Judgment of the Court of First Instance (Third Chamber, extended composition) of 12 May 1999. - Moccia Irme SpA, Prolafer Srl, Ferriera Acciaieria Casilina SpA, Dora Ferriera Acciaieria Srl, Ferriera Lamifer SpA and Nuova Sidercamuna SpA v Commission of the European Communities. - Action for annulment - State aid - ECSC Treaty - Fifth Steel Aid Code - Requirement of regular production within the meaning of Article 4(2) of the Fifth Steel Aid Code. - Joined cases T-164/96, T-165/96, T-166/96, T-167/96, T-122/97 and T-130/97.



European Court reports 1999 Page II-01477



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

1 Plea of illegality - Measures in respect of which a plea of illegality may be raised - General ECSC decision forming the basis of the individual decision contested

(ECSC Treaty, Arts 33, second para., and 36, third para.)

2 ECSC - Steel aid - Prohibited - Whether conditionally prohibited - Prejudicial to competition - No such condition

(ECSC Treaty, Arts 4(c) and 95)

3 ECSC Treaty - Steel aid - Authorisation by the Commission - Aid for closure - Conditions - Discretion of the Commission - Regular production

(ECSC Treaty, Arts 4(c) and 95; Commission Decision No 3855/91/ECSC)

4 ECSC - Steel aid - Authorisation by the Commission - Principle of non-discrimination - Breach - Conditions

(Commission Decision No 3855/91/ECSC, Art. 4(2))

5 ECSC - Steel aid - General aid scheme approved by the Commission - Definition of the criteria for its application - Whether individual aid is covered by the approval - Investigation by the Commission - Assessment in the light of the general scheme and the conditions laid down in the decision approving it

(ECSC Treaty, Arts 5 and 15)

6 Acts of the institutions - Statement of reasons - Obligation - Scope - ECSC decision

(ECSC Treaty, Arts 5 and 15)

Summary

1 Where a Commission decision finding that aid is incompatible with the common market for the purposes of Article 4(c) of the ECSC Treaty produces legal effects of its own, including the definitive refusal of the aid, the recipient undertaking must have a means of redress. This means that it must be able to rely, in support of an action for annulment, on the illegality of any general decision on which the contested decision is based, irrespective of whether or not it has challenged the decision to initiate the procedure for examining the disputed aid.

2 The system set up by Article 4(c) of the ECSC Treaty thus differs from that under Article 92(1) of the EC Treaty (now, after amendment, Article 87(1) EC). The former imposes a general and unconditional prohibition on all aid, which is in substance contrary to the very conditions in which the common market in coal and steel was established. The latter, on the other hand, only prohibits aid where it is such as to distort or threaten to distort competition by favouring certain undertakings or the production of certain goods.

It follows that aid for closure granted by a Member State to a steel undertaking falls within the prohibition in Article 4(c) of the ECSC Treaty, without there being any need to establish that the conditions of competition have in fact been undermined.

3 Under Article 4(c) of the Treaty, all aid for steel from the Member States in any form whatsoever is prohibited. Derogations from that prohibition, such as the Fifth Steel Aid Code, adopted on the basis of Article 95 of the Treaty, must be interpreted strictly.

Having regard to the generally applicable prohibition on aid laid down by Article 4(c) of the ECSC Treaty and to the exceptional and limited nature of the derogations allowed, the Commission was entitled to consider (in the Fifth Steel Aid Code authorising aid in favour of undertakings which definitively cease their production of steel), in exercising its discretion and without manifestly misconstruing the law or misusing its powers, that aid for closure must have significant effects on the market and therefore should only be granted to undertakings which, whilst less competitive, have none the less produced on a regular basis within the meaning of Article 4(2) of the Fifth Code. Moreover, the Commission may, in a later decision, lay down the conditions for implementing that provision.

4 For the Commission to be found in breach of the principle of non-discrimination, it must be shown to have treated like cases differently, thereby placing some traders at a disadvantage by comparison with others, without such differentiation being justified by the existence of substantial objective differences.

In the context of steel aid, it is therefore necessary to consider whether or not the difference in treatment as between undertakings is based on the existence of objective and substantial differences having regard to the aims which the Commission may lawfully pursue as part of its industrial policy in the European steel industry.

5 Whilst the second indent of Article 4(2) of the Fifth Steel Aid Code lays down the requirement of regular production, it does not define that requirement. It follows that the Commission, in approving a general aid scheme notified by a Member State, is of necessity bound to define in abstract terms the criteria for the application of that requirement so as to enable it then to make a uniform and predictable assessment of individual requests for aid notified under Article 6(6) of the Fifth Code, in compliance with the principles of legal certainty and protection of legitimate expectations.

Once the criteria have been specified and the general scheme has been approved, the Commission must, when aid granted on the basis of the previously authorised scheme is notified, confine itself to checking that the aid is covered by the general scheme and satisfies the conditions laid down in the decision approving it. Were it not to take that approach, the Commission could, whenever it examined any individual cases notified, reconsider its decision approving the general aid scheme. This would jeopardise the principles of legal certainty and the protection of legitimate expectations from the point of view of both the Member States and traders since individual aid in conformity with the decision approving the general aid scheme could thus at any time be called in question by the Commission in breach of those principles.

6 The requirement of a statement of reasons laid down by Articles 5 and 15 of the ECSC Treaty must be assessed in the light of the circumstances of the case, in particular the content of the measure, the nature of the reasons relied upon and the interest which the addressees or other persons concerned by the measure, for the purposes of the second paragraph of Article 33 of the Treaty, may have in obtaining an explanation. In the case of a measure which is intended to be of general application, the requirements laid down in Articles 5 and 15 oblige the Commission to mention, when stating the reasons on which its decision is based, the situation as a whole which led to the adoption of the decision and the general objectives which it seeks to attain.

Parties

In Joined Cases T-164/96, T-165/96, T-166/96, T-167/96, T-122/97 and T-130/97,

Moccia Irme SpA, a company incorporated under Italian law, established in Naples (Italy), represented by Emilio Cappelli, Paolo De Caterini and Andrea Bandini, all of the Rome Bar, with an address for service in Luxembourg at the Chambers of Charles Turk, 13A Avenue Guillaume,

Prolafer Srl, a company in liquidation incorporated under Italian law, established at Bergamo (Italy),

Ferriera Acciaieria Casilina SpA, a company incorporated under Italian law, established at Montecompatri (Italy),

Dora Ferriera Acciaieria Srl, a company in liquidation incorporated under Italian law, established at Bergamo,

Ferriera Lamifer SpA, a company incorporated under Italian law, established at Travagliato (Italy),

represented by Carmine Punzi and Filippo Satta, both of the Rome Bar, with an address for service in Luxembourg at the chambers of Charles Turk, 13A Avenue Guillaume,

Nuova Sidercamuna SpA, a company incorporated under Italian law, established at Berzo Inferiore (Italy), represented by Enrico A. Raffaelli, of the Milan Bar, Ivo Van Bael, of the Brussels Bar, and Fabrizio Di Gianni, of the Rome Bar, with an address for service in Luxembourg at the Chambers of Freddy Brausch, 11 Rue Goethe,

applicants,

v

Commission of the European Communities, represented by Paul Nemitz, Enrico Altieri and Laura Pignataro, of its Legal Service, acting as Agents, assisted by Massimo Moretto, of the Venice Bar, with an address for service in Luxembourg at the office of Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

APPLICATION for annulment of Commission Decision 96/678/ECSC of 30 July 1996 concerning certain aid proposed by Italy as part of a programme for the restructuring of its private steel industry and Commission Decision 97/258/ECSC of 18 December 1996 concerning aid closures envisaged by Italy as part of the restructuring of its private steel industry (OJ 1996 L 316, p. 24 and OJ 1997 L 102, p. 42 respectively),

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES

(Third Chamber, Extended Composition),

composed of: M. Jaeger, President, K. Lenaerts, V. Tiili, J. Azizi and P. Mengozzi, Judges,

Registrar: H. Jung,

having regard to the written procedure and further to the hearing on 17 November 1998,

gives the following

Judgment

Grounds

Legislative background

1 Article 4(c) of the ECSC Treaty 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;

...'.

2 Under the first paragraph of Article 95 of the ECSC Treaty, the Commission, with the unanimous assent of the Council and having consulted the Consultative Committee, adopted Decision No 257/80/ECSC of 1 February 1980 establishing Community rules for specific aids to the steel industry (OJ 1980 L 29, p. 5), commonly referred to as `the First Steel Aid Code'. According to the second paragraph of Part I of the preamble to that decision, the prohibition in the ECSC Treaty on subsidies or aid granted by States applies only to measures constituting purely national steel policy instruments and not to aid aimed at setting up a Community steel policy, such as the restructuring of the steel industry, which was the aim of Decision No 257/80/ECSC.

3 The First Steel Aid Code was subsequently replaced by successive codes, each establishing the rules applicable to State aid for the steel industry by laying down the criteria under which aid to the steel industry financed by a Member State in any form whatsoever may be deemed Community aid and therefore compatible with the orderly functioning of the common market.

4 In 1991 Commission Decision No 3855/91/ECSC of 27 November 1991 establishing Community rules for aid to the steel industry (OJ 1991 L 362, p. 57, the Fifth Steel Aid Code, hereinafter `the Fifth Code') laid down the new provisions on the grant of State aid in this field from 1 January 1992 to 31 December 1996. It was replaced as of 1 January 1997 by Commission Decision No 2496/96/ECSC of 18 December 1996 establishing Community rules for State aid to the steel industry (OJ 1996 L 338, p. 42), which constitutes the Sixth Steel Aid Code.

5 The Fifth Code provides:

- in Article 4(2):

aid `to steel undertakings which permanently cease production of ECSC iron and steel products may be deemed compatible with the orderly functioning of the common market provided that the undertakings

- ...

- have been regularly producing ECSC iron and steel products up to the date of notification of the aid,

- ...'.

