Cases T-394/08, T-408/08, T-453/08 and T-454/08

Regione autonoma della Sardegna (Italy) and Others

v

European Commission

‛State aid — Aid in favour of the hotel industry in the Region of Sardinia — Decision declaring the aid partly compatible and partly incompatible with the common market and ordering its recovery — New aid — Duty to state reasons — Protection of legitimate expectations — Incentive effect — De minimis rule’

Judgment of the General Court (Fourth Chamber), 20 September 2011 II - 6268

Summary of the Judgment

The fourth paragraph of Article 40 of the Statute of the Court of Justice and Article 116(4) of the Rules of Procedure of the General Court give the intervener the right to set out arguments as well as pleas independently, provided they support the form of order sought by one of the main parties and are not entirely unconnected with the issues underlying the dispute, as established by the applicant and defendant, as that would otherwise change the subject-matter of the dispute. It is thus for the Court, when determining the admissibility of the pleas put forward by an intervener, to determine whether they are connected with the subject-matter of the dispute, as defined by the main parties. (see paras 42-43)

In the procedure for examining the compatibility of aid granted by the Member States with the common market, the Commission’s final decision may differ somewhat from the decision to initiate the procedure, without, however, those differences affecting the legality of the final decision. Viewed from this perspective, there would therefore be no need for the Commission to correct a decision to initiate the formal investigation procedure. Nevertheless, it is logical and, moreover, it is in the interest of the potential recipients under an aid scheme that, if the Commission realises, once a decision to initiate the formal investigation procedure has been adopted, that that decision is based either on incomplete facts or on an incorrect legal classification of those facts, it must be able to alter its position by adopting a correction decision. Indeed, such a correction decision, together with a new invitation to the interested parties to submit their observations, allows those parties to respond to the change in the Commission’s provisional assessment of the measure at issue and to put forward their point of view in that regard. In that regard, the Commission could also have chosen to adopt, first of all, a decision concluding the procedure and, thereafter, a new decision to initiate the formal investigation procedure based on its revised legal assessment, the content of which would have been essentially the same as the content of the correction decision. In such circumstances, considerations relating to procedural economy and the principle of sound administration point to it being preferable to adopt a correction decision rather than to conclude the procedure and initiate a new procedure. With regard to the legal classification of such a correction decision, since it is combined with the decision to initiate the procedure to form therewith an amended decision to initiate the procedure, it shares its legal status. In this regard, the sole aim of the communication regarding the initiation of the formal investigation procedure is to obtain from persons concerned all information required for the guidance of the Commission with regard to its future action. (see paras 70-73)

The final decision adopted by the Commission in order to conclude the formal investigation procedure provided for in Article 88(2) EC constitutes a measure which may be contested on the basis of Article 230 EC. Such a decision produces effects which are binding on and capable of affecting the interests of the parties concerned, since it concludes the procedure in question and definitively decides whether the measure under review is compatible with the rules applying to State aid. Accordingly, interested parties are always able to contest the final decision which concludes the formal investigation procedure and must, in that context, be able to challenge the various elements which form the basis for the position definitively adopted by the Commission. That right is independent of whether the decision to initiate the formal investigation procedure gives rise to legal effects which may be the subject-matter of an action for annulment. It is true that an action may be brought against the initiation decision when it gives rise to definitive legal effects which cannot subsequently be regularised by the final decision. Such is the case when the Commission initiates the formal investigation procedure in respect of a measure which it provisionally classifies as new aid, since that decision to initiate the procedure entails legal effects independent of the final decision. Suspension of the measure concerned, which under Article 88(3) EC results from the provisional classification of that measure as new aid, is independent of the final decision, limited in time until the conclusion of the formal procedure. Nevertheless, the right to contest a decision to initiate the procedure may not diminish the procedural rights of interested parties by preventing them from challenging the final decision and relying in support of their action on defects at any stage of the procedure leading to that decision. It follows that the fact that the applicants and the interveners do not bring an action against the correction decision within the specified time-limit does not prevent them from putting forward pleas in law alleging the illegality of that decision against the Commission’s final decision. (see paras 77-79)

In the case of an aid scheme, the Commission is, in principle, not required to conduct an analysis of the aid granted in individual cases but may confine itself to examining the characteristics of the scheme in question. Furthermore, the specific circumstances of the individual recipients of an aid scheme can be assessed only at the stage of recovery of the aid by the Member State concerned. Indeed, if the situation were otherwise, the burden of proof on the Commission would be greater in the case of a scheme put into effect unlawfully, in breach of Article 88(3) EC, than where the Member State in question has complied with the notification requirement laid down in that provision, since, in the latter case, the specific circumstances of the potential recipients are by definition unknown at the examination stage. The Commission may therefore confine itself to examining the aid scheme as such and is not required to take into account the relationships between the recipient undertakings and the State concerned, the differences existing between the various undertakings concerned or any legitimate expectations which might be claimed by some of those undertakings. Account can be taken of such circumstances only at the stage of the recovery of the individual grants of aid. (see paras 91-92)

