Joined Cases T-102/07 and T-120/07

Freistaat Sachsen (Germany) and Others

v

European Commission

(State aid – Aid granted by Germany in the form of a participation and loan guarantees – Decision declaring the aid to be incompatible with the common market – General aid scheme approved by the Commission – Concept of a firm in difficulty – Guidelines on State aid for rescuing and restructuring firms in difficulty – Amount of aid – Obligation to state reasons)

Summary of the Judgment

1. State aid – General aid scheme approved by the Commission – Individual aid presented as being covered by the approval – Examination by the Commission

(Arts 87 EC and 88 EC)

2. State aid – Prohibition – Exceptions

(Arts 87(1) and (3) EC and 88(3) EC; Commission Notice 1999/C 288/02, para. 3)

3. State aid – Prohibition – Exceptions – Commission Notice on the framework for State aid for firms in difficulty

(Commission Notice 1999/C 288/02, paras 4 to 6)

4. Acts of the institutions – Statement of reasons – Obligation – Scope – Commission decision on State aid – Calculation of the amount of aid for a firm in difficulty

(Arts 87 EC and 253 EC; Commission Notice 1997/C 273/03)

1. When it has before it a specific grant of aid alleged to have been made in pursuance of a previously authorised scheme, the Commission cannot at the outset examine it directly in relation to the Treaty. Prior to the initiation of any procedure, it must first confine itself to examining whether the aid is covered by the general scheme and satisfies the conditions laid down in the decision approving that general scheme. If it did not do so, the Commission could, whenever it examined an individual aid measure, go back on its decision approving the aid scheme, which already presupposed an examination in the light of Article 87 EC. Aid which constitutes a strict and foreseeable application of the conditions laid down in the decision approving the general aid scheme is thus considered to be existing aid which does not have to be notified to the Commission or examined in the light of Article 87 EC.

A Commission decision ruling on whether an aid measure is consistent with the relevant scheme comes within the scope of the Commission’s obligation to ensure the application of Articles 87 EC and 88 EC. Consequently, the Commission’s examination of the conformity of an aid measure with that scheme does not constitute a step that exceeds its powers. The Commission’s assessment cannot therefore be limited by the assessment of the national authorities which granted the aid.

(see paras 59-60, 62, 136)

2. According to paragraph 3 of the Community guidelines on State aid for rescuing and restructuring firms in difficulty, which the Commission was entitled to adopt in order to exercise the wide discretion that it enjoys for the purposes of the application of Article 87(3) EC and by which it is governed, ‘State aid for rescuing firms in difficulty from bankruptcy and helping them to restructure may only be regarded as legitimate subject to certain conditions’. That is the reason why those guidelines provide that there is a duty to notify the Commission in advance of any funding provided or guaranteed by the State to a firm that is in financial difficulties.

It cannot be accepted that there is a specific definition of the concept of a firm in difficulty for the purposes of an approved regional aid scheme. Acceptance that different definitions of the concept of a firm in difficulty can exist alongside each other might create a situation in which a firm that is in difficulty according to those guidelines might nevertheless benefit from State aid without that aid having to be notified and without compliance with those guidelines. Such a situation would, however, be contrary to the broad logic of Article 87(1) and (3) EC and Article 88(3) EC as clarified by those guidelines.

(see paras 74, 76)

3. Paragraph 4 of the Community guidelines on State aid for rescuing and restructuring firms in difficulty merely states in general terms that a firm is regarded as being in difficulty where it is unable, whether through its own resources or with the funds that it is able to obtain from its owner/shareholders or creditors, to stem losses which, without outside intervention by the public authorities, would almost certainly condemn it to go out of business in the short or medium term. Furthermore, the wording of paragraphs 5 and 6 of those guidelines shows that, although a firm is ‘in any event’ regarded as being in difficulty where a material part of its share capital has disappeared, other evidence, such as the factors set out in paragraph 6, may also be used to establish that it is in financial difficulty for the purposes of those guidelines, even if it has not lost a significant part of its share capital.

Thus, a material reduction in the share capital is a very serious factor signalling that an undertaking is in difficulty. In addition, there are a number of economic factors, of which paragraph 6 of those guidelines contains a non-exhaustive list, which may also indicate that an undertaking is in difficulty, even if the undertaking has not lost a significant part of its share capital or is not insolvent within the terms of paragraph 5 of those guidelines.