- in Article 6(1):

`The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid of the types referred to in Articles 2 to 5. ...';

- in Article 6(4):

- `If, after giving notice to the interested parties concerned to submit their comments, the Commission finds that aid in a given case is incompatible with the provisions of this decision, it shall inform the Member State concerned of its decision. ...';

- in Article 6(6):

`All individual awards of the types of aid referred to in Articles 4 and 5 shall be notified to the Commission. ...'

Background to the applications

Notification by the Italian Government of Law No 481/94 and Decree No 683/94

6 In February 1994 the Italian Government notified to the Commission, pursuant to Article 6(1) of the Fifth Code, Decree-Law No 103 of 14 February 1994 introducing urgent measures for the implementation of its steel restructuring programme (hereinafter `Decree-Law No 103/94'). That decree was reaffirmed by Decree-Law No 234 of 14 April 1994 and again by Decree-Law No 396 of 20 June 1994, which was definitively converted into Law No 481 of 3 August 1994 on the restructuring of the Italian private steel sector (GURI No 183 of 6 August 1994, p. 12, hereinafter `Law No 481/94').

7 That Law makes provision inter alia for the grant of aid for the closure of steelworks on condition the plant and equipment is dismantled. In Article 1(3) it provides that `requests for the grant of aid [...] must be submitted [...] before 30 July 1994 [...]', whilst `plant and equipment is to be dismantled before 31 March 1995 and the aid is to be paid [...] by 31 December 1996.' Under Article 1(4), the technical rules for its implementation are to be laid down by decree of the Italian Minister for Industry, Trade and Craft Trades. The Italian authorities subsequently notified the measure implementing Law No 481/94, that is to say, Decree No 683 of 12 October 1994 of the Minister for Industry, Trade and Craft Trades (hereinafter `the implementing measure'). Article 1(1) of that decree provides that, in order to receive the aid referred to in Article 1 of Law No 481/94, the undertakings concerned must comply inter alia with the following condition:

`(e) until the date of adoption of Decree-Law No 103 of 14 February 1994, ... have been engaged in regular production, as certified by a report sworn by a technical expert in the field, listed in the register of experts and appointed by the court within whose jurisdiction the company has its head office'.

Commission decision of 12 December 1994 authorising, in principle, the aid scheme notified by the Italian Government

8 By decision of 12 December 1994, the Commission authorised the aid scheme concerned as a matter of principle, subject to prior notice being given of all actual cases of application of aid, pursuant to Article 6(6) of the Fifth Code (OJ 1994 C 390, p. 20, hereinafter `the decision of 12 December 1994').

9 The Commission stated that it would make its authorisation subject to compliance with certain conditions in each case. As regards the condition concerning regular production laid down in the second indent of Article 4(2) of the Fifth Code, the undertaking must have been in operation for on average at least one shift per day, that is to say, at least eight hours per day, five days per week for the whole of 1993 and until February 1994, when Decree-Law No 103/94 was notified to the Commission.

10 The Commission also stated that the Italian authorities could establish, however, on the basis of objective criteria, that an undertaking which did not satisfy that condition had regularly produced ECSC iron and steel products.

Notification by the Italian Government of the aid planned for the benefit of the applicants

11 On 8 September 1995, 23 November 1995 and 11 March 1996, the Italian Government notified the Commission, in accordance with Article 6(6) of the Fifth Code, of aid for the definitive closure under Law No 481/94 inter alia of the applicant undertakings in the six cases, T-164/96, T-165/96, T-166/96, T-167/96, T-122/97 and T-130/97, that is to say, Moccia Irme SpA (hereinafter `Moccia'), Prolafer Srl (hereinafter `Prolafer'), Ferriera Acciaieria Casilina SpA (hereinafter `Casalina'), Dora Ferriera Acciaieria Srl (hereinafter `Dora'), Ferriera Lamifer SpA (hereinafter `Lamifer') and Nuova Sidercamuna SpA (hereinafter `Sidercamuna') in the following amounts:

Case Number / Applicant undertaking / Amount of aid (in ITL)

T-164/96 / Moccia / 13 509 million

T-165/96 / Prolafer / 2 038 million

T-166/96 / Casilina / 2 908 million

T-167/96 / Dora / 3 438 million

T-122/97 / Lamifer / 4 889 million

T-130/97 / Sidercamuna / 16 127 million

12 The applicants are undertakings within the meaning of Article 80 of the Treaty producing steel or hot-rolled products. Their declared production capacity in 1993 and their actual production during the reference period, that is to say from 1 January 1993 to 28 February 1994, and the proportion the latter represents of the former expressed as a percentage, were as follows:

Production capacity (in tonnes/year) / Actual production (in tonnes)

T-164/96 Moccia / 288 000 crude steel 165 000 hot-rolled products / 0

T-165/96 Prolafer / 200 000 steel 150 000 hot-rolled products / 0

T-166/96 Casilina / 80 000 hot-rolled products / 11 356 hot-rolled products (or 14.2%)

T-167/96 Dora / 250 000 hot-rolled products / 21 444 hot-rolled products (or 8.6%)

T-122/97 Lamifer / 154 560 hot-rolled products / 23 542 hot-rolled products (or 15.2%)

T-130/97 Sidercamuna / 475 000 reinforcing rods and rolled products (flat) / 36 002 reinforcing rods and rolled products (flat) (or 7.6%)

13 In total, 43 ECSC steel undertakings established in Italy submitted requests for aid under Law No 481/94.

Initiation by the Commission of the procedure provided for in Article 6(4) of the Fifth Code

14 On 15 December 1995, 2 February and 12 June 1996, the Commission, by letters essentially reproduced in Commission Notices 96/C 101/05, 96/C 121/03 and 96/C 215/03, addressed pursuant to Article 6(4) of the Fifth Code to Member States and other interested parties concerning aid that Italy decided to grant to Casilina, Acciaierie del Sud SpA, Officine Laminatoi Sebino SpA (OLS), Montifer Srl, Moccia et Mini Acciaierie Odolese SpA (MAO), Prolafer, Dora and Acciaierie San Gabriele SpA, Diano SpA, Lamifer, Ferriere Demafer Srl, Lavorazione Metalli Vari - LMV SpA and Sidercamuna (OJ 1996 C 101, p. 4, OJ 1996 C 121, p. 3 and OJ 1996 C 215, p. 3), informed the Italian Government of its decision to initiate the procedure provided for in Article 6(4) of the Fifth Code in respect of the aid envisaged for the benefit inter alia of the applicant undertakings.

15 The Commission explained in those notices that it was clear, from the information available to it, that none of the undertakings in question, and the applicants in particular, had been engaged in production for on average one shift per day, that is to say, at least eight hours per day, five days per week throughout the whole of 1993 and up to 28 February 1994.

16 As regards Moccia and Casilina, it stated in Notice 96/C 101/05:

`... [Casilina] (Case N777/95) produced only 11 356 tonnes of hot-rolled products, equivalent to 14.2% of its capacity; ... [Moccia] (Case N793/95) was not in production.'

17 With regard to Prolafer and Dora, it stated in Notice 96/C 121/03:

`In Case 977/95 ... Prolafer [was] not engaged in production at all in 1993. In Case 978/95, Dora produced only 21 444 tonnes of hot-rolled steel, accounting for 8.6% of its capacity.'

18 Finally, as regards Lamifer and Sidercamuna, it stated in Notice 96/C 215/03:

`In Case 178/96 Lamifer ... produced only 23 542 tonnes of hot-rolled steel (15.2% of capacity); in Case 182/96 Sidercamuna produced only 36 002 tonnes of hot-rolled steel (7.6% of capacity).'

Decisions of 30 July and 18 December 1996 declaring the aid incompatible with the common market

19 By Decision 96/678/ECSC of 30 July 1996 concerning certain aid proposed by Italy as part of a programme for the restructuring of its private steel industry (OJ 1996 L 316, p. 24, hereinafter `Decision 96/678'), the Commission declared that the State aid which the Italian Republic planned to grant to eight of the nine undertakings in question, including Moccia, Prolafer, Casilina and Dora, was incompatible with the common market within the meaning of Article 4(c) of the Treaty.

20 By Decision 97/258/ECSC of 18 December 1996 concerning aid for closures envisaged by Italy as part of the restructuring of its private steel industry (OJ 1997 L 102, p. 42, hereinafter `Decision 97/258'), the Commission also declared that the State aid which the Italian Republic planned to grant to four of the five undertakings in question, including Lamifer and Sidercamuna, was incompatible with the common market within the meaning of Article 4(c) of the Treaty.

21 The Commission gave the following reasons for those decisions (in Decision 97/258):

`The Commission concludes that the cases under consideration satisfy every requirement except the one - regarding regular production - that had led to the initiation of proceedings.

In this connection, although it states that, in order to be eligible for aid, a firm must be in regular production at the time of the closure, the Steel Aid Code does not give a precise definition of regular. Accordingly, in its decision authorising Italian Law No 481 of 3 August 1994, the Commission stated that the requirement concerned would be deemed to be met if the firm receiving the aid had been in production for on average at least one shift per day, i.e. at least eight hours per day, for five days per week for the whole of 1993 and up to 28 February 1994, when Decree-Law No 103/94, converted by the Italian Parliament into Law No 481/94, was notified to the Commission. The Commission decided, moreover, that the Italian authorities should be allowed to demonstrate on the basis of objective criteria that a firm which did not satisfy this requirement had regularly produced ECSC iron and steel products.

The Commission was then to examine the aid in the light of the particular circumstances of the case, in order to ensure that the criterion of regular production had been complied with.

The purpose of Article 4 of the Steel Aid Code and of the Commission decision of 12 December 1994 is clear: aid for closures may be granted only to firms that are significantly active, or whose production on the market in iron and steel products is regular. The Community legislator did not, however, feel it necessary or advisable to allow an exception to the general prohibition provided for in Article 4 of the ECSC Treaty in the absence of significant effects on the market resulting from the closure of a firm, as the latter is not in regular production.

