OPINION OF ADVOCATE GENERAL

STIX-HACKL

delivered on 8 September 2005 1( )

Case C-66/02

Italian Republic

v

Commission of the European Communities





(Action for annulment – State aid – Article 87 EC – Commission Decision 2002/581/EC – Tax advantages for banks)









Table of contents





I – Introduction

II – Facts and procedure

III – Procedure before the Commission and the contested decision

IV – The application

A – Preliminary remarks concerning the grounds of the application

B – The first general plea in law concerning the failure properly to take into account the aims and nature of the disputed measures (first plea)

1. Main arguments of the Italian Government

2. Assessment

C – The allegation that the Commission – erroneously and in breach of the obligation to state reasons – classified the disputed measures as aid within the meaning of Article 87(1) EC (second plea)

1. The defective nature of the contested decision as regards whether the disputed measures confer a selective advantage conferred through State resources

(a) Main arguments of the Italian Government

(b) Assessment

2. Distortion of competition and the affecting of trade between Member States

(a) Main arguments of the Italian Government

(b) Assessment

3. The allegation that the statement of reasons is inadequate because there is no separate review of the disputed measures under Article 87(1) EC and Article 87(3) EC and because the disputed measures are reviewed in an excessively general manner

(a) Main arguments of the Italian Government

(b) Assessment

D – The infringement of Article 87(3) EC and the infringement of the obligation to state the reasons as regards the question of compatibility with the common market (third plea)

1. Main arguments of the Italian Government

2. Assessment

V – Costs

VI – Conclusion

I – Introduction

1. By an application, received at the Registry of the Court of Justice on 28 February 2002, the Italian Republic is seeking the annulment, pursuant to the first paragraph of Article 230 EC, of Commission Decision 2002/581/EC of 11 December 2001 on the tax measures for banks and banking foundations implemented by Italy. ( )

II – Facts and procedure

2. Until the 1980s, the Italian banking sector was partly State-owned and, in general, characterised by significant State influence and both specialisation and regionalisation. From the early 1980s, the Italian authorities began to privatise banks, with the intention also of increasing the average bank size and bringing to an end specialisation. By Law No 218/90 of 30 July 1990, the so-called ‘Amato Law’ (‘the Amato Law’), the Italian Government adopted fundamental measures with a view to the gradual privatisation of the banking sector.

3. Consequently, the banks which were State-owned were able to be converted into public limited companies, with such conversion becoming mandatory in 1993. Their shares were placed on the market or transferred to profit-oriented establishments, referred to as ‘banking foundations’. As part of the latter processes, the following split occurred: the newly established banks (hereinafter generally referred to as ‘the banks’) assumed responsibility for banking operations, whilst the banking foundations owned and managed the shares in the banks, thus controlling them. Under certain tax provisions contained in the Amato Law, the banking foundations were also entitled to transfer to the banks certain fixed and other assets which were not essential to the banks’ corporate objectives.

4. In the late 1990s, the Italian Government adopted new measures to promote the restructuring and consolidation of the banking sector. Law No 461/98 of 23 December 1998 (‘the Ciampi Law’) granted the government the power, inter alia, to adopt tax provisions to facilitate the retransfer to the banking foundations of the banks’ fixed and other assets, which were not essential to their corporate objectives, and to facilitate the restructuring of the banking sector by means of mergers between banks or similar restructuring measures.

5. The Ciampi Law was implemented by Legislative Decree No 153/99 of 17 May 1999 (‘Decree No 153/99’), which provides for special tax rules in respect of certain restructuring and retransfer transactions.

6. In points 1 to 5 of recital 5 in the preamble to the contested decision, the fiscal measures introduced by the Ciampi Law and Decree No 153/99 (‘the disputed aid scheme’) are described, in essence, as follows:

(1) A reduction to 12.5% of the rate of income tax (IRPEG) for banks which merge or engage in similar restructuring for five years after the operation, provided that the profits are placed in a special reserve which may not be distributed for three years; the profits paid into the special reserve may not exceed 1.2% of the difference between the sum of credits and debits of the post-merger bank and the sum of credits and debits of the largest pre-merger bank (Articles 22(1) and 23(1) of Decree No 153/99);

(2) Tax neutrality for transactions in which property and assets in ancillary activities transferred to banking companies pursuant to Law No 218/90 of 30 July 1990 are returned to the transferring institution (Article 16(3) of Decree No 153/99);

(3) The imposition of a fixed-rate levy in place of the taxes otherwise payable in connection with the operations referred to in the two preceding indents (Articles 24(1) and 16(5) of Decree No 153/99);

(4) Fiscal neutrality in relation to the local tax on capital gains on immovable property in connection with these operations (Articles 24(1) and 16(5) of Decree No 153/99);

(5) Exemption from tax for the transfer to banking foundations by the banking companies of their shareholdings in the Banca d’Italia (Article 27(2) of Decree No 153/99).

7. The disputed measures apply to transactions during the period 1998 to the end of 2004.

III – Procedure before the Commission and the contested decision

8. In response to a parliamentary question on the matter, the Commission launched preliminary investigations into the Ciampi Law and Decree No 153/99. In the course of the procedure, the Commission notified the Italian authorities by letter of 23 March 2000 that the Ciampi Law and Decree No 153/99 might contain elements of aid and requested that they provisionally cease to apply the disputed measures. By letter of 12 April 2000, the Italian authorities informed the Commission that they would suspend the application of the disputed measures, with the result that the tax concessions could be granted in 1998, 1999 and 2000 only.