(see paras 103-105, 133, 135)

4. The scope of the duty to state reasons depends on the nature of the measure in question and on the context in which it was adopted. The statement of reasons must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure, so as to enable the persons concerned to ascertain the reasons for it in order that they can defend their rights and ascertain whether or not the measure is well founded and to enable the Courts of the European Union to exercise their power of review. It is not necessary for the statement of reasons to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. In particular, the Commission is not obliged to adopt a position on all the arguments relied on by the parties concerned, it being sufficient if it sets out the facts and legal considerations which have decisive importance in the context of the decision.

It is, however, necessary to annul a Commission decision finding State aid to be incompatible with the common market which does not contain any reference, in its calculation of the amount of aid for undertakings in difficulty, to the practice of the financial markets on risk accumulation (undertaking in difficulty, lack of security, etc.), since the relationship between the premiums fixed by the Commission and the specific situation of the undertakings concerned does not become clear and the premiums fixed give, at least, the impression of having been randomly chosen, and the Commission notice concerning the method for fixing the reference and discount rates does not contain any indication as to that risk accumulation. The Commission ought to have explained why it resorted to additional premiums and how it chose their amounts by way of an analysis of market practice in order to allow those undertakings to question whether the premiums were appropriate and to enable the Court to review their legality.

(see paras 180, 217-218)

JUDGMENT OF THE GENERAL COURT (Fourth Chamber)

3 March 2010 ( )

(State aid – Aid granted by Germany in the form of a participation and loan guarantees – Decision declaring the aid to be incompatible with the common market – General aid scheme approved by the Commission – Concept of a firm in difficulty – Guidelines on State aid for rescuing and restructuring firms in difficulty – Amount of aid – Obligation to state reasons)

In Joined Cases T‑102/07 and T‑120/07,

Freistaat Sachsen (Germany), represented by C. von Donat and G. Quardt, lawyers,

applicant in Case T‑102/07,

MB Immobilien Verwaltungs GmbH, established in Neukirch (Germany), represented initially by G. Brüggen, and subsequently by A. Seidl, K. Lengert and W.T. Sommer, lawyers,

MB System GmbH & Co. KG, established in Nordhausen (Germany), represented by G. Brüggen, lawyer,

applicants in Case T‑120/07,

v

European Commission, represented by K. Gross and T. Scharf, acting as Agents,

defendant,

APPLICATIONS for annulment of Commission Decision 2007/492/EC of 24 January 2007 on the State aid C 38/2005 (ex NN 52/2004) implemented by Germany for the Biria Group (OJ 2007 L 183, p. 27),

THE GENERAL COURT (Fourth Chamber),

composed of O. Czúcz (Rapporteur), President, I. Labucka and K. O’Higgins, Judges,

Registrar: T. Weiler, Administrator,

having regard to the written procedure and further to the hearing on 20 January 2009,

gives the following

Judgment

Legal context and background

1. Community law

1 Article 87 EC provides:

‘1. Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.

...

3. The following may be considered to be compatible with the common market:

(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment;

...

(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest …’

2 Point 2 of the Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ 1999 C 288, p. 2) (‘the 1999 Guidelines’) provides as follows:

‘2.1. Concept of “a firm in difficulty”:

(4) There is no Community definition of what constitutes “a firm in difficulty”. However, for the purposes of these Guidelines, the Commission regards a firm as being in difficulty where it is unable, whether through its own resources or with the funds it is able to obtain from its owner/shareholders or creditors, to stem losses which, without outside intervention by the public authorities, will almost certainly condemn it to go out of business in the short or medium term.

(5) In particular, a firm is, in any event and irrespective of its size, regarded as being in difficulty for the purposes of these Guidelines:

(a) in the case of a limited company, where more than half of its registered capital has disappeared and more than one quarter of that capital has been lost over the preceding 12 months;

or

(b) in the case of an unlimited company, where more than half of its capital as shown in the company accounts has disappeared and more than one quarter of that capital has been lost over the preceding 12 months;

or

(c) whatever the type of company concerned, where it fulfils the criteria under its domestic law for being the subject of collective insolvency proceedings.

(6) The usual signs of a firm being in difficulty are increasing losses, diminishing turnover, growing stock inventories, excess capacity, declining cash flow, mounting debt, rising interest charges and falling or nil net asset value. In acute cases the company may already have become insolvent or may be the subject of collective insolvency proceedings brought under its domestic law. In the latter case, these Guidelines apply to any aid granted in the context of such proceedings which leads to the firm continuing in business. In any event, a firm in difficulty is eligible only where, demonstrably, it cannot recover through its own resources or with the funds it obtains from its owners/shareholders or creditors.

...’