It therefore follows that criteria could, provided they demonstrated the regularity of production, be accepted as an alternative to the one laid down by the Commission in its decision. The criteria put forward by the Italian Government (non-cancellation of the electricity-supply contract, continued employment of the workforce, investment in plant and equipment, maintenance of the facilities, etc.), however, demonstrate not that the firms in question were in regular production, but that they were capable of producing on a regular basis.

Article 4 of the Steel Aid Code is drafted in such a way as to rule out a broad interpretation which would allow aid to go to firms which, although they had not been in regular production, were merely capable of producing ECSC products on a regular basis.'

Procedure

22 By applications lodged at the Registry of the Court of First Instance on 19 October 1996, Moccia, Prolafer, Casilina and Dora brought the actions registered as Cases T-164/96, T-165/96, T-166/96 and T-167/96 respectively.

23 By application lodged at the Registry of the Court of First Instance on 18 April 1997, Lamifer brought the action registered as Case T-122/97.

24 By application lodged at the Registry of the Court of First Instance on 22 April 1997, Sidercamuna brought the action registered as Case T-130/97.

25 By separate document lodged at the Registry of the Court of First Instance on 28 November 1996, Moccia submitted an application for the adoption of interim measures, under Article 39 of the Treaty, seeking suspension of the operation of Decision 96/678 and of the previous acts and requiring the Commission to call upon the Italian authorities to suspend payment of the State aid for closure referred to by Law No 481/94 until judgment is given on the merits of the case, and in the alternative to reopen the consultative procedure for examining the aid intended for it.

26 By order of the President of the Court of First Instance of 17 December 1996 in Case T-164/96 R Moccia Irme v Commission [1996] ECR II-2261, the application for interim measures was dismissed.

27 By order of the President of the Court of Justice of 30 April 1997 in Case C-89/97 P (R) Moccia Irme v Commission [1997] ECR I-2327, the appeal against that order was dismissed.

28 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Third Chamber, Extended Composition) decided to open the oral procedures without any preparatory measures of inquiry.

29 The parties presented oral argument and answered oral questions from the Court at the hearings in open court on 17 November 1998.

30 By order of the President of the Third Chamber, Extended Composition, of the Court of First Instance of 18 December 1998, the cases were joined for the purposes of the judgment.

Forms of order sought

31 Moccia claims that the Court should:

- annul Decision 96/678 pursuant to Articles 33 and 36 of the Treaty and, consequently and in so far as is necessary, rule that the other previous acts, whether associated or related, are wholly inoperative;

- order the Commission to pay the costs.

32 Prolafer claims that the Court should:

- annul Decision 96/678, the decision of 12 December 1994 and, in so far as is necessary, the second indent of Article 4(2) of the Fifth Code and all previous acts, whether related or subordinate, of whatever nature.

33 Casilina claims that the Court should:

- annul Decision 96/678, the decision of 12 December 1994 and all previous acts, whether related or subordinate, of whatever nature;

- order the Commission to pay the costs.

34 Dora claims that the Court should:

- annul Decision 96/678, the decision of 12 December 1994 and all previous acts, whether related or subordinate, of whatever nature;

- order the Commission to pay the costs.

35 Lamifer claims that the Court should:

- annul Decision 96/678, the decision of 12 December 1994 and all previous acts, whether related or subordinate.

36 Sidercamuna claims that the Court should:

- annul Decision 97/258;

- order any other measures required to protect the interests of the applicant, both in law and in equity;

- order the defendant to pay the costs.

37 The Commission contends in all the cases that the Court should:

- dismiss the application;

- order the applicant to pay the costs.

Admissibility

38 In the six cases, the Commission disputed the admissibility of the applicants' claims concerning both the Fifth Code and the decision of 12 December 1994.

The pleas alleging inadmissibility of the challenge to the Fifth Code

39 The Commission disputes, first, the relevance of the claims in certain applications in so far as they are expressly directed against the Fifth Code. Second, it considers the objection in Case T-130/97 that the Fifth Code is illegal to be out of time.

1. The plea alleging that the claims in certain applications are irrelevant in so far as they are expressly directed against the Fifth Code

40 The Commission points out that Prolafer, Casilina, Dora and Lamifer seek to plead, under the third paragraph of Article 36 of the Treaty, the illegality of any act prior to the decision of 12 December 1994 and Decisions 96/678 and 97/258, which would include the Fifth Code. However, the arguments of the applicants are intended merely to establish that the Commission infringed that code rather than to call it in question.

41 In that connection, the Court finds that this plea by the Commission regarding the admissibility of the applications, on which the applicants have not expressed a view, is unfounded. Whilst it is true that in those cases no argument is directed specifically at the Fifth Code, it being, rather, the basis for the criticisms levelled at the legality of the decision of 12 December 1994 and Decisions 96/678 and 97/258, that fact is in itself not such as to render the claims in question inadmissible.

2. The plea of inadmissibility alleging that the objection of illegality raised against the Fifth Code in Case T-130/97 is out of time

42 In the Sidercamuna case, the Commission contends that the objection of illegality raised against the Fifth Code is inadmissible as it was put forward for the first time at the stage of the reply and is thus a new plea.

43 The Court observes that, by virtue of Article 48(2) of the Rules of Procedure, no new plea in law may be introduced in the course of proceedings unless it is based on matters of law or of fact which come to light in the course of the procedure.

44 Here, the applicant in Case T-130/97 argues in the application that, given the primary objective of the steel aid programme, namely the reduction of production capacity, it would be unlawful to make the attainment of that objective subject to conditions bearing no relation to it, such as the level of regular production. In the reply it cites that argument as evidence that it raised an objection of illegality against the Fifth Code at the stage of the application.

45 However, in the view of the Commission, that argument raised at the stage of the application is not directed at the Fifth Code but is in fact a criticism of the breach or misinterpretation of that code by secondary measures.

46 The Court observes that the applicant's argument attacks the fact that the attainment of one of the objectives of the Fifth Code, namely the reduction of production capacity, is subject to a condition which is wholly unrelated to that objective, that is to say the existence of regular production. As pointed out above in paragraph 5, that condition is laid down by the second indent of Article 4(2) of the Fifth Code. That argument is therefore aimed at that provision of the Fifth Code.

47 Moreover, that argument is put forward in connection with the part of the first plea in the application relating to breach by the Commission of the principle of effectiveness and not in connection with the part which specifically criticises the breach of Article 4 of the Fifth Code by secondary measures.

48 The argument in question therefore constitutes an objection of illegality directed at the second indent of Article 4(2) of the Fifth Code. As the objection was raised at the stage of the application, it was not raised out of time. The plea of inadmissibility put forward by the Commission must therefore be rejected.

The pleas alleging inadmissibility of the challenge to the decision of 12 December 1994

49 The Court observes, first, that Prolafer, Casilina, Dora and Lamifer plead the illegality of the decision of 12 December 1994 and seek its annulment.

50 The Court considers that the applicants intend in fact to plead the illegality of the decision of 12 December 1994 as an ancillary issue at the same time as, and in support of, their applications for annulment of the decisions not to approve the aid, and thus in the form of an objection of illegality.

51 Moccia and Sidercamuna formally raised an objection of illegality to the decision of 12 December 1994.

52 The objections of illegality thus raised in the six joined cases to the decision of 12 December 1994 are all directed against the criterion laid down in that decision by the Commission by way of a definition of the requirement of regular production laid down by the second indent of Article 4(2) of the Fifth Code, that is to say the undertaking seeking aid for closure must have been engaged in production for on average at least one shift per day, that is to say, at least eight hours per day, five days per week for the whole of 1993 and until February 1994.

53 The Commission contends that those objections of illegality are inadmissible.

54 It puts forward two pleas in that connection. In the first, raised in all the cases, it is argued that Decisions 96/678 and 97/258 (hereinafter `the contested decisions') are not based on the decision of 12 December 1994 but directly on the Fifth Code. In the second, raised in the Lamifer and Sidercamuna cases, it is argued that the decision of 12 December 1994 constitutes at most the basis for the decision to initiate the procedure adopted on the basis of Article 6(4) of the Fifth Code but not for the later decision not to approve the aid, which merely constitutes a measure confirming the first decision.

1. The plea alleging that the contested decisions are based not on the decision of 12 December 1994 but directly on the Fifth Code

55 The Commission argues that, in the present case, there is no connection between the contested decisions and that of 12 December 1994. Article 6(6) of the Fifth Code provides that all individual awards of the types of aid referred to in Articles 4 and 5 are to be notified to the Commission so that it can make a decision on them independently of the adoption of a decision authorising a general aid scheme on the basis of those articles. Accordingly, the contested decisions cannot be deemed to have their legal basis in the decision of 12 December 1994, but solely, in so far as is relevant in the present case, on Article 6(6) of the Fifth Code.

56 The Court observes that, although in an action for a declaration that an individual decision is void the applicant may allege that certain provisions of the general decisions which the contested decision implements are illegal, the applicant may do so only if the individual decision is based on the rules alleged to be illegal (Joined Cases 275/80 and 24/81 Krupp v Commission [1981] ECR 2489, paragraph 32, Case 258/80 Rumi v Commission [1982] ECR 487, paragraph 6, Joined Cases 140/82, 146/82, 221/82 and 226/82 Walzstahl-Vereinigung and Thyssen v Commission [1984] ECR 951, paragraph 20, and Case 151/83 Alpa v Commission [1984] ECR 3519, paragraph 9).