9. By letter of 25 October 2000, the Commission notified the Italian Government of the opening of State aid proceedings.

10. On 11 December 2001, the Commission adopted the contested decision in which it held that the disputed measures – with the exception of the measure set out in point 5 of recital 5 in the preamble to the contested decision – constituted State aid which is incompatible with the common market (Articles 1 and 2 of the decision). In addition, the Commission required the Italian Government to withdraw the disputed aid scheme (Article 3 of the decision), to recover the aid granted under the unlawful provisions plus interest (Article 4 of the decision) and to inform the Commission, within two months of notification of the decision, of the measures taken to implement it (Article 5 of the decision).

IV – The application

A – Preliminary remarks concerning the grounds of the application

11. By its application, the Italian Government is claiming an infringement of the obligation to state reasons, of Article 87(1) EC and Article 253 EC as well as of Article 87(3)(b) and (c) EC. The Commission has disputed the validity of all of those claims.

12. To substantiate its application, the Italian Government first claims by its first plea that, in the contested decision, the Commission failed properly to take into account or overlooked the aims and characteristics of the disputed measures as well as the continuity between the underlying objective of the Amato Law and that of the Ciampi Law, and, consequently, was in breach of the obligation to state reasons, in terms of bolstering competition in particular.

13. By its second plea, which consists of several parts, the Italian Government claims that the disputed measures have incorrectly been categorised as aid within the meaning of Article 87(1) EC.

14. By its third plea, the Italian Government claims that the Commission is in breach of Article 87(3) EC and Article 253 EC because, as a result of a legally flawed and contradictory statement of reasons, it failed to declare the measures at issue to be ‘aid to promote the execution of an important project of common European interest’ or ‘aid to facilitate the development of certain economic areas’ within the meaning of those provisions, and, consequently, as compatible with the common market.

15. In addition, in its reply, the Italian Government alleged that its right of defence had been infringed. It objected to the fact that the Commission raised a separate objection concerning the indirect taxation of the privatised banks only in the contested decision – but not in the preliminary procedure – consequently, neither the Italian Government nor the recipients of the alleged aid were able to exercise their right of defence in that regard.

16. It must be pointed out in response to that objection that it follows from Article 42(2) of the Rules of Procedure of the Court of Justice that, in principle, new pleas in law may not be introduced in the course of proceedings, unless they are based on matters of law or fact which come to light in the course of the procedure. ( )

17. Since the Italian Government only introduced the objection of an infringement of the right of defence in its reply and did not base it on matters which came to light only during the procedure, it follows that this plea, as the Commission has correctly maintained, is inadmissible and, consequently, is not to be assessed in terms of the substance below.

B – The first general plea in law concerning the failure properly to take into account the aims and nature of the disputed measures (first plea)

1. Main arguments of the Italian Government

18. The Italian Government claims that the Commission has failed to appreciate the important role of the disputed measures in the context of reforming Italy’s banking sector and has misunderstood the close connection between the Amato Law and the Ciampi Law. In fact, the disputed measures constitute a necessary step in the process of completing the privatisation and restructuring of the banking sector that was set under way by the Amato Law and is consistent with the objectives of integration and competition. The fiscal measures contained in the Amato Law did not entirely produce the desired outcome, in relation, for instance, to market segmentation, which had largely continued. The Ciampi Law and implementing Decree No 153/99, which contain the contested measures, had, consequently, been necessary to achieve the aims of the Amato Law. The Commission was, therefore, mistaken in its assumption that the process of privatisation was completed in 1992. Since the Commission has not properly appreciated the exceptional nature of the measures as part of the reform of the banking sector, it has not fulfilled its obligation to provide an adequate statement of reasons. There was, for example, no proper assessment of the question whether the disputed measures actually prejudiced competition in the banking sector or, as the Italian Government contends, actually contributed to competition in that sector.

2. Assessment

19. I should first point out that Article 87(1) EC defines State aid which is governed by the EC Treaty as aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, in so far as it affects trade between Member States.

20. According to settled case-law, for a measure to be classified as aid, the following cumulative conditions have, consequently, to be met: (i) the measure must confer an advantage on specific undertakings or the production of specific goods; (ii) the advantage must be conferred directly or indirectly from State resources; (iii) the measures must distort or threaten to distort competition; and (iv) must be liable to affect trade between Member States. ( )

21. The nature of the aims and the causes for a State measure are not, however, decisive for classifying that measure as aid. According to settled case-law, Article 87 EC draws no distinction based on the ‘causes or aims of the State intervention but defines it in relation to its effects’. ( )

22. The actual ‘character’ of a measure provides no indication as to whether or not that measure fulfils the criteria of aid. In relation to rules in the social insurance field, for example, the Court has held, in settled case-law, that the ‘social character of State intervention is not sufficient’ to exclude it from being categorised as aid within the meaning of Article 87(1) EC. ( )

23. It is also difficult clearly and generally to establish the purpose of fiscal rules. As is also apparent from the Italian Government’s submissions in its application, different aims and purposes emerge, depending on the perspective from which such rules are considered. Consequently, the disputed measures may, indeed, be more or less closely linked to the privatisation project, but the Italian Government has also explained that the measures were intended to act as an incentive to mergers or retransfers, with the aim of enhancing the profitability or capitalisation of the banks concerned and the competitiveness of the banking sector. At another point, that same government stated that the disputed measures were designed to offset the higher tax burden affecting the banking sector in comparison with other economic sectors.

