of the Italian steel industry the objective of that Decision. This is contrary to the statement in Fabrique de fer de Charleroi v Commission, that the specific needs of a single Member State could not legitimately be taken into account in regulating the common market as a whole.
59. The Commission argues that this ground is inadmissible as it merely comprises a vague allegation which does not take issue with the relevant parts of the Court of First Instance's analysis. Italy contends that it is inadmissible because it is a new argument and that, in any event, it is apparent that the Italian steel industry constitutes an important part of the Community sector as a whole.
60. This ground of appeal seems to me to derive clearly from the argument made before the Court of First Instance, which is summarised at paragraph 28 above, and so cannot, in my view, be rejected as an inadmissible new argument. It is clear, however, that the Court of First Instance did address the argument that aid authorised with the objective of providing the Italian steel industry with a sound and economically viable structure did not serve the objectives of the Treaty. Its response, based on the general crisis in the steel sector and on the fact that Decision 94/259/ECSC was part of a wider package of measures concerning a variety of steel undertakings, is summarised at paragraph 30 above. As Wirtschaftsvereinigung does not challenge any particular element of the Court of First Instance's analysis in this regard, this ground of appeal should be rejected.
D. British Steel: (ii) Legitimate expectations
61. British Steel submits that the Commission's practice gave rise to a legitimate expectation that it would not authorise restructuring aid during the period of validity of the Aid Code. It gives as examples a number of Commission decisions which refused to authorise aid on the basis that it fell outside the scope of the Aid Code. Furthermore, it could not be deemed to have been alerted to the Commission's plans by virtue of being represented on the ECSC Consultative Committee because its members sat in their personal capacity. Finally, Decision 92/411/ECSC permitting relief for Danish and Dutch steel undertakings from certain environmental taxes was not comparable to the contested Decisions, as it did not involve restructuring aid and merely permitted the extension to the steel sector of a more general aid otherwise governed by the EC Treaty. Its adoption could not, therefore, affect British Steel's legitimate expectations.
62. The Commission contends that British Steel's argument refers in large part to Commission practice after the date of adoption of the contested Decisions. The Court cannot substitute its assessment in this regard for that of the Court of First Instance, or examine new evidence put forward by British Steel. The Council, Italy and Spain argue that there could be no legitimate expectation that a given regulatory position would be maintained as the proper functioning of the common market required constant adaptations to economic conditions; in any event, the Fifth Aid Code was not exhaustive in character. Although one of British Steel's directors sat on the Consultative Committee in a personal capacity, the Commission submits that this did not mean that British Steel was not kept informed of its discussions; it was for British Steel to prove otherwise. Italy adds that this was a purely subsidiary element of the Court of First Instance's reasoning.
63. I see no reason to depart from the Court of First Instance's basic finding, summarised at paragraph 26 above, that the Aid Code did not give rise to a legitimate expectation that other types of aid would not be authorised by the Commission because its terms did not (and could not) exclude, during its period of validity, such further grants of aid in exceptional circumstances. In this context, the Court of First Instance was correct to state that well-informed traders could not assume that a given legal situation would be maintained even in the face of altered economic conditions. Even if one ignores the fact that much of the Commission practice referred to by British Steel post-dates the adoption of the contested Decisions, the Commission's refusals to authorise aid in those cases may be understood as referring to its lack of competence to approve aid which did not come within Articles 2 to 5 of the Aid Code under its simplified procedures. Thus, they could not engender any legitimate expectations about non-recourse by the Commission to Article 95(1) of the Treaty to approve such aid. Although, as British Steel points out, Decision 92/411/ECSC is quite different in subject-matter to the contested Decisions, I do not think these differences are material. That Decision is a clear case, before the adoption of the contested Decisions, of approval of aid which fell outside the scope of the Aid Code. If Article 1(1) of the Aid Code were to be read as prohibiting all other forms of aid - which, in my view, is not its proper construction - it would exclude, in equal measure, approval by individual decision of the types of aid covered by Decision 92/411/ECSC and by the contested Decisions. By the same token, the continued possibility of authorising the grant of aid by way of tax relief illustrated that Article 95(1) of the Treaty could easily be used to authorise other types of aid as well. In the light of these observations, the nature of the information which was, or should have been, available to British Steel by virtue of one of its directors sitting on the ECSC Consultative Committee does not appear to me to be material to the outcome of the case. I recommend, therefore, that the Court reject British Steel's second ground of appeal.
V - Conclusion
64. In the light of the foregoing, I recommend that the Court order as follows in these two cases:
In Case C-441/97 P Wirtschaftsvereinigung Stahl, Thyssen Stahl AG, Preussag Stahl AG and Hoogovens Staal BV v Commission of the European Communities, that
- the appeal be rejected; and that
- the appellants pay the costs.
In Case C-1/98 P British Steel Plc v Commission of the European Communities, that
- the appeal be rejected; and that
- the appellant pay the costs.