57 In the present case, the contested decisions refer expressly to the decision of 12 December 1994, which approves Law No 481/94 and thus forms the subject-matter of the objection of illegality. They note that although the Fifth Code makes the grant of aid subject to the requirement that the undertaking has been engaged in regular production until the time of closure, it does not contain a clear definition of the concept of regular production. They point out that it is for that reason that the decision of 12 December 1994 made the award of aid for closure subject to the requirement that the undertaking must have been engaged in production for on average at least one shift per day, that is to say at least eight hours per day, five days per week for the whole of 1993 and until February 1994. They state that although the applicants met the other conditions laid down in Article 4 of the Fifth Code, they did not meet that condition. They observe that, as a result of that finding, the procedure provided for in Article 6(4) of the Fifth Code was initiated. They consider that the Italian Government has failed to establish, in accordance with the decision of 12 December 1994, by means of other objective evidence, that the applicants had none the less regularly produced ECSC products.

58 It follows that the decision of 12 December 1994 laid down a criterion the application of which to the applicants entailed the initiation of the procedure provided for by Article 6(4) of the Fifth Code and pursuant to which the aid was finally declared incompatible with the common market, within the meaning of Article 4(c) of the Treaty.

59 The contested decisions are thus to that extent based on the definition given by the decision of 12 December 1994 of the requirement of regular production laid down by the second indent of Article 4(2) of the Fifth Code. That definition of the requirement of regular production forms, in its turn, the subject-matter of the objection of illegality raised against the decision of 12 December 1994. Accordingly, the contested decisions are based on the rule which is alleged to be illegal. The plea of inadmissibility raised by the Commission is thus unfounded.

60 The Commission raises the objection, first of all, in the six joined cases, that, under Article 6(6) of the Fifth Code, all individual awards of aid must be notified to it, independently of the adoption of a decision authorising a general aid scheme, so that the contested decisions could be considered to have their legal basis not in the decision of 12 December 1994 but solely in Article 6(6) of the Fifth Code. Furthermore, even in the absence of the decision in question, the contested decisions could have been validly adopted and produced all their effects. However, that argument disregards the fact that the Commission, in considering specific cases of aid notified following approval of the general aid scheme by the decision of 12 December 1994, analysed compliance with the requirement of regular production by reference to the criterion laid down in that decision, so that, to that extent, it constitutes the legal basis for the contested decisions.

61 The Commission objects, second, in Cases T-164/96, T-165/96, T-166/96, T-167/96 and T-122/97, that the requirement of regular production laid down in the second indent of Article 4(2) of the Fifth Code was clarified in its decision of 12 December 1994 merely by way of example with the agreement of the Italian Government. However, that argument disregards the fact that the Commission, far from treating the criterion set out in the decision of 12 December 1994 simply as a non-binding illustration, applied it in initiating the procedure provided for by Article 6(4) of the Fifth Code and declared the planned aid incompatible with the common market.

62 The Commission objects, third, in Cases T-164/96, T-166/96, T-167/96, T-122/97 and T-130/97, that the decision of 12 December 1994, whilst laying down a criterion explaining the requirement of regular production provided for by the second indent of Article 4(2) of the Fifth Code, enabled the Italian Government to prove, on the basis of objective criteria, that an undertaking not fulfilling that criterion had none the less regularly produced ECSC iron and steel products, so that the reference to that decision by the contested decisions was not a crucial factor. The aid could thus have been authorised despite the failure to fulfil the criterion laid down in the decision of 12 December 1994, with the result that the latter does not constitute the basis for the contested decisions. However, that objection disregards the fact that it is clear from the contested decisions that the Commission required the applicant undertakings to satisfy the criterion in question, that failure to satisfy that criterion resulted in the initiation of the procedure provided for by Article 6(4) of the Fifth Code and that, given the Italian Government's failure, in the view of the Commission, to furnish proof of the fulfilment of alternative objective criteria, the aid sought was declared incompatible with the common market. It follows that the refusal of the aid was in the end a result of failure to fulfil the criterion laid down by the decision of 12 December 1994, which constitutes a presumption that, in the event, was not rebutted by the Italian Government. To that extent, therefore, the contested decisions are based on the criterion in question.

63 The Commission objects, fourth, in Case T-164/96, that the mere reference in Decision 96/678 to the decision of 12 December 1994 is not in itself a determining factor, in that Moccia was not engaged in production during the reference period, with the result that the criterion laid down by the first decision was not applicable. However, that argument disregards the fact that, in formal terms, Decision 96/678 notes that the criterion was applied in the case of the applicant. Moreover, it was also applied in practice in that, in particular, the applicant's production was assessed solely by reference to the period stipulated by that criterion, that is to say, between January 1993 and February 1994, and not, for example, from 1 January 1992, the date of the entry into force of the Fifth Code.

2. The plea alleging that Decision 97/258 is not a confirmatory measure

64 In Cases T-122/97 and T-130/97, the Commission explains that the criterion defining the requirement of regular production, laid down by the decision of 12 December 1994, had already been applied in the applicants' case before the adoption of Decision 97/258 by the previous decision initiating the procedure for examining aid, provided for by Article 6(4) of the Fifth Code. That decision noted that the applicants did not fulfil the criterion in question and went on to seek proof from the Italian authorities, on the basis of other objective criteria, that the applicants were engaged in regular production. The purpose of Decision 97/258 was to conclude that the Italian authorities had not furnished such proof. It also pointed out that the applicants did not fulfil the criterion laid down by the decision of 12 December 1994, but in that respect it merely served to confirm the previous decision. Since the applicants did not contest the decision initiating the procedure provided for by Article 6(4) of the Fifth Code within the period prescribed and did not in that connection raise an objection of illegality against the criterion laid down by the decision of 12 December 1994, they are precluded from doing so in these proceedings.

65 The Court observes that the applicants plead the illegality of the decision of 12 December 1994 in support of their application for the annulment of Decision 97/258. In its plea of inadmissibility, the Commission disputes whether the applicants are entitled to close on the ground that they could have raised that plea in an application against the decision initiating the procedure for examining the aid. However, it is sufficient to note that Decision 97/258 produces legal effects of its own, including the definitive refusal of the aid, and that the applicants must therefore have a means of redress against that decision (see, by analogy, Case 730/79 Philip Morris v Commission [1980] ECR 2671, paragraph 5, and Case C-188/92 TWD Textilwerke Deggendorf v Germany [1994] ECR I-833, paragraph 14), which implies that they must be able to rely, in support of an action for the annulment of that decision, on the illegality of the decision on which it is based, irrespective of whether or not the applicants have challenged the decision to initiate the procedure for examining the disputed aid (Case T-129/96 Preussag Stahl v Commission [1998] ECR II-609, paragraph 31).

66 It follows that the second plea of inadmissibility relating to the objection that the decision of 12 December 1994 is illegal is unfounded.

Substance

67 The applicants have raised pleas relating to the substance of the contested decisions (I) and to breach of the obligation to state reasons for those decisions (II).

I - The pleas relating to the substance of the contested decisions

Preliminary observations

68 The Court observes that, under Article 33, first paragraph, second sentence, of the ECSC Treaty, in exercising its jurisdiction in actions for annulment of decisions or recommendations of the Commission, `the Court of Justice may not ... examine the evaluation of the situation resulting from economic facts or circumstances, in the light of which the Commission took its decisions or made its recommendations, save where the Commission is alleged to have misused its powers or to have manifestly failed to observe the provisions of this Treaty or any rule of law relating to its application.'

69 That limitation of the Court's discretion also applies to the examination of decisions and recommendations whose legality is contested, by means of an objection, on the basis of the third paragraph of Article 36 of the Treaty. Under that article, legality must then be contested `under the same conditions as in the first paragraph of Article 33' of the Treaty (see, to that effect, Joined Cases 154/78, 205/78, 206/78, 226/78, 227/78, 228/78, 263/78, 264/78, 31/79, 39/79, 83/79 and 85/79 Ferriera Valsabbia and Others v Commission [1980] ECR 907, paragraph 10).

70 So far as concerns the concept of manifest failure to observe legal provisions, the Court points out that the term `manifest' presupposes that that failure is such that it appears to derive from an obvious error in the evaluation, having regard to the provisions of the Treaty, of the situation in respect of which the decision was taken (see Case 6/54 Netherlands v High Authority [1954-1956] ECR 103, at p. 115, Joined Cases 15/59 and 29/59 Knutange v High Authority [1960] ECR 1, at p. 10, and order of the President of the Court in Case C-399/95 R Germany v Commission [1996] ECR I-2441, paragraph 62).

71 The Court observes, as regards the concept of misuse of powers, that a measure may amount to a misuse of powers only if it appears, on the basis of objective, relevant and consistent factors, to have been taken with the exclusive purpose, or at any rate the main purpose, of achieving an end other than that stated or of evading a procedure specifically prescribed for dealing with the circumstances of the case (see Case C-331/88 Fedesa and Others [1990] ECR I-4023, paragraph 24, and Case T-57/91 Naloo v Commission [1996] ECR II-1019, paragraph 327).

The pleas alleging that the Treaty does not apply

72 The applicants raise pleas alleging that the Treaty does not apply in the present case.

A - The plea alleging that the applicants could not be classified as ECSC steel undertakings

73 Moccia and Sidercamuna submit that an undertaking which is planning to close its plant does not constitute an ECSC steel undertaking within the meaning of Article 80 of the Treaty, with the result that the Treaty, including the prohibition laid down by Article 4(c) thereof, is not applicable to them.

74 The Court points out, however, that an ECSC steel undertaking seeking aid for closure retains that status as long as its production activity has not fully and finally ceased, possibly following the grant of such aid. In the present case, it is common ground that, at the time when the aid was requested, the applicants were either engaged in ECSC production, or, if not so engaged, had not definitively closed yet. The Commission was therefore entitled to treat the applicants as ECSC steel undertakings. This plea must therefore be rejected.

B - The plea alleging that aid for closure is not covered by the prohibition in Article 4(c) of the Treaty, inasmuch as it is not likely to distort competition

75 Moccia submits, essentially, that the Fifth Code, which constitutes a derogation based on Article 95 of the Treaty from the prohibition contained in Article 4(c) thereof, must respect the fundamental principles of the Treaty and, in particular, confine itself to what is necessary to prevent distortion of competition. Closure of an undertaking which is uncompetitive cannot distort competition. It follows that aid for closure awarded to such an undertaking is not prohibited and cannot therefore be covered by the Fifth Code.