24. However, the Italian Government’s submission that, based on considerations such as privatisation and boosting competition, the disputed measures were adopted in accordance with the interests of European unity, is not in itself apt, pursuant to the case-law I have cited in points 21 and 22 above, to preclude classifying the disputed measures as aid within the meaning of Article 87(1) EC, in accordance with the criteria I have set out in point 20. In any event, it is for the Commission – exercising its discretion to approve aid under Article 87(3) EC – to undertake an evaluation going beyond that, taking account of political and economic interests, as stated by the Italian Government, and to make the appropriate assessment of the justification for aid. ( )

25. On the other hand, statements concerning the aim and object of a measure cannot be denied all relevance or evidential value for the purposes of an assessment under Article 87(1) EC, to the extent that they may provide information on the effect a measure may have and, consequently, play a role in determining the existence of the various ‘effect-related’ features of the concept of aid listed in point 20 above. ( )

26. But even construed thus, the argument advanced on several occasions to the effect that the disputed measures were ultimately intended to boost competition or make the banks competitive through restructuring and strengthening does not preclude those measures constituting aid.

27. The law on aid in fact constitutes an instrument in the context of the system provided for in Article 3(1)(g) EC ‘ensuring that competition in the internal market is not distorted’. A distortion of that nature would in fact be apparent were a Member State to strengthen undertakings or an economic sector for competitive purposes, with the result that competition was ‘boosted’ in comparison, for example, with equivalent undertakings or economic sectors in the internal market. ‘Boosting’ or ‘supplementing’ competition does not in fact fall outside the concept of the ‘distortion of competition’, to which Community law on aid relates. Taking that approach, the Court has also held, in settled case-law, that the fact that a Member State seeks to approximate, by unilateral measures, the conditions of competition in a particular sector of the economy to those prevailing in other Member States cannot deprive the measures in question of their character as aid. ( )

28. Turning to the arguments of the Italian Government in relation to the continuity between the objectives of the Amato Law and the Ciampi Law, these are clearly based on the view that the law at issue cannot be classified as aid because the Commission did not previously object to the measures adopted under the Amato Law.

29. It should be pointed out in that connection that, in accordance with the constituent elements set out in Article 87 EC, the classification of a State measure as aid within the meaning of that article depends on a whole range of factors and requires a detailed analysis in the individual case of the technical and legal aspects of the individual State measure and its economic context. ( ) Precisely because – as the Italian Government has to that extent correctly pointed out – the law on aid must be attuned to economic realities, exercising control over aid within the meaning of the Treaty is not a static concept. The Council, for example, expressed that as follows in the fourth recital in the preamble to Regulation (EC) No 659/1999: ( )

‘… the completion and enhancement of the internal market is a gradual process, reflected in the permanent development of State aid policy; … following these developments, certain measures, which at the moment they were put into effect did not constitute State aid, may since have become aid’.

30. In the light of those considerations, it seems clear that the fact that, at an earlier point in time, the Commission did not raise any objection to legislation such as the Amato Law – which, moreover, and the Italian Government does not dispute this, the Commission scrutinised in regard to certain aspects only – cannot lead to the conclusion that subsequent legislation, even if it ‘follows on’ from the earlier legislation or serves the same aim, cannot be classified as State aid. In other words, the Commission is in no way, to an extent, ‘precluded’ from classifying a provision as State aid simply because it failed to object to the earlier provision.

31. In so far as the Italian Government, finally, claims that there has been a failure to provide an adequate statement of reasons in accordance with Article 253 EC, it is necessary first to draw attention in this connection to a number of principles that emerge from settled case-law.

32. It must first be borne in mind that the duty to provide a statement of reasons is an essential procedural requirement as distinct from the question whether the reasons given are correct, which goes on to the substantive legality of the contested measure. ( )

33. Secondly, as far as the requirements pertaining to the statement of reasons are concerned, it is settled case-law that the reasons must be appropriate to the measure at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent Community Court to exercise its power of review. The requirements to be satisfied must be assessed by reference to the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed not only with regard to its wording but also to its context and all the legal rules governing the matter in question.( )

34. As regards the criticism that the Commission failed to take proper account of the exceptional nature of the measures as part of the reform of the banking sector, it has, from that perspective, to be established, that in recital 16 in the preamble to the contested decision, the Commission summarised Italy’s statements on the background to and aims of the disputed measures. Furthermore, recitals 30 and 32 in the preamble to the contested decision then refer to the aim of the aid, in particular the consolidation of the banking sector, in the context of the assessment in terms of the law on aid.

35. In view, in particular, of the role played by the aims of the disputed measure for its classification as aid within the meaning of Article 87(1) EC, as I have described that role in points 21 to 25 above, there is nothing to indicate that the statement of reasons was inadequate in terms of taking into account the nature and aims of the disputed measure.

36. As regards the argument concerning continuity between the disputed measure and the Amato Law, that issue is covered in recital 53 in the preamble to the contested decision.

37. In so far as the Italian Government is claiming, by its first general plea, that there has been an infringement of the obligation to state reasons under Article 253 EC, that allegation is, therefore, unfounded.

38. On the basis of the foregoing considerations, the assessment of the first plea has, therefore, revealed nothing that calls into question the validity of the contested decision.

C – The allegation that the Commission – erroneously and in breach of the obligation to state reasons – classified the disputed measures as aid within the meaning of Article 87(1) EC (second plea)

39. This plea consists in several, not very clearly structured parts, by which the Italian Government claims, in summary, the following, in relation to the contested decision:

– inadequate statement of reasons because there was no separate assessment of the disputed measures under Articles 87(1) EC and 87(3) EC and because the review of the disputed measures was too general;

– incorrect premisses and faulty assessment of the conferment of advantage and of selectivity in relation to the fiscal measures listed in point 1 of recital 5 in the preamble to the contested decision;

– no charge on the State budget or use of State resources as a result of the disputed measures and fiscal neutrality of the measures in relation to retransfer transactions;

– the disputed measures were not selective in nature;

– there was no distortion of competition between the banks operating in Italy or between domestic and foreign banks;

– faulty assessment and inadequate statement of reasons in relation to the effects on trade between Member States.