3 As regards aid schemes for small and medium-sized enterprises (SMEs), point 4 of the 1999 Guidelines provides:

‘4.1. General principles

(64) The Commission will authorise aid schemes for rescuing and/or restructuring small or medium-sized enterprises in difficulty only where the firms concerned correspond to the Community definition of SMEs. Subject to the following specific provisions, the compatibility of such schemes will be assessed in the light of the conditions set out in [points] 2 and 3. Any aid which is granted under a scheme and does not meet one of those conditions must be notified individually and approved in advance by the Commission.

4.2. Eligibility

(65) Unless otherwise stipulated in rules on State aid in a particular sector, awards of aid, under schemes authorised from now on, to small or medium-sized enterprises will be exempted from individual notification only where the enterprise concerned meets at least one of the three criteria set out in [paragraph] 5. Aid to enterprises that do not meet any of those three criteria must be notified individually to the Commission so that it can assess whether they qualify as firms in difficulty.

…’

4 Point 6 of the 1999 Guidelines concerns appropriate measures under Article 88(1) EC. As regards the adaptation of rescue or restructuring aid schemes, it provides as follows:

‘(94) Member States must adapt their existing rescue and restructuring aid schemes which are to remain in operation after 30 June 2000 in order to bring them into line with these Guidelines, and in particular with the requirements of [point] 4, after that date.

(95) To enable the Commission to monitor the adaptation process, Member States must let it have a list of all such schemes before 31 December 1999. They must subsequently, and in any event before 30 June 2000, provide it with sufficient information to enable it to check that the schemes have indeed been modified in accordance with these Guidelines.’

2. Approved aid scheme

5 The Bürgschaftsrichtlinien des Freistaates Sachsen für die Wirtschaft und die freien Berufe sowie die Land- und die Forstwirtschaft (the directives concerning the guarantee scheme for the Land of Saxony for the benefit of enterprises, the liberal professions, agriculture and forestry) provide for two types of guarantee: first, guarantees provided as aid in the form of operating aid and aid for investment for regional purposes (‘regional aid programme’) and, second, guarantees provided as rescue and restructuring aid (‘rescue and restructuring aid programme’). The Commission of the European Communities approved that scheme for Freistaat Sachsen by way of Decision SG (93) D/9273 of 7 June 1993 on State aid N 73/93. It is thus an approved aid scheme (‘approved aid scheme’). In that decision of 7 June 1993, the Commission stated that guarantees extended to undertakings in respect of which the guarantor – as a diligent operator – knows, or ought to know, that they are in difficulty, constitute aid that is not covered by the decision at issue and must be notified to the Commission in each individual case.

6 The approved aid scheme was brought into line with the 1994 version of the Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ 1994 C 368, p. 12) (‘the 1994 Guidelines’). Thus, on 13 March 1996, the Commission adopted Decision 96/475/EC on the compatibility with the common market of State guarantees for measures to restructure large firms in difficulty under the State guarantee schemes of the Länder of Saxony-Anhalt, Lower Saxony, North Rhine-Westphalia, Rhineland-Palatinate, Bavaria, Bremen, Mecklenburg-Western Pomerania, Schleswig-Holstein and Saxony (OJ 1996 L 194, p. 25), which stated that the granting of guarantees for the restructuring of large firms in difficulty under a guarantee scheme such as the guarantee scheme for Freistaat Sachsen had to be notified to the Commission in each individual case. As regards the concept of a firm in difficulty, that decision refers to the criteria set out in the 1994 Guidelines. By letter of 19 December 1996, the Federal Republic of Germany confirmed that that decision had been transposed correctly by Freistaat Sachsen.

7 Taking the view that the definition of the concept of a firm in difficulty was vague, the German authorities and the Commission deemed it necessary to render that concept operational for the purposes of the application of the guarantee programmes of the German Länder. A Commission letter of 2 March 1998 dealt with that issue.

8 In that letter, the Commission proposed appropriate measures for the application of the guarantee schemes of the German Länder, including the approved aid scheme, and in particular the following definition of the concept of a firm in difficulty (‘appropriate measure E 16/94’):

‘For the purposes of the application of the abovementioned guarantee schemes, an undertaking is considered to be in difficulty if one of the following criteria is fulfilled:

– the relevant undertaking is insolvent or over-indebted within the meaning of the [Konkursordnung (German Bankruptcy Code)] or the [Einführungsgesetz zur Insolvenzordnung (Introductory Law to the German Insolvency Code)];

– in the case of a partnership, more than half of the registered capital or, in the case of a joint stock company, more than half of the authorised capital has been used up by losses within the meaning of Paragraph 92 [of the Aktiengesetz (German Companies Law)] and Paragraph 49 [of the Gesetz betreffend die Gesellschaften mit beschränkter Haftung (German Law on Limited Liability Companies)] and 25% of that capital has been lost over the 12 months preceding the request for a guarantee.