76 Sidercamuna argues along the same lines that, for the reasons given above, aid for closure sought in those circumstances cannot be classified as aid within the meaning of Article 4(c) of the Treaty. In the alternative, if it were so classified, the award of the aid would not be prohibited.

77 The applicants put forward three arguments in support of that plea.

78 Moccia argues that the definition of State aid under the ECSC Treaty is the same as that laid down by the EC Treaty, with the result that, even under the ECSC Treaty, if there are no unfavourable effects on competition, aid is compatible with the common market.

79 Sidercamuna refers to the judgment of the Court in Case T-244/94 Wirtschaftsvereinigung Stahl and Others v Commission [1997] ECR II-1963, which states, at paragraph 32:

`Article 4(c) of the Treaty prohibits, in principle, State aid within the European Coal and Steel Community to the extent to which it is liable to undermine attainment of the essential objectives of the Community laid down by the Treaty, in particular the establishment of conditions of free competition.'

80 It concludes that aid is prohibited under Article 4(c) only to the extent that it is likely to affect the balance of competition.

81 Sidercamuna also refers to the judgment in Case 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v High Authority [1961] ECR 1, at p. 20, third paragraph, which, in explaining the definition of subsidy under the Treaty, refers to the third indent of the second paragraph of Article 5, which lays down that the Communities' principal task is to ensure the establishment, maintenance and observance of normal competitive conditions.

82 The Court observes that the purpose of Article 4 of the Treaty is, as described above, to ensure `the establishment, maintenance and observance of normal competitive conditions' (De Gezamenlijke Steenkolenmijnen in Limburg v High Authority, cited above in paragraph 81, at p. 22). Article 4(c) prohibits subsidies or aids granted by States `in any form whatsoever'. That phrase does not appear in Articles 4(a), 4(b) or 4(d) and this gives an unusually wide meaning to the prohibition it describes (judgment cited above, at p. 21). The prohibition so expressed is formulated in exceptionally strict terms because it targets direct interference in the operation of the common market in coal and steel, which is considered, as such, to be contrary to the very conditions on which the common market was established. For that reason, such aid is deemed incompatible with the common market without the need to establish or even to consider whether there is, in actual fact, any interference with the conditions of competition or it is liable to occur (see the Opinion of Advocate General Lagrange in De Gezamenlijke Steenkolenmijnen in Limburg v High Authority, cited above, [1961] ECR 34, at p. 41).

83 The system set up by Article 4(c) of the ECSC Treaty thus differs from that under Article 87(1) EC (ex Article 92). The former imposes a general and unconditional prohibition on all aid, which is in substance contrary to the very conditions in which the common market in coal and steel was established. The latter, on the other hand, only prohibits aid where it is such as to distort or threaten to distort competition by favouring certain undertakings or the production of certain goods.

84 It follows that aid for closure granted by a Member State to an ECSC steel undertaking falls within the prohibition in Article 4(c) of the ECSC Treaty, without its being necessary to establish that the conditions of competition have been undermined. The Fifth Code, whose purpose is to provide for derogations from that prohibition, can therefore apply to such aid.

85 That finding is not called in question by the judgments in Wirtschaftsvereinigung Stahl and Others v Commission, cited at paragraph 79, and De Gezamenlijke Steenkolenmijnen in Limburg v High Authority, cited at paragraph 81, on which the applicants seek to rely.

86 The judgment in Wirtschaftsvereinigung Stahl and Others v Commission, cited above at paragraph 79, does indeed state, as do two other judgments given the same day (Case T-239/94 EISA v Commission [1997] ECR II-1839, paragraph 61, and Case T-243/94 British Steel v Commission [1997] ECR II-1887, paragraph 40), that Article 4(c) of the Treaty prohibits, in principle, State aid within the European Coal and Steel Community to the extent to which it is liable to undermine attainment of the essential objectives of the Community laid down by the Treaty, in particular the establishment of conditions of free competition. It also adds (see paragraph 33 of that judgment, and EISA v Commission, cited above, paragraph 62, and British Steel v Commission, cited above, paragraph 41) that the existence of such a prohibition does not mean that all State aid within the sphere of the ECSC must be regarded as incompatible with the objectives of the Treaty.

87 The purpose of those statements was, however, only to enable the Court to conclude that Article 4(c) of the Treaty does not prevent the Community institutions, which have exclusive jurisdiction as regards aid within the Community, from authorising, by way of derogation, aid envisaged by the Member States and compatible with the objectives of the Treaty, on the basis of the first and second paragraphs of Article 95 in order to deal with unforeseen situations (paragraphs 33 and 34 of the aforesaid judgment and EISA v Commission, cited above, paragraphs 62 and 63, and British Steel v Commission, cited above, paragraphs 41 and 42).

88 Thus, in the context of that judgment, those statements did not, contrary to Sidercamuna's claims, constitute a finding that aid which is compatible with the objectives of the Treaty is automatically exempted from the scope of the prohibition in Article 4(c) of the Treaty.

89 The judgment in De Gezamenlijke Steenkolenmijnen in Limburg v High Authority, cited above in paragraph 81 (at p. 20, third paragraph, and p. 22, first paragraph), does indeed state, as noted at paragraph 82 above, that the purpose of Article 4 of the Treaty is, as confirmed by the third indent of the second paragraph of Article 5 of that Treaty, to ensure the establishment, maintenance and observance of normal competitive conditions.

90 However, in the context of that judgment, that point was not made to justify limiting the scope of the prohibition on aid, but, on the contrary, as a reason for extending it. The Court referred to that point in order to widen the interpretation of the concepts of subsidy or aid under Article 4(c) of the Treaty to include payment of a fraction of production costs by a party other than the purchaser or user, where such payment manifestly impedes the establishment of normal conditions of competition. Moreover, the Court was at pains to observe in that same judgment, as noted above at paragraph 82, that an unusually wide meaning is given to the prohibition described by that article. It follows that the reference in that judgment to the fourth indent of the second paragraph of Article 5 of the Treaty does not constitute a limitation of the scope of the prohibition on aid to the case where conditions of competition have actually been shown to be affected.

91 This plea must therefore be rejected.

The pleas alleging that the second indent of Article 4(2) of the Fifth Code is illegal

92 Moccia observes that a system of Community monitoring, intended to prevent abuses, in particular in the case of the closure of an undertaking, ought to be confined to laying down the essential preconditions for carrying out the monitoring in question and ought not to introduce pointlessly irksome conditions, such as the requirement in this case that an undertaking which may not be very competitive must have been engaged in regular production of ECSC steel products.

93 Sidercamuna observes that the principle of effectiveness requires the application of Community law to be subordinated to the achievement of its objectives. As the reduction of production capacity is the primary purpose of the programme of aid for the steel industry, it is unlawful to make the achievement of that purpose subject to conditions bearing no relation to it, such as compliance with a certain level of regular production.

94 The Court finds that the Commission, in adopting the Fifth Code, and the Council, in giving its assent, authorised aid in favour of undertakings which definitively cease their production of ECSC steel on condition that the recipient undertakings were engaged in regular production of ECSC steel products until the aid was notified. Their objective was, as is clear from the contested decisions (see paragraph 21 above), to award aid for closure only to undertakings with a certain level of activity. On the other hand, they did not consider it necessary or useful to grant a derogation from the general prohibition laid down by Article 4 of the Treaty in favour of undertakings not engaged in regular production, as their closure does not have significant effects on the market.

95 Under Article 4(c) of the Treaty, all aid for steel from the Member States in any form whatsoever is prohibited. Derogations from that prohibition, such as the Fifth Code, adopted on the basis of Article 95 of the Treaty, must be interpreted strictly (Case T-150/95 UK Steel Association v Commission [1997] ECR II-1433, paragraph 114).

96 It follows that, having regard to the generally applicable prohibition on aid laid down by Article 4(c) of the Treaty and to the exceptional and limited nature of the derogations allowed, the Commission was entitled to consider, in exercising its discretion and without manifestly misconstruing the law or misusing its powers, that aid for closure would have significant effects on the market and therefore should only be granted to undertakings which, whilst less competitive, have none the less produced on a regular basis.

97 The pleas raised must therefore be rejected.

The pleas based on the Commission's interpretation in the present case of the requirement of regular production laid down by the second indent of Article 4(2) of the Fifth Code

98 It should be borne in mind, first of all, that in its decision of 12 December 1994 the Commission, whilst authorising in principle the aid scheme governed by Law No 481/94, made all specific awards of aid subject to prior notification and stated that in each case its authorisation would be subject to the fulfilment of certain conditions. One of those conditions, the requirement of regular production, laid down by the second indent of Article 4(2) of the Fifth Code, is interpreted by the Commission to mean that, in order to receive the aid, the undertaking must `have been in production for on average at least one shift per day, i.e. at least eight hours per day, for five days per week for the whole of 1993 and up to February 1994', when Decree-Law No 103 of February 1994 was notified to the Commission.

99 That criterion is based on the objective finding that, for technical reasons, steel is produced continuously, generally on the basis of three eight-hour shifts per day, seven days a week, and thus 168 hours per week. The minimum production required pursuant to that criterion is 40 hours per week, that is to say one quarter or 25% of the maximum production possible (or production capacity). In the decisions refusing aid, the Commission compares, for each applicant, the declared highest possible production with actual production during the reference period (from January 1993 to February 1994) and expresses that proportion as a percentage. The minimum threshold required is actual production amounting to 25% of the highest possible production.

100 In any event, the Commission took care, in its decision of 12 December 1994, to give the Italian authorities the opportunity to prove on the basis of other objective criteria that the steel undertaking had been engaged in regular production. The Commission added in that decision that the Italian authorities could, however, `establish, on the basis of objective criteria, that an undertaking which did not satisfy that condition had regularly produced ECSC iron and steel products'.