1. The defective nature of the contested decision as regards whether the disputed measures confer a selective advantage conferred through State resources

(a) Main arguments of the Italian Government

40. By the second part of its second plea, the Italian Government contends that as regards the measure described in point 1 of recital 5 in the preamble to the contested decision, that decision is based on an incorrect premiss in terms of the conferment of an advantage. The reduction to 12.5% of the tax rate (IRPEG) related only to profits earmarked for special purpose reserves and not generally to all of the profits of banks involved in a merger or similar restructuring. That fiscal advantage was linked to four conditions, which the Commission failed to take into account. It was clear from those conditions that the objective of that fiscal measure was not to benefit the shareholders but was geared to the capitalisation of the bank born of the merger. The effect was to boost the competitiveness of the banking sector.

41. Furthermore, and in contrast to the Commission’s finding in recital 33 in the preamble to the contested decision, this was not a selective measure. The Italian Government stresses in particular the inaccuracy of the finding that the measure had the effect of disadvantaging smaller in relation to larger banks. Moreover, the measure was not confined to Italian banks but also encompassed branches of banks of other Member States located in Italy.

42. By the third part of its second plea, the Italian Government claims that the concept of State aid requires an advantage for the undertaking as well as a direct impact on the State budget – through the use or non-use of resources. However, overall and taking the longer view, the State budget is not burdened by the disputed measures. The Italian legislature has consistently sought to employ instruments which are neutral in terms of both competition and the totality of fiscal measures in the banking sector.

43. The Italian Government further emphasises that measures concerning the retransfer to the banking foundations of fixed and other assets, which were not essential for the banks’ corporate objectives, should be deemed to be not tax exemptions but simply as fiscally neutral. Those retransfers generated no added or lesser value, and the banking foundations had basically to pay the tax owed by the banks, albeit at a later date than the original due date, so that it was possible to speak only in terms of a time-limited suspension of the tax debt. Consequently, there had been no renunciation of tax revenue. In addition, those measures benefited establishments like holdings also, which could not be classified as undertakings within the meaning of the aid concept.

44. By the fourth part of its second plea, the Italian Government claims generally that the disputed measures are, in addition, not selective. They are in fact general measures, directed, without discrimination, to all banks taking part in the reform.

45. In assessing the selectivity of a tax concession, it is first necessary to determine whether it constitutes an exception to the application of the generally applicable tax system for the benefit of certain undertakings of a Member State. If that is the case, it must then be established whether the exception or differentiation within the system is justified by the nature or internal structure of the taxation system.

46. In this case, although the disputed measures relate solely to the banking sector, they have to be seen not as specific but as general measures because they are based on the fundamental principle that exists in the Italian legal system, according to which banks are taxed differently from other industrial undertakings. According to the Italian Government, the banking sector is subject to special statutory requirements and controls. The banking sector also exhibits special features in relation to the competitive dynamic. There are objective differences between persons liable for tax in the banking sector and in other sectors. Special taxation of the banking sector is, therefore, objectively justified, as is clear from the Commission’s notice on the application of the State aid rules to measures relating to direct business taxation. ( ) The disputed measures should not, therefore, be deemed to constitute an ‘exception’ to the general system. These are unusual and time-limited measures intended to provide an incentive for necessary structural adjustments. In addition, improved competition in the banking sector is also of direct advantage to other branches of the economy.

(b) Assessment

47. The concept of aid pursuant to Article 87(1) EC first requires that certain undertakings or the production of certain goods should be favoured. It should be borne in mind here that it is settled case-law that the concept of State aid within the meaning of Article 87(1) goes beyond the concept of subsidy, since it covers not only positive benefits such as subsidies, but also measures which, in a variety of ways, reduce the burdens that undertakings have normally to bear. ( )

48. Consequently, aid is described here as a departure from a set of rules or from a normal [fiscal] burden, which confers an advantage. That establishes the requisite point of reference for an ‘advantage’. ( )

49. And so, it must first and very fundamentally be established whether the disputed measures have to be assessed in relation to the system of taxation that otherwise applies to the relevant transactions or whether, as the Italian Government has claimed, they constitute an autonomous general system of taxation or ‘special system of taxation’.

50. In this case, I consider that the overall context of the disputed measures argues far more persuasively for assessing them against the yardstick of the general system of taxation, rather than viewing them as a new general system or ‘normal rule’. We are dealing with a bundle of individual departures from previously applicable general fiscal provisions, which are designed to facilitate certain transactions in connection with bank mergers. ( ) In that regard, the circumstances of the present case do not differ significantly from those in Steenkolenmijnen( ) or Maribel, ( ) for example, which related to special fiscal provisions in relation to a general system – in those instances, the general social security system. In those cases, the Court also analysed those special provisions as exceptions to the general system in each case, and not as autonomous measures. Similarly, in its judgment in Adria-Wien Pipeline, the Court did not follow the view of Advocate General Mischo that the rules on remuneration at issue constituted a newly established general measure. ( )

51. As regards, firstly, the fulfilment of the condition relating to the conferment of an advantage by the measures at issue, that is surely apparent from the fact that, as a result of the disputed measures, the banks concerned were not required to pay or were required to pay in a lesser amount, certain charges which have normally to be paid under the general taxation system – the income tax and charges payable on transactions relating to retransfers, for example. In a nutshell, the disputed measures had the effect of reducing the burden on the undertakings concerned. In that sense, in the contested decision, the Commission correctly described the disputed measures as ‘fiscal advantages’, and, in recital 42 in the preamble to the contested decision, established, among other things, that those advantages were conferred by renouncing certain tax revenue.

52. As regards mergers or other similar restructuring operations, in particular – that is to say, operations to which point 1 of recital 5 in the preamble to the contested decision refers – that advantage consists in the reduction of income tax to 12.5%, subject to certain conditions, which are also set out in that recital in the contested decision.