In the light of Article 10(1) of Regulation No 659/1999, laying down detailed rules for the application of Article 88 EC, where the Commission has in its possession information from whatever source regarding alleged unlawful aid, it is to examine that information without delay. That provision must not be understood as referring to the conclusion of the preliminary examination stage, but rather as relating to the beginning of the preliminary examination, that argument being supported by the fact that the Commission is not bound by the ordinary time-limit in the case of a preliminary examination initiated by a complaint. The two-month time-limit within which the Commission must conclude the preliminary examination stage applies exclusively in the case of aid notified by the Member States, and not in cases where, for example, the preliminary examination stage was initiated by a complaint. (see paras 97-98)

Since it has exclusive jurisdiction to assess the compatibility of State aid with the common market, the Commission must, in the interests of sound administration and the fundamental rules of the Treaty relating to State aid, conduct a diligent and impartial examination of a complaint alleging aid to be incompatible with the common market, and cannot therefore prolong indefinitely its preliminary investigation into State measures in relation to which there has been a complaint concerning State aid. Whether or not the duration of an administrative procedure is reasonable must be determined in relation to the particular circumstances of each case and, especially, its context, the various procedural stages to be followed by the Commission, the complexity of the case and its importance for the various parties involved. (see para. 99)

The Commission’s duty to state reasons does not apply to the duration of the procedure but simply to the actual content of the decision. The statement of reasons required by Article 253 EC must be appropriate to the measure at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure adopted and to enable the competent court to exercise its power of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom the measure is of direct and individual concern, may have in obtaining explanations. The duration of a procedure is not determined by the reasoning followed by the institution in question, which may justify that duration, but is rather a purely factual circumstance which depends exclusively on the time needed by the institution to bring the procedure to its conclusion. It does not therefore form part of the content of the decision, in respect of which reasons may be stated. It requires merely and purely as a matter of fact that the various stages of the procedure leading up to the adoption of the decision in question be listed. (see paras 120-122)

Where the decision to initiate the procedure provided for in Article 88(2) EC contains an adequate preliminary analysis by the Commission setting out the reasons for its doubts regarding the compatibility of the aid in question with the common market, it is for the Member State concerned and the potential recipient to adduce evidence to show that the aid is compatible with the common market. However, this is simply a rule relating to the burden of proof and not to the duty to state reasons, meaning that it is for the Commission, where appropriate, to set out in its decision the reasons which led it to take the view that, despite the evidence adduced by the Member State or the recipients, the aid in question is not compatible with the common market. (see para. 132)

In the matter of State aid, where, contrary to the provisions of Article 88(3) EC, the aid has already been granted, the Commission, which has the power to require the national authorities to order repayment, is not obliged to provide specific reasons in order to justify the exercise of that power. That case-law, which pre-dates the entry into force of Regulation No 659/1999, continues to apply within the framework of Article 14(1) of that regulation. The decision to recover the aid is therefore the more or less automatic consequence where that aid is held to be unlawful and incompatible, subject to the sole condition — which stems from the second sentence of that provision — that an order for recovery is not contrary to a general principle of Community law. The Commission therefore has no discretion in this regard. In such circumstances, once it has set out the reasons why it takes the view that the aid in question is unlawful and incompatible with the common market, it cannot be required to state reasons for the decision ordering the recovery. (see para. 152)

In the matter of State aid, measures to grant or alter aid must be regarded as new aid. In particular, where the alteration affects the actual substance of the original scheme, the latter is transformed into a new aid scheme. On the other hand, if the alteration is not substantive, only the alteration as such is liable to be classified as new aid. In particular, where an approval decision by the Commission expressly refers to the condition that the application for aid had to be submitted before work was started on the investment projects and the Member State concerned grants, on the basis of a regulation adopted after the approval decision, aid for projects on which work had started before the submission of the applications for aid, that will be new aid within the meaning of Article 1(c) of Regulation No 659/1999 laying down detailed rules for the application of Article 88 EC. Such an alteration cannot be regarded as minor or insignificant. Since the Commission regularly makes its approval of regional aid schemes subject to the condition that the application for aid must be made before work is started on the projects, it is clear that the removal of that condition is likely to influence the assessment of the compatibility of the aid measure with the common market. (see paras 176-179)

The compatibility of an aid scheme with the common market must be assessed exclusively according to the characteristics of that specific scheme, in the light of the policy pursued by the Commission at the time of that assessment. However, the assessment of the compatibility of an aid scheme with the common market cannot be influenced by the fact that it may have been preceded by other schemes in relation to which the Commission accepted certain arrangements. Indeed, if that were not the case, it would be impossible for the Commission to amend the criteria on the basis of which it assesses the compatibility of State aid, a power which it must have in order to be able to react both to the evolution of the practices of the Member States in relation to the grant of State aid and to the development of the common market. (see para. 190)