101 It should be noted, finally, that the Commission chose the main criterion and the possibility of other objective criteria in close cooperation with the Italian authorities to whom the decision of 12 December 1994 was addressed. The letter from the Italian Minister for Industry, Trade and Craft Trades of 5 October 1994 to the Commission states: `It would be reasonable to accept the Commission's suggestion that regular production within the meaning of Article 4(2) of the Aid Code means that an undertaking in receipt of closure aid must have been engaged in production for on average one shift per day during 1993. That does not, of course, rule out the Commission's accepting the possibility of proving by other objective means that an undertaking which does not fully comply with that criterion might none the less have been engaged in regular production at the time of notification.'

102 It follows that, in providing in the decision of 12 December 1994 both for a main criterion raising a presumption of regular production within the meaning of Article 4(2) of the Fifth Code and for the possibility of proof by other objective criteria, the Commission has not misused its powers, nor has it manifestly failed to observe the provisions of the Treaty or any rule of law relating to its application.

103 However, in pleading that the Commission misused its powers or failed to observe the Treaty when it applied the main criterion to their actual circumstances, the applicants put forward arguments which essentially criticise, first, the choice of the main criterion and, second, the refusal by the Commission to take account of other objective criteria.

A - The pleas criticising the choice of the criterion of minimum production of one eight-hour shift per day, five days a week

104 The applicants criticise both the circumstances in which the criterion was applied and its scope.

1. The pleas criticising the circumstances in which the criterion was applied

105 Moccia puts forward a plea alleging breach of the principles of publication and non-retroactivity of legal rules.

106 It argues, essentially, first, that the criterion in question constitutes a rule of law which was applied for the first time by Decision 96/678. It is applied to events which took place between January 1993 and February 1994. The principle that legal rules should not be retrospective has thus been infringed.

107 Second, that rule of law was not published prior to its application. The principle that legal rules must be published has thus been infringed as well.

108 The Court observes that this plea is aimed at the fact that the criterion laid down by the decision of 12 December 1994, for the assessment of the requirement of regular production provided for by the second paragraph of Article 4(2) of the Fifth Code, takes account of production during a period which came to an end when it was adopted and applied, that is to say, the period up to the date of notification to the Commission of the Italian aid scheme, in February 1994.

109 The establishment of the relevant period for the assessment of production merely constitutes the application of the second indent of Article 4(2) of the Fifth Code, which provides that aid for closure can be considered compatible with the common market only if the undertaking seeking the aid has been regularly producing ECSC iron and steel products `up to the date of notification of the aid'.

110 The Fifth Code was published in the Official Journal of the European Communities on 31 December 1991. Under Article 9 thereof, it entered into force on 1 January 1992.

111 The production period taken into consideration by the decision of 12 December 1994 for undertakings seeking closure aid pursuant to Law No 481/94 was from January 1993 to February 1994. It is therefore subsequent to the publication and implementation of the Fifth Code, which laid down the method of assessment in question.

112 The pleas raised must therefore be rejected.

2. The pleas criticising the scope of the criterion

113 The applicants criticise the actual scope of the criterion laid down by the decision of 12 December 1994 in three respects. First, in requiring an objectively high level of production, the criterion prevents aid from benefiting less competitive undertakings. Second, the reference period set is insufficient and, third, the highest possible production is an arbitrary parameter.

(a) The plea alleging that the criterion, in requiring an objectively high level of production, prevents aid from benefiting less competitive undertakings

114 Moccia and Lamifer argue that, according to the fourth paragraph of Section I of the Fifth Code, aid for closure is intended to benefit the least competitive undertakings. In interpreting the criterion relating to regular production, the Commission required undertakings seeking such aid to have objectively high production thresholds. It thus failed to take account of the fact that closure aid is intended for less competitive undertakings.

115 The Court observes, as a preliminary matter, that the fourth paragraph of Part I of the preamble to the Fifth Code, to which the applicants refer, is intended to summarise the principles governing Commission Decisions No 3484/85/ECSC of 27 November 1985 and No 322/89/ECSC of 1 February 1989 establishing Community rules for aid to the steel industry, the Third and Fourth Steel Aid Codes. Its purpose is not to give specific reasons for the closure aid provided for by the Fifth Code. However, as the purpose of the Fifth Code is to replace the previous codes which had expired and no specific reason cited in that code expressly sets it apart from those principles, it cannot be ruled out that those principles should apply also to the Fifth Code. That interpretation is confirmed by the fact that the Sixth Steel Aid Code cites similar reasons in its third recital, referring to the Fifth Code which is at issue here.

116 However, such reasons must be considered in the light of the actual wording of the Fifth Code and the second indent of Article 4(2) in particular, which requires undertakings seeking closure aid to be engaged in regular production. It follows that the Community legislature did not intend to refer the category of less competitive undertakings indiscriminately, but only to undertakings within that category which were engaged in `regular production'. As demonstrated above (see paragraphs 94 to 96), the Commission did not commit a manifest error in limiting the aid in question to undertakings whose closure has a significant effect on the market.

117 This plea must therefore be rejected.

(b) The pleas alleging that the reference period is insufficient

118 Casilina, Dora and Lamifer claim, first, that the start of the reference period for regular production should have been set at 1 January 1991 and, second, that the insufficient length of the reference period made it impossible to assess whether the presence of an undertaking on the market was significant.

- The plea alleging that the start of the reference period for regular production should have been set at 1 January 1991

119 The applicants submit that the start of the reference period for regular production should have been set at 1 January 1991, the date appearing in the first and third indents of Article 4(2) of the Fifth Code.

120 The Court observes that Article 4(2) of the Fifth Code sets out the conditions which an undertaking must fulfil in order for closure aid for its benefit to be considered compatible with the common market.

121 The first indent of the paragraph requires the undertaking to have become a legal entity `before 1 January 1991.' The second indent stipulates that the undertaking must have been regularly producing ECSC iron and steel products `up to the date of notification of the aid.' The third indent provides that the undertaking must not have not reorganised its production or plant structure `since 1 January 1991.'

122 It is clear from that list that each of those three conditions has its own time-limit. Moreover, those limits differ in each case, since the conditions are to be fulfilled before 1 January 1991, after 1 January 1991 and before the date of notification of the aid respectively. Purely from the point of view of the wording, therefore, there is no need to assume that the condition laid down in the second indent of the paragraph is less complete than the other two, nor that it must be supplemented by reference to them.

123 Next, it is true that the second indent of Article 4(2) of the Fifth Code does not specify any date from which regularity of production is to be assessed. If the Community legislature had intended to set 1 January 1991 as the date from which that condition is to be assessed, it is hard to believe that it would have failed to mention it, since that date is, moreover, earlier than that of the entry into force of the Fifth Code.

124 Finally, the Commission is right to point out that the objectives of the first and third indents of Article 4(2) of the Fifth Code and those of the second indent of that provision are different. The former are clearly intended to avoid fraud by preventing those concerned from being able to form a company, extend the structure of their production or add to their plant and equipment with no other end in view than to benefit from aid. However, the primary purpose of the condition set out in the second indent of Article 4(2) is not the prevention of fraud. It is not fraudulent for an undertaking already in existence under the first indent of Article 4(2) of the Fifth Code before 1 January 1991, that is to say before the adoption of the Fifth Code, to seek closure aid when it is no longer engaged in regular production. The objective of the requirement of regular production is, rather, to ensure that the award of closure aid brings about an appreciable reduction in production, which implies that such aid is to be awarded only to undertakings which at the time of closure had a reasonable level of production.

125 It is true that the prevention of fraud is a factor incidental to the requirement that this condition must be complied with before notification of the aid, that is to say at a time which is in the past and is therefore not suspect, thereby preventing any increase in production aimed at satisfying the criterion of regular production. That requirement, however, which only concerns the rules for assessment of the relevant condition, has nothing to do with the purpose of the latter.

126 It follows that there is no crucial reason why regularity of production, provided for by the second indent of Article 4(2) of the Fifth Code, should be assessed from 1 January 1991 because that date appears in the first and third indents of that paragraph.

127 This plea must therefore be rejected.

- The plea alleging that the insufficient length of the reference period makes it impossible to assess whether the presence of an undertaking on the market is significant

128 The applicants point out that the aim of the criterion chosen was to allow only those undertakings whose presence on the steel market was significant to benefit from aid. They explain that the presence of an undertaking on a market cannot be assessed correctly on the basis of an objectively limited period, such as that in this case. The presence of an undertaking on the market is significant if it holds a certain share of the market on a lasting basis, that is to say, a market share viewed as part of a dynamic process and not limited arbitrarily to one year. The applicants refer by analogy to Commission Decision 89/467/EEC of 12 July 1989 relating to a proceeding pursuant to Article 85 of the EEC Treaty (IV/30.566 - UIP) (OJ 1989 L 226, p. 25), adopted pursuant to Article 85 of the EC Treaty, which recognised that the considerable variations in the market share held by dealers from one year to the next do not necessarily reflect changes in their economic presence on the market, which should instead be assessed as part of a dynamic process.

129 The Commission observes that the Fifth Code does not specify from what point in time regular production must be assessed. It was therefore for the Commission to determine the starting point for such assessment and, consequently, the reference period to be taken into account. It resolved the question by starting with the objective of the provision in question, namely, to ensure that the closure aid will have a significant effect on the market. It explains that, to achieve that objective, it was necessary, first, to set a period as close as possible to the date of notification of the general scheme, so that aid is only awarded to undertakings which are actually in operation at that point in time. Second, the length of the period had to be sufficient to ascertain whether the presence on the market of the undertaking in question could be considered to be significant enough. To that end, the Commission considered it fair to fix as the reference period that running from the year before the date of notification of the general scheme to the date on which the scheme was implemented.