53. In my view, the Italian Government has failed to demonstrate anything that might cast doubt on the conferment of an advantage by that measure.

54. It has first to be pointed out that the Commission reproduces or summarises the features of this fiscal measure in point 1 of recital 5 in the preamble to the contested decision, evidently as described by the Italian Government. More particularly, it is explicitly stated there that the reduction applies, inter alia, ‘provided that the profits are placed in a special reserve …’.

55. Secondly, the (technical) features of this fiscal measure do not in any way in particular affect the fact that the banks concerned are, in any event, accorded a reduction in income tax.

56. Thirdly, according to the Italian Government, that measure is specifically intended to provide a fiscal incentive for mergers.

57. Fourthly, it should be pointed out that it is apparent from recital 8 in the preamble to the contested decision, which the Italian Government has not challenged, that the Italian authorities themselves calculated at EUR 2 767 million the maximum theoretical amount of the tax benefits that beneficiaries of the measure may have enjoyed during the material period.

58. Turning more specifically to the disputed measures, in so far as they provide for the ‘fiscal neutrality’ of transactions in the context of the restructuring of the banks – including, namely, transactions involving the retransfer to the provider of fixed and other assets, which are not essential for corporate objectives – according to the information available, the effect of that ‘fiscal neutrality’ is to prevent taxes being payable which the banks would normally have to pay when carrying out the transactions in question, particularly the tax on capital appreciation.

59. That, in my view, clearly represents a tax advantage. It is immaterial in this case that, as the Italian Government has submitted, these measures do not result in a tax benefit in regard to certain operations because, in the specific case, there is in fact no tax payable on the basis of other rules, or because, for example, in certain individual cases, there is no tax payable on capital appreciation, since the transaction does not give rise to capital appreciation of that nature. The subject-matter of the contested decision is, in fact, as the Commission sets out in recital 29 in the preamble to that decision, the disputed measures themselves and not individual aid or cases. According to case-law, in the case of an aid programme, the Commission may confine its examination to the characteristics of the programme in question in order to determine, on that basis, whether it contains elements of aid. ( ) Advantage in the individual case is not therefore the issue. The argument that the disputed measures cannot be classified as aid because establishments such as holdings, which are not undertakings within the meaning of the concept of aid, also benefit from them is irrelevant here for those same reasons. The crucial factor in this case is, as I have already stated, that as a result of this measure, where in consequence of the execution of the relevant transactions, a tax would normally be payable, this is in principle ‘neutralised’ for the banks.

60. That aside, in response to the Italian Government’s objection that, to the extent that they relate to the abovementioned transactions involving retransfer, the disputed measures result solely in a postponement or temporal suspension of the tax debt, it has to be pointed out, as the Commission has also noted, that the mere fact that payment of a tax is deferred must be deemed to be a financial advantage. ( )

61. Finally, the Italian Government has itself stated that the aim of the measures concerning retransfer transactions is to remove fiscal obstacles.

62. On the basis of the foregoing considerations, the Italian Government has failed to advance any argument to rebut the finding that, in so far as the disputed measures provide for ‘fiscal neutrality’ for certain transactions, an advantage within the meaning of Article 87(1) EC has been conferred.

63. Moving on then to the issue of the grant of State resources, that occurs in instances of ‘negative’ aid, as in the present case, in the form of the renunciation of tax revenue which is bound up with the advantage. ( )

64. The Italian Government’s argument that, ultimately or in the long term, the disputed measures will not be a charge on the State budget must be dismissed. The aim of Article 87 EC is to prevent trade between Member States from being affected by the advantages conferred by the public authorities, which, in various forms, distort or threaten to distort competition by favouring certain undertakings or the production of certain goods. ( ) The criterion of the use of State resources serves to distinguish State aid from private intervention, which is not covered by the law on aid. ( ) That criterion must, therefore, be assessed separately from the question whether that use of resources in the end results in a charge on the budget or, actually, has a beneficial impact on the State budget. Consequently, whether or not there is a charge on the budget of the State concerned, is, ultimately, immaterial. ( )

65. Finally, the Italian Government has specifically contested the selectivity of the disputed measures.

66. According to the wording of Article 87(1) EC, an economic advantage conferred by a Member State is in the nature of aid only if it is likely to favour ‘certain undertakings or the production of certain goods’.

67. The criterion of selectivity helps to distinguish between State measures, which may be aid within the meaning of Article 87 EC, and those general measures which are the expression of a Member State’s general fiscal policy and are reserved for the Member States.

68. Measures which benefit all economic operators equally within the territory of a Member State have, for example, in principle to be considered to be general and not selective measures. ( )

69. Where a measure fails to meet the above criterion of generality, it can, however, prove very difficult to distinguish between general and selective measures. According to case-law itself, there may be (selective) aid within the meaning of Article 87(1) EC even where that aid affects an entire or even several sectors of the economy. ( )

70. In this case, it is, however, incontestable that the disputed measures apply exclusively to the banking sector.

71. I have already stated that, in my view, in so far as they constitute for beneficiaries exemptions from the financial charges they have normally to bear, the disputed measures have to be viewed in the context of or in relation to the general rules on taxation, to which those exemptions relate.

72. According to a concept first developed by Advocate General Darmon in his Opinion in Sloman Neptun, a selective measure within the meaning of Article 87(1) EC should constitute a ‘derogation’, by virtue of its actual nature, from the scheme of the general system in which it is set. ( )

73. Whether differential treatment under a measure – as a result of which a beneficiary is accorded an advantage within the general system to which that measure belongs – is or is not selective consequently depends on whether that difference in treatment results from the nature or structure of the general system – in a word, from its internal fiscal logic.