Article 241 EC expresses a general principle conferring upon any party to proceedings the right to challenge, for the purpose of obtaining the annulment of a decision of direct and individual concern to that party, the validity of previous acts of the institutions which, although they are not in the form of a regulation, form the legal basis of the decision under challenge, if that party was not entitled under Article 230 EC to bring a direct action challenging those acts, by which it was thus affected without having been in a position to ask that they be declared void. With regard to the Guidelines concerning State aid for regional purposes, it is clear from their introductory section that they lay down, in a general and abstract manner, the criteria which the Commission is to apply for the purposes of the assessment of the compatibility with the common market of regional aid, in accordance with Article 87(3)(a) and (c) EC, and thereby guarantee legal certainty for the Member States granting such aid. In particular, the condition laid down in Section 4.2 of the 1998 Guidelines applies to all the aid covered by those Guidelines, irrespective of its subject-matter, form or amount. Where the Commission, in its final decision, relies explicitly on Section 4.2 of the Guidelines as part of its assessment of the compatibility of certain aid, even if Section 4.2 of those Guidelines is not the legal basis of the contested decision, the condition formulated therein may be regarded as determining in general and abstract terms the way in which the Commission assessed the compatibility of the aid in question with the common market. In that case, there is a direct legal connection between the Commission’s final decision and the Guidelines, and, where a party was not in a position to seek the annulment of the Guidelines, as a general measure, those Guidelines may form the subject-matter of a plea of illegality. (see paras 206, 208-210)

The purpose of the criterion laid down in Section 4.2 of the 1998 Guidelines, which provides that aid schemes must provide for the application for aid to be introduced before projects are started, is to establish whether an aid measure has an incentive effect in a situation in which it is not possible to conduct a full examination of all the economic aspects of the investment decision of the future beneficiaries of the aid. In this connection, the second and fourth subparagraphs of Section 2 of the 1998 Guidelines make clear that the Commission, in principle, approves regional aid only in the form of aid schemes, since it considers that individual ad hoc aid does not satisfy the requirement that an equilibrium is to be guaranteed between the resulting distortions of competition and the advantages of the aid in terms of the development of a less-favoured region. In the course of the Commission’s examination of the compatibility of a notified aid scheme with the common market, the particular circumstances specific to the various potential beneficiaries of the scheme and to the particular projects in respect of which those beneficiaries will be able to apply for grants are by definition unknown to the Commission. Accordingly, the Commission must take as a basis, when assessing the compatibility of an aid scheme with the common market, criteria which are either independent of the particular circumstances specific to the future beneficiaries or uniform in respect of all future beneficiaries. The requirement that the application for aid be submitted before work is started on the subsidised project makes it possible to guarantee that the undertaking concerned has clearly demonstrated its intention to benefit from the aid scheme in question before starting work on that project. This therefore means that it is possible to prevent applications for projects on which work has started irrespective of the existence of an aid scheme from being submitted ex post. In the light of those considerations, the mere finding that the application for aid was made prior to the start of work on the investment project is a simple, relevant and suitable criterion which allows the Commission to assume that an incentive effect exists. (see para. 215)

In the matter of State aid, when the Commission decides to initiate the formal investigation procedure, it is for the Member State concerned and the beneficiaries of the measure under consideration to put forward the arguments whereby they seek to show that the measure at issue either does not constitute aid or is aid compatible with the common market, since the object of the formal procedure is specifically to ensure that the Commission is fully informed of all the facts of the case. Indeed, although the Commission is required to express its doubts clearly as to the compatibility of the aid with the common market when it opens a formal procedure, in order to enable the Member State and the other parties concerned to respond as fully as possible, the fact remains that it is for the latter to dispel those doubts and to establish that the measure in question satisfies the conditions for a derogation. In particular, in order to obtain approval of aid by way of derogation from the Treaty rules, the Member State concerned must, in order to fulfil its duty to cooperate with the Commission, provide all the information necessary to enable that institution to verify that the conditions for the derogation sought are satisfied. (see para. 246)

A legitimate expectation in the lawfulness of State aid can, in principle, save in exceptional circumstances, be relied upon only where that aid was granted in a manner compatible with the procedure laid down in Article 88 EC. Indeed, a diligent operator should normally be able to determine whether that procedure has been followed. Thus, aid beneficiaries who do not comply with the conditions of the Commission’s approval decision, cannot, in principle, be allowed to rely on a legitimate expectation in the lawfulness of that aid. Admittedly, the case-law does not preclude the possibility that, in order to challenge its repayment, the recipients of unlawful aid may, in the procedure for the recovery of the aid, plead exceptional circumstances which could legitimately have given rise to a legitimate expectation that the aid was lawful. However, those recipients can rely on such exceptional circumstances, on the basis of the relevant provisions of national law, only in the framework of the recovery procedure before the national courts, the only courts competent to assess the circumstances of the case, if necessary after obtaining a preliminary ruling on interpretation from the Court of Justice. Moreover, since the general principle under Article 87(1) EC is that State aid is not permitted, and exceptions to that principle are to be interpreted strictly, a decision not to raise objections to an aid scheme is concerned only with the actual grant of the aid falling under that scheme and cannot, therefore, form the basis for a legitimate expectation on the part of the potential beneficiaries of similar future aid projects in the compatibility with the common market of the aid at issue. (see paras 274-277, 283)