130 The Court concurs with the Commission in finding that, if undertakings which were not representative of the market in 1993 and in January and February 1994 but which had achieved a sufficient level of production during the two-year period from 1991 to 1992 had been able to benefit from the aid in question, the fall in production resulting from their closure would have been purely nominal, or, at least, markedly lower. Moreover, the result achieved would also have been contrary to the objectives pursued if the undertakings with a significant presence on the market in 1993 but insufficiently active during the period from 1991 to 1992 had been denied the benefit of the aid.

131 Furthermore, according to the information provided by the Commission, which is not disputed, closure aid was granted, in this case, to 33 of the 43 Italian steel undertakings which requested it, effectively reducing production of hot-rolled steel by more than 5 million tonnes, a quantity which meets the target set by the Italian Government in connection with the grant of the aid in question. Thus the choice made by the Commission regarding the reference period for the assessment of regularity of production not only made it possible to evaluate correctly the presence on the market of the undertaking intended for closure, but also enabled the reduction targets set by the Italian Government to be achieved in practice.

132 The applicants' argument based on Decision 89/467 of 12 July 1989, cited above, need not be taken into consideration either. In that decision, adopted on the basis of Article 81 EC (ex Article 85), the Commission recognised that the considerable variations in the market share held by dealers from one year to the next did not necessarily reflect changes in their economic presence on the market, which should instead be assessed as part of a dynamic process. On that point it suffices to observe, as the Commission does, that it is inappropriate to refer in this instance to that decision, which was adopted in the film distribution sector. There, it was a matter of assessing the economic power of undertakings destined to remain on the market and, in particular, to ascertain the effects of the agreement concluded between them, in the light of the possible elimination of competition for a significant number of the products in question. In the present case, however, it was a matter of assessing the presence of a steel undertaking on the market with a view to its definitive closure and thus on the basis of the fall in production which might have ensued therefrom. The effect of such closure on overall production of steel products is all the more significant where the undertaking had a high level of production during a period as close as possible to closure.

133 Accordingly, it has not been shown that the Commission, in fixing the duration of the period within which regularity of production must be assessed, manifestly failed to observe the provisions of the Treaty or any rule of law relating to its application or misused its powers.

134 This plea must therefore be rejected.

(c) The pleas criticising the choice of the highest possible production as the frame of reference for the calculation of regular production

135 Casilina, Dora and Lamifer criticise the fact that the criterion devised by the Commission in its decision of 12 December 1994 refers to the highest possible production. First of all, the frame of reference should be actual production and, secondly, reliance on the highest possible production is inappropriate for the assessment of production of rolling mills, as opposed to steel mills.

- The plea alleging that regularity of production should be assessed on the basis of actual production

136 The applicants consider that it is arbitrary to rely on the concept of the highest possible production. The words `regularly producing' used in the Fifth Code are intended to refer to production activity at the level achieved by the undertaking in the past. Production can be considered regular if it does not depart significantly from the trend observed in previous and subsequent years. This can only be evaluated on the basis of actual figures, that is to say production in previous years, and not on the basis of theoretical and potential data, such as production capacity.

137 The Court observes, with reference to the arguments which the Commission was right to put forward, that the second indent of Article 4(2) of the Fifth Code does not limit that institution's discretion in choosing the frame of reference for verifying whether the requirement of regular production has indeed been fulfilled. The only limitation arises from the need to fix parameters so as to ensure that the aim of the rule in question, namely to reduce production effectively, is achieved.

138 The applicants, rather than specifying in what way the criterion used by the Commission is manifestly in breach of the provisions of the Fifth Code or is contrary to its objectives, merely suggest an alternative criterion. That criterion, namely the actual production of an undertaking and its regularity from one year to the next, does not, however, take into consideration the production which the undertaking is capable of achieving and the ratio between production capacity and actual production. Accordingly, if that criterion were applied, closure aid might be awarded to an undertaking whose actual production, whilst regular, is only a tiny fraction of its production capacity. Consequently that interpretation, unlike the criterion used by the Commission, would surely result not in a rapid and sizeable fall in actual production but merely in a fall in production capacity. Moreover, as the Commission rightly argues, if account were taken simply of the continuity of the level of production of an undertaking over a given period, as the applicants suggest, aid would ultimately be awarded even to undertakings which, although in irreversible crisis, none the less managed to survive on the market for some years with a level of production which is very low and thus irrelevant in terms of the achievement of the objectives pursued by such aid. As the purpose of the Aid Code is to bring about a significant fall in production by means of closure aid, that criterion appears manifestly less suitable for the achievement of that objective than that chosen by the Commission.

139 It has not been established, therefore, that the Commission, in adopting the criterion of the highest possible production, manifestly failed to observe the provisions of the Treaty or any rule of law relating to its application, or misused its powers.

- The plea alleging that the highest possible production is inappropriate as a criterion for assessing the production of rolling mills

140 The applicants consider that the highest possible production is inappropriate for assessing the production of rolling mills, as opposed to steel mills. That concept, as used by the Commission in the present case, is based on the assumption that production is organised on the basis of three shifts, each of eight hours' duration, three times per day. For technical reasons, in fact, those are the conditions of production in steel mills. However, rolling mills are usually run on the basis of a single shift, of eight hours' duration, per day.

141 The Court observes, first of all, that the applicants' claim that the production of rolling mills is, as a rule, organised on the basis of a single shift is expressly disputed by the Commission which argues that rolling mills normally operate on the basis of three shifts, inter alia for reasons relating to the efficiency of the heat cycle, that is to say, the need to avoid the huge consumption of gas necessary to cool the furnace. It is also apparent from the file, more specifically from the expert's report of 16 January 1996, drawn up by R.D., an engineer, and lodged by Lamifer ... , that the restriction of production in 1993 to Saturdays and Sundays led to a huge increase in the consumption of methane because of the greatly reduced efficiency of the heat cycle. Hence there is evidence that the organisation of production on a basis other than three shifts per day is not ideal, even for rolling mills.

142 Accordingly, the applicants' claim, which is unsupported by any objective evidence on the file, has not been established.

143 Moreover, as the Commission correctly submits, the parameter of the highest possible production calculated on the basis of three shifts has the advantage of ensuring objectivity and of being applicable in a general and uniform manner to all steel undertakings.

144 Finally, it must be observed that, as explained above in paragraph 131, and according to the information provided by the Commission, which has not been disputed, the contested criterion in fact enabled production of hot-rolled steel to be reduced by more that 5 million tonnes, and enabled the targets set by the Italian Government to be met. Thus that criterion clearly did not prevent the award, under reasonable conditions, of closure aid to rolling mills.

145 Accordingly, it has not been shown that the Commission, in deciding that the highest possible production must be calculated on the basis of three shifts even for rolling mills, manifestly failed to observe the provisions of the Treaty or any other rule of law relating to its application, or misused its powers.

146 This plea must therefore be rejected.

B - The pleas criticising the Commission's refusal to consider other objective criteria

147 Moccia, Prolafer and Sidercamuna criticise the fact that the requirement of regular production laid down by the second indent of Article 4(2) of the Fifth Code was interpreted so as to exclude undertakings which, while not having a sufficient level of actual production, were none the less suitable for production.

148 The applicants submit, first, that rejection of the criterion of suitability for production was contrary to the objective of the Fifth Code, namely to reduce production capacity. Second, that criterion had already been accepted by the Commission in the decision of 12 December 1994. Third, in the contested decisions the Commission wrongly rejected the argument of the Italian Government justifying recourse to that criterion by the existence of a major crisis on the Italian market. Fourth, in rejecting that criterion, the contested decisions did not take account of the specific circumstances of Moccia, Prolafer, Lamifer and Sidercamuna, which could have relied thereon.

1. The pleas alleging that rejection of the criterion of suitability for production is contrary to the objective of the Fifth Code

149 Sidercamuna explains that the denial of closure aid to steel undertakings which, whilst not regularly producing, were none the less suitable for doing so, is contrary to Article 4 of the Fifth Code. The objective of that provision was to eliminate surplus production capacity. It cannot be attained by denying the above category of undertakings the grant of aid. In particular, it cannot be ruled out that those undertakings might subsequently sell their production plant and equipment to other undertakings which are still in operation and thus return to the market in due course, thereby increasing production capacity in the long term.

150 It argues further that the grant of aid to that category of undertakings would have produced an effect which, whilst unpredictable, is far greater than the grant of aid only to undertakings fulfilling the criterion laid down by the decision of 12 December 1994 and the second indent of Article 4(2) of the Fifth Code. The Commission thus adopted a decision which blatantly contravened the principle of effectiveness.

151 It concludes that, in the decision of 12 December 1994 and Decision 97/258, the Commission not only made a manifest error of assessment and misused its powers but also used its power of interpretation in a manner which was inappropriate for the application of the Treaty and the Fifth Code.

152 Similarly, Moccia considers that the Commission, in refusing aid for the closure of undertakings which, like the applicant, had to halt production because of the crisis on the market, misused its powers.

153 The Court observes that Article 4(c) of the Treaty prohibits State aid. As the rule is that aid is prohibited and the Fifth Code constitutes a derogation from that principle, it must be interpreted strictly (UK Steel Association v Commission, cited above in paragraph 95, paragraph 114). It follows that the second indent of Article 4(2) of the Fifth Code, which requires an undertaking seeking aid for closure to have been producing ECSC steel products on a regular basis, must be interpreted all the more strictly.

154 That condition shows that the objective pursued by the Fifth Code is not to encourage the closure of any undertakings, no matter which, and thereby achieve a reduction, however small, in production capacity. Instead its objective is to authorise only the grant of aid for undertakings with a significant presence on the market, the closure of which will bring about a commensurate decrease in actual steel production.

155 By adopting the requirement of regular production laid down by Article 4(2) of the Fifth Code, the Community legislature thus sought to increase the effectiveness of closure aid by ensuring, as the Commission rightly submits, that it has sufficiently significant effects, not only in that plant and equipment is dismantled, but also in terms of reducing the current level of production.