74. In recital 32 in the preamble to the contested decision, the Commission referred to the relevant finding of the Court in Maribel, according to which ‘a measure intended partially to exempt undertakings of a particular industrial sector from the financial charges arising from the normal application of the general social security system, without there being any justification for this exemption on the basis of the nature or general scheme of this system’, must be regarded as aid. ( )

75. Differential treatment can therefore be non-selective only where it is objectively justified in regard to the rules on taxation within which it has been adopted. That this assessment is akin to a review of equality [of treatment] is, moreover, evident here, and this is also expressed in the Court’s case-law on selectivity to the extent that it requires it to be established whether certain undertakings or the production of certain goods might be favoured ‘in comparison with others which, in the light of the objective pursued by the system in question, are in a comparable legal and factual situation’. ( )

76. The disputed measures have introduced, for the banking sector exclusively, a series of changes to the taxation system normally applicable (reduction in income tax, fiscal neutrality in relation to capital appreciation, and so on). Since differential treatment within a taxation system is not of an ‘exceptional nature’ and, consequently, not to be deemed to be selective, only where that differential treatment results, so to speak, from the ‘internal logic’ of the taxation system, the differential treatment introduced by the disputed measures would be non-selective only were it consistent with the fiscal logic of the general taxation system or, as the Italian Government put it, if the general system was being adjusted to fit in with the particular features of banking activity.

77. However, I agree with the Commission that this is not the case here and that, in other words, the disputed measures have not resulted in objective differential treatment between the banking sector and other sectors and undertakings. The disputed measures are selective measures intended to bring about the consolidation of the Italian banking sector or, as the Italian Government stated, to boost the competitiveness of the Italian banking sector. I therefore consider the Commission’s finding in recital 32 in the preamble to the contested decision to be accurate, in the sense that this is an external element which appears not to be inherently linked to the structure of the system that normally applies – in relation to mergers or other transactions to which the disputed measures relate. The objective of restructuring or privatising a Member State’s banking sector may in itself be an entirely legitimate goal, but that does not mean that the exclusive advantage to the banking sector is covered by the nature and general aims of the normally applicable national taxation system. The objective of the disputed measures, which are unrelated to that system, are in my view an indication that those measures do not constitute an adaptation of the general system.

78. Advocate General Ruiz-Jarabo Colomer has, moreover, pointed out that the proof that a measure serves the system’s internal logic can succeed only provided there is no intention ‘to improve the position of one particular sector in relation to its foreign competitors’. ( ) But the Italian Government has itself stated on several occasions that the disputed measures are also intended to boost competitiveness – by means of mergers or securing increased profitability.

79. On the basis of the foregoing considerations, I consider that since they, in any event, apply only to the relevant transactions in the banking sector, the disputed measures are sectorally selective, as the Commission correctly found in recital 35 in the preamble to the contested decision.

80. Incidentally, the fact that undertakings in other sectors of the economy – which, were they to embark upon equivalent restructuring operations of the kind that, in the banking sector, benefit from tax reductions as a result of the disputed measures, would have to pay the relevant taxes – are not in competition with the banks does not argue against such selectivity. This will in fact often be the case in relation to aid for entire sectors involved in the ‘production of certain goods’, which are, however, specifically listed in Article 87(1) EC.

81. At the forefront of that provision is the influence on competition in the Community, that is to say, at issue here is, for example, also, competition with the banking sectors of other Member States. ( ) Thus, in Adria-Wien Pipeline, which the Commission cites, the Court found that there was a selective advantage, even though the scope of the national aid related very broadly to ‘undertakings whose activity … consist[s] in the manufacture of goods’. ( )

82. In the contested decision, the Commission also made (potential) ( ) findings in relation to the selectivity of the disputed measures, particularly the measure referred to in point 1 of recital 5 in the preamble to the contested decision, within the banking sector, that is to say, in regard to the selective nature of the differential treatment afforded to different banks.

83. Since, as set out above, the Commission’s finding is accurate in relation to sectoral selectivity and, for a measure to be classified as aid, it is sufficient that it is selective in one respect at least, it is unnecessary to consider whether, in fact, beyond that, the disputed measures are also selective within the sector. ( )

84. It must therefore be established that the Commission correctly concluded that the disputed measures fulfil the conditions governing the unilateral conferment of an advantage from State resources.

2. Distortion of competition and the affecting of trade between Member States

(a) Main arguments of the Italian Government

85. By the fifth part of its second plea, the Italian Government claims that competition is not being distorted either in the relationship between banks operating in Italy or between domestic and foreign banks.

86. It contends that the tax concessions at issue can be claimed by all banks which meet certain criteria. The tax concessions relating to certain transactions are merely linked to the conditions that such transactions take place in Italy. As regards the measure referred to in point 1 of recital 5 in the preamble to the contested decision, it also applies to branches of foreign banks. Access for foreign banks to the national market is not, therefore, being made more difficult.

87. Furthermore, in assessing the effects on competition of the disputed measures, account must be taken of the fact that the tax burden for banks operating in Italy is appreciably higher than the European average. That situation can justify measures to reduce the tax burden. The Commission wrongly neglected to consider the issue of distortion of competition by reference to the relevant market.

88. By the sixth part of its second plea, the Italian Government claims that the prejudice to trade between Member States has been incorrectly assessed and an adequate statement of reasons not provided. It disputes, in particular, the finding in the contested decision to the effect that the disputed measures make it easier for Italian banks to expand abroad and more difficult for foreign banks to access the Italian market. According to the Italian Government, those reasons are neither adequate nor relevant. It again states that the disputed measures are applicable to foreign banks also and that Italian banks are subject to a higher tax burden, precluding any ‘potentially aggressive’ expansion on their part.