156 That objective was achieved in that the interpretation of that requirement adopted by the Commission enabled closure aid to be granted to 33 of the 43 Italian steel undertakings which had applied for it, effectively reducing production of hot-rolled products by more than 5 million tonnes, as pointed out in paragraphs 131 and 144 above.

157 In contrast, the applicants' suggested frame of reference, that is to say, mere suitability for production, manifestly disregarded the aforesaid requirement, ignoring actual, and hence regular, production. Moreover, as the Commission is right to point out, it would inevitably have resulted in loss of, or at least a marked reduction in, the effectiveness of the objective pursued. On that basis, aid could have been granted to undertakings with plant and equipment which is no longer operational. It was possible to achieve the objective pursued only in so far as it was possible to award the aid in question to undertakings that were sufficiently active on the market.

158 It follows that the Commission, in rejecting suitability for production as a criterion, did not manifestly fail to observe the provisions of the Treaty or a rule of law relating to its application, nor did it misuse its powers.

2. The plea that the Commission should not, in Decision 97/258, have rejected suitability for production as a criterion, when it had already endorsed it in approving the Italian legislation by the decision of 12 December 1994

159 Sidercamuna argues that, in refusing the grant of closure aid to undertakings which are merely suitable for production, the Commission contradicts its decision of 12 December 1994 to approve Law No 481/94 and the implementing measure, on the basis of which the aid at issue was requested, and thereby infringes the principles of legal certainty and protection of legitimate expectations. The implementing measure provides in Article 1(5) that the existence of insolvency proceedings or a scheme of arrangement or composition does not preclude the award of aid, given that the purpose of such aid is to encourage the physical destruction of the plant and equipment used to manufacture ECSC steel products. In approving that provision, the Commission at the same time approved the criterion of suitability for production.

160 The Court observes that Article 1 of the implementing measure, entitled `Conditions for acceptance of the application', provides, in paragraph 1(e), that authorisation for aid for closure is subject without exception to the condition that it must be certified `to have been engaged in regular production'.

161 In view of the wide scope of that provision, the purpose of Article 1(5) is clearly, as the Commission is right to point out, to state that the existence of insolvency proceedings does not preclude the award of closure aid, and thus does not constitute in itself a reason for exclusion from the benefit of the measure. On the other hand, it does not mean that an undertaking subject to insolvency proceedings could qualify for closure aid without being required to meet the condition laid down in Article 1(e) of the implementing measure that it must be certified to have been engaged in regular production.

162 It follows that, in accepting the Italian legislation, including the implementing measure, by its decision of 12 December 1994, the Commission did not endorse suitability for production as a criterion and thus did not infringe the principles of legal certainty and protection of legitimate expectations.

163 This plea must therefore be rejected.

3. The plea alleging that the Commission's rejection of the Italian Government's argument relating to the significant crisis on the Italian market is unjustified

164 Sidercamuna takes the view that, in Decision 97/258, the Commission was wrong to reject the argument of the Italian authorities attributing the fall in production to the particularly unfavourable economic situation and the significant crisis on the market in steel products.

165 The Commission failed to make a proper assessment of the market or, in particular, to take account of certain fundamental aspects of the situation such as the background, the lengthy crisis affecting the sector and the need for restructuring.

166 Finally, it was wrong to take into consideration production figures, rather than figures relating to consumption, as a parameter.

167 The Court observes that, in Decision 97/258 (Part III of the preamble), the Commission states that the claim made by the Italian authorities that the low output recorded by Italian steel firms in 1993 was due to particularly unfavourable cyclical conditions and to a major crisis on the market in long products is not founded. In fact production was only slightly down in the case of long products, in particular in the case of wire rod and other bars and sections. In support of its assertions, the Commission sets out a table from which it is clear that production of long products, in millions of tonnes, fell from 13.3 in 1991 to 13.2 in 1992 and to 12.5 in 1993, production of wire rod rose from 3 in 1991 to 3.2 in 1992 and fell to 3.1 in 1993 and production of other bars and sections fell from 3.5 in 1991 to 3.3 in 1992 and to 3.2 in 1993. The Commission adds that the same applies to the market in concrete reinforcing rods where there was a slight reduction in the rate of use of production capacity at both European and Italian level. A second table shows that production of concrete reinforcing rods, in millions of tonnes, rose in Europe from 12.24 in 1991 to 12.53 in 1992 and to 12.92 in 1993. Finally, a third table shows that production of concrete reinforcing rods, in millions of tonnes, rose in Italy from 5.5 in 1991 to 5.7 in 1992 and fell to 5.4 in 1993. The Commission concludes that, on the basis of those figures, the argument put forward by the Italian authorities that the low level of production of the firms in question, including the applicant, was attributable to unfavourable market conditions in 1993, cannot be accepted.

168 In the light of that information, which is not disputed by Sidercamuna, the Commission was able to reach the above conclusion without making a manifest error.

169 It is also clear from the tables appearing in the body of the decision that the Commission compared data relating to production in Europe and in Italy in 1993 with data from the previous two years. It thus carried out an assessment of the market, which, inasmuch as it enabled an appropriate response to be made to the argument put forward by the Italian authorities, is not manifestly inadequate.

170 Contrary to the applicant's view, the Commission was not obliged to make an assessment also taking account of the duration of the crisis affecting the sector and the need to restructure the steel industry. First, such matters are not capable of justifying the absence of regular production on the part of the applicant. Second, they were the subject of an assessment by the Community legislature when it adopted the successive Steel Aid Codes. That assessment did not prevent the legislature from making authorisation for closure aid subject to the requirement of regular production.

171 As regards the applicant's argument that no figures for consumption were taken into consideration, it is sufficient to note that, as the undertaking in question is a producer, and not a consumer, operating on the market, and as closure aid is intended to reduce production and not consumption of the products in question, the Commission did not make a manifest error of assessment in looking at steel production rather than steel consumption.

172 This plea must therefore be rejected.

4. The plea alleging that no account was taken of the specific circumstances of some of the applicants

173 Moccia, Prolafer, Lamifer and Sidercamuna refer, in support of their case, to specific circumstances said to justify non-compliance with the requirement of regular production.

(a) The case of Moccia

174 Moccia takes the view that the Commission, in refusing to allow the closure aid intended for the applicant, disregarded the fact that the latter had to halt production in order to adapt its plant and equipment in accordance with the rules relating to the protection of the environment.

175 However, the Court finds that only the documents produced by the applicant show on that point that it received, by decree of the Italian Minister for Industry, Trade and Craft Trades of 6 October 1992, an interest rate subsidy for the construction of new plant and equipment for the elimination and recycling of industrial waste. In contrast, there is nothing on the file to show that the applicant was compelled to cease all production activity during the reference period in order to bring its existing plant and equipment into line with the rules on the protection of the environment.

176 This plea has thus not been substantiated and must therefore be rejected.

(b) The case of Prolafer

177 Prolafer, whilst accepting the requirement of regular production, none the less takes the view that an undertaking which was unable to produce regularly because it was forced to halt production for reasons beyond its control and unrelated to market conditions ought to qualify for aid. It explains that it had to halt production as a result of a court order sequestrating its plant and equipment. In support of that argument, it submits that, once the obstacle to production is removed, an undertaking in that situation could return to a market which has been artificially cleared by the departure of a number of competitors who received closure aid, an outcome which would be contrary to the spirit of the Treaty.

178 The Court finds that the documents supporting the application do indeed show that the court sequestrated the applicant's production plant and equipment on 9 January 1991 on grounds of environmental pollution. However, as a document attached to the defence shows, that sequestration order was lifted approximately one month later, on 15 February 1991, that is to say before the start of the reference period for verifying compliance with the requirement of regular production.

179 As this plea has not been substantiated, it must be rejected.

(c) The case of Lamifer

180 Lamifer argues that it was prevented from achieving the minimum level of production required during the reference period because measures adopted by the local authorities prohibited all production activity during the night, which was the most economical time to operate from the point of view of electricity costs.

181 However, the Court observes that it is clear from the documents produced by the applicant, namely the order by the Mayor of Travagliato (Italy) of 30 March 1989, attached to the application, that the measures in question, far from simply prohibiting production during the night, merely imposed on the undertaking concerned the obligation to adapt its plant and equipment so as to keep its noise level within acceptable limits. It is therefore not true that the applicant was obliged for that reason to limit its production cycle to one daytime shift.

182 This plea must therefore be rejected.

(d) The case of Sidercamuna

183 Sidercamuna criticises the Commission's refusal to take account of the alternative criteria proposed by the Italian Government, designed to establish suitability for production rather than actual production. That refusal meant that it was prevented from receiving closure aid, even though it continued to operate on the market and was managed with a view to regular production, despite the economic crisis of 1993.

184 As regards the legality of the Commission's rejection of suitability for production as a criterion, the Court refers to paragraphs 149 to 158.

185 As regards the applicant's production at its site in Berzo Inferiore (Brescia, Italy), the subject of the application for closure aid, the Court observes that the report on the budget by the applicant's board of directors adopted on 31 December 1992 (appendix 8 R) shows that, in view of the unsatisfactory financial situation and the consequent mistrust of suppliers, its production had gradually come to a halt. The accountant's report on the budget adopted on 31 December 1992 (appendix 8 R) shows that on 30 March 1993 an extraordinary meeting of partners decided to apply to the court in Brescia for inter alia, `(3) an order suspending the production of reinforcing rods and flat bars by the factory at Berzo Inferiore; (4) an order for the dismantling of the premises at Berzo Inferiore either as a result of measures to be taken by the EEC before September or by means of their sale to a third party'. Finally, on 5 April 1993, Sidercamuna made an application for the controlled management procedure to be set in motion, which was granted by the insolvency chamber of the Brescia court on 28 April 1993.

186 It follows that the applicant, face