(b) Assessment

89. It has first to be borne in mind that, according to settled case-law, it is not actual prejudice to competition and intra-Community trade which must be determined; the issue is simply whether the measure in question is apt to affect trade between Member States and distort competition. ( )

90. Furthermore, it may result from the actual circumstances in which the aid is granted that it may affect trade between Member States and distort or threaten to distort competition. ( )

91. Turning now to the argument that there is no distortion of competition, I have already stated that the Community law on aid is an instrument to prevent distortions of competition in the common market. ( ) It is, therefore, sufficient to justify the applicability of Article 87(1) EC, if the disputed measures are likely to distort competition in relation to competitors operating in the common market. ( ) The fact that the disputed measures are applicable in accordance with objective criteria and are open to both domestic and foreign banks is, as the Commission has stated, not capable of proving that they are not likely to distort competition. The decisive factor is that, as a result of the disputed measures, certain banks operating in Italy are being strengthened in terms of their size – by mergers – or their financial capacity – by retransfers, for instance. Even if, in principle, foreign branches are able to benefit from the disputed measures, provided they fulfil the necessary conditions, that does not alter the fact that those measures could influence the competitiveness of banks operating in Italy as compared with banks operating in other Member States. In the light of the liberalisation of the financial markets which has taken place in recent years, there can, in my view, be no serious doubt that there is at least a certain degree of intra-Community competition in the banking sector.

92. As regards the argument that the tax burden for banks operating in Italy is appreciably higher than the European average, it must be pointed out that, according to case-law, an attempt to bring the competitive conditions of a specific economic sector closer to those of other Member States through unilateral measures cannot deprive the measures of their character of aid. ( ) That ‘compensatory’ approach in the arguments of the Italian Government must, therefore, be dismissed.

93. It follows that the Italian Government has failed to demonstrate that the Commission erred in assuming that the disputed measures were likely to distort competition.

94. Turning then to the assessment of and statement of reasons why the disputed measures are likely to affect intra-Community trade, no strict criterion emerges from the Court’s case-law in relation either to the effect on competition or to establishing that trade between Member States is affected. ( )

95. According to the case-law which the Commission has pertinently cited in recital 41 in the preamble to the contested decision, if a conferred advantage strengthens the position compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid. ( )

96. According to the Italian Government, the disputed measures are intended to boost the competitiveness of the Italian banking sector. They are designed to increase the profitability of the banks concerned and facilitate mergers.

97. Furthermore, it is sufficient to establish that – in view of the trend towards liberalising financial services and integrating financial markets, which the Commission mentioned in recital 41 in the preamble to the contested decision and which the Italian Government itself did not dispute – it cannot in any event be ruled out that beneficiary undertakings are in competition with undertakings in other Member States. ( )

98. Consequently, the Commission could rightly assume that trade was affected. Furthermore, in recital 41 in the preamble to the contested decision the Commission provides a detailed statement of the reasons why it assumes that trade to be affected.

99. Therefore, the arguments relating to the flawed assessment of the effect on competition and trade between the Member States are also unfounded.

3. The allegation that the statement of reasons is inadequate because there is no separate review of the disputed measures under Article 87(1) EC and Article 87(3) EC and because the disputed measures are reviewed in an excessively general manner

(a) Main arguments of the Italian Government

100. The Italian Government first claims that the contested decision fails separately to assess two different questions, namely the classification of the disputed measures as aid within the meaning of Article 87(1) EC and the applicability of the exceptions under Article 87(3) EC. In addition, the reasons given for classifying the disputed measures as State aid within the meaning of Article 87(1) EC are too general.

(b) Assessment

101. In the light of the principles governing the obligation to state reasons, as I have cited them in points 32 and 33 above, it must be established that, as regards the question of classifying the disputed measures as aid within the meaning of Article 87(1) EC and that of the applicability of the exceptions under Article 87(3) EC, the reasons were stated separately in the contested decision, in relation to the former in recitals 32 to 43 in the preamble to the contested decision and, in relation to the latter, in recitals 45 to 48.

102. The applicant’s argument that the two questions were not dealt with separately cannot, therefore, be accepted.

103. Nor is there justification, in the light of my earlier comments on the individual constituent elements of the concept of aid, in which I considered the relevant findings of the Commission, for the general allegation that the statement of reasons was too general or that there was no adequate statement of the reasons for classifying the disputed measures as State aid within the meaning of Article 87(1) EC.

104. The first part of the second plea is, therefore, also unfounded.

105. On the basis of the foregoing considerations, the second plea, to the effect that the Commission, incorrectly and in breach of the obligation to state reasons, classified the disputed measures as aid within the meaning of Article 87(1) EC, must be dismissed as unfounded.

D – The infringement of Article 87(3) EC and the infringement of the obligation to state the reasons as regards the question of compatibility with the common market (third plea)

1. Main arguments of the Italian Government

106. The Italian Government alleges that the Commission has infringed Articles 87(3) EC and 253 EC by failing, as a result of a faulty and contradictory statement of reasons, to declare the disputed measures compatible with the common market.

107. In that connection, the Italian Government first states with reference to recital 48 in the preamble to the contested decision that the Commission could not conclude from the fact that the disputed measures were not notified pursuant to Article 88(3) EC that they should not be declared compatible with the common market under Article 87(3) EC or that it could, therefore, undertake a purely superficial assessment of the material circumstances. In other cases concerning measures that had not been notified, the Commission had taken an unbiased approach, discussed the matter with the Italian Government and, finally, applied the derogations under Article 87(3)(c) EC. In this case, the Commission has, however, relied solely on incoherent standard formulas.

108. The Italian Government then claims that as ‘aid to promote the execution of an important project of common European interest’, the disputed measures could have been declared to be compatible with the common market in accordance with Article 87(3)(b) EC.

109. In that connection, the Italian Government submits that, with the Ciampi Law, the Italian legislature was seeking to achieve a significant impact on the Italian banking market, namely the complete and definitive privatisation of Italian banks. A project of that nature, which also corresponds to the European project of achieving the euro zone and the internal market, constitutes a ‘project of common European interest’. A project of that nature could be implemented by the Member States only in relation to the banks established in their own territory. However, the whole Community would benefit from this privatisation, which would boost competition on as significant a financial market as the Italian financial market. To that extent, the Commission’s finding in recital 45 in the preamble to the contested decision, according to which the disputed measures ‘will benefit mostly the economic operators of one Member State and not the Community as a whole’ was not the full story. Only the ‘project’ and not the aid had to be ‘of common European interest’ and, consequently, represent an advantage for the Community as a whole. In the light of the aims, which it had set out in detail, the Italian Government also disputes that this is not a ‘concrete, precise and well-defined project’ (again, recital 45 in the preamble to the contested decision).

110. Advancing the same arguments in relation to the aims of the disputed measures, the Italian Government then claims that the disputed measures could also have been declared compatible with the common market as ‘aid to facilitate the development of certain economic activities’ within the meaning of Article 87(3)(c) EC.

111. The Italian Government further contends that the Commission ought not to have ruled out the possibility of the disputed measures being compatible with that provision solely on the basis of guidelines like those on national regional aid. ( ) In a case like the present case, in particular, which related to ‘atypical’ measures, it was also necessary to examine whether the measures could be caught by the concept of aid under Article 87(3)(c) EC, independently of the categories covered by the guidelines.

112. The Italian Government then criticises above all the Commission’s finding in recital 47 in the preamble to the contested decision that, compared with earlier measures, particularly within the framework of the Amato Law, the main effect of the disputed measures would be to improve the competitiveness of the recipients of the aid.

2. Assessment

113. I should first point out that in the application of Article 87(3) EC, the Commission has a wide discretion the exercise of which involves economic and social assessments which must be made in a Community context. ( )

114. Since the Commission enjoys that wide discretion, the Court, when examining the lawfulness of the exercise of such freedom, cannot substitute its own assessment of the matter for that of the competent authority. ( )

115. Consequently, it is not for the Court to establish whether a State aid should be or could have been declared to be compatible with the common market. ( )

116. Judicial review of the manner in which the Commission’s discretion is exercised is, in fact, confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with and to verifying the accuracy of the facts relied on and that there has been no error of law, manifest error of assessment in regard to the facts or misuse of powers. ( )

117. As regards the Italian Government’s claim in relation to recital 48 in the preamble to the contested decision, the Commission did not conclude on the basis of the failure to notify it of the disputed measures that those measures were incompatible with the common market.

118. The Commission’s assessment is actually based on the considerations set out in recitals 45 to 48 in the preamble to the contested decision.

119. In those recitals, the Commission discussed, inter alia, the derogations provided for under Article 87(3) EC and, in each instance, stated why it did not consider the derogation appropriate in the circumstances of this case.

120. In the light of the principles I have set out in points 32 and 33 above concerning the obligation to state reasons, it has, therefore, to be established that the contested decision contains an adequate statement of reasons on the matter of compatibility with the common market. ( ) In so far as the Italian Government has claimed that the contested decision is inconsistent with earlier decisions, that does not prove that the reasons for the contested decision itself are contradictory.

121. It has, further, to be established in response to the Italian Government’s arguments that there was a failure to examine the disputed measures independently of the Commission’s guidelines, that it is clear from recitals 47 and 48 in the preamble to the contested decision that the Commission did not assess the compatibility of the disputed measures with the common market solely by reference to the guidelines, even though it did conclude that the circumstances of the case did not permit the disputed measures to be declared compatible with the common market.

122. Furthermore, and as I have already pointed out, the decision whether the disputed measures constitute a ‘project of common European interest’ or ‘aid to facilitate the development of certain economic activities’ involves complex economic and social assessments by the Commission which must be made in a Community context. Therefore, even if it had to be accepted that the disputed measures serve to attain the complete and definitive privatisation of Italian banks and that this is consistent with the achievement of the internal market and the euro zone – itself subject to discretionary assessment – that alone cannot lead to the conclusion that the Commission erred in law in not classifying the disputed measures under Article 87(3)(b) or (c) EC.

123. In the light, as discussed above, of the multilayered nature of the aims of the disputed measures and their effects, I am further of the view that the Italian Government has failed to demonstrate that, by its finding in recital 45 in the preamble to the contested decision, according to which the disputed measures ‘will benefit mostly the economic operators of one Member State and not the Community as a whole’ and do not represent a ‘concrete, precise and well-defined project’, the Commission has committed a manifest error of assessment.

124. As regards, finally, the finding in recital 45 in the preamble to the contested decision that, in contrast to the earlier measures (in the context of the Amato Law), the disputed measures serve primarily to boost competitiveness, the comparability of the disputed measures with earlier measures in terms of the question of compatibility with the common market is not in any event decisive. ( ) In view of the fact that the disputed measures – as the Italian Government has itself stated, moreover – patently have the effect of boosting competition, the Commission’s finding that these measures serve primarily to boost the competitiveness of the recipients of the aid is not, in itself at least, a manifestly incorrect assessment.

125. On the basis of the foregoing considerations, the third plea must be dismissed as unfounded.

V – Costs

126. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission applied for an order for costs and the Italian Republic has been unsuccessful, the latter must be ordered to pay the costs of the proceedings.

VI – Conclusion

127. On the basis of the above considerations, I propose that the Court should:

(1) dismiss the application;

(2) order the Italian Republic to pay the costs.