In addition, in applying that concept, [the following] must be borne in mind for the purposes of budgetary law and checked by the guarantor in each individual case:

– As a general rule, a guarantee may not be granted where it has to be expected, with a high degree of probability, that the guarantor will have to step in (Paragraph 39 of the provisional administrative regulations on the federal budget code and the corresponding provisions in the budget laws of the Länder); it follows that a guarantee may not be granted to firms in difficulty, within the meaning of the criteria set out above, unless the guarantor establishes, on the basis of an expert’s report prepared by an (independent) accountant taking into account the guaranteed loan, that the prognosis for the beneficiary undertaking is positive.

– When a guarantee is granted, checks must be carried out in every individual case to establish whether no other source of financing is available on the financial markets.’

9 The Federal Republic of Germany confirmed in a letter of 29 June 1998 that that definition of the concept of a firm in difficulty was being used.

10 Furthermore, in a letter from the Commission to the Federal Republic of Germany of 11 November 1998, the Commission explained the following as regards the concept of a firm in difficulty:

‘As regards the points that have not yet been settled conclusively, in particular the question of the definition of “a firm in difficulty” and the application of the “de minimis” rule to guarantees for firms in difficulty, the Commission proposes to wait for the adoption of the amended guidelines on State aid for rescuing and restructuring. Once the decision has been taken, the outstanding points will be brought into line with those guidelines.’

11 The approved aid scheme was subsequently amended to reflect the 1999 Guidelines. In compliance with the appropriate measures set out in point 6 of the 1999 Guidelines (see paragraph 4 above), the Federal Republic of Germany sent to the Commission, by letter of 1 December 1999, a list of aid schemes that remained in force after 30 June 2000 and which therefore had to be amended in accordance with those appropriate measures (‘the letter of 1 December 1999’). That list included the approved aid scheme. By letter of 20 January 2000 (‘the letter of 20 January 2000’), the Federal Republic of Germany accepted those appropriate measures. In addition, in accordance with paragraph 95 of the 1999 Guidelines, the Federal Republic of Germany also sent various documents to the Commission in this regard (letters of 30 June 2000, 11 December 2000 and 26 March 2001) in order to show that the existing German aid schemes had been amended in accordance with those appropriate measures.

12 Against that background, the Federal Republic of Germany also sent, by letter of 30 June 2000 (‘the letter of 30 June 2000), a Prüfraster für staatliche Bürgschaften aus den Bürgschaftsrichtlinien des Bundes und der Länder (checklist for State guarantees under the guarantee schemes of the Federal Government and the Länder; ‘the checklist’).

3. Undertakings at issue

13 The Biria Group was active in the manufacture and distribution of bicycles.

14 The first applicant in Case T‑120/07, MB Immobilien Verwaltungs GmbH (‘MB Immobilien’), is the legal successor to Biria AG (new), the former parent company of the Biria Group.

15 Biria AG (new) was created in 2003 as a result of the merger between Biria AG (old) and Sachsen Zweirad GmbH, with the undertaking first being renamed Biria GmbH and subsequently Biria AG (new). The sole owner of Biria AG (new) was Mehdi Biria.

16 The second applicant in Case T‑120/07, MB System GmbH & Co. KG (‘MB System’), is the legal successor to Bike Systems GmbH & Co., Thüringer Zweiradwerk KG (‘Bike Systems’), which was one of the major companies within the Biria Group. MB System manufactured only bicycles, while another undertaking within the group was responsible for marketing them.

4. Measures at issue

17 Between March 2001 and December 2003, the Biria Group received three financial contributions.

18 First, in March 2001, gbb Beteiligungs AG (‘gbb’), a subsidiary of Deutsche Ausgleichsbank, a German public law development bank which had the task of supporting the German economy in the public interest, provided until the end of 2010 a silent participation to Bike Systems amounting to some EUR 2 070 732 (‘Measure 1’).

19 Second, on 23 March 2003, under the approved aid scheme, Freistaat Sachsen provided an 80% guarantee for an operating credit of EUR 5.6 million in favour of Sachsen Zweirad which was originally due to expire at the end of 2008 (‘Measure 2’). That guarantee was given back on 5 January 2004 and replaced by a guarantee in favour of Biria GmbH (see paragraph 20 below).

20 Third, on 9 December 2003, also under the approved aid scheme, Freistaat Sachsen provided an 80% guarantee for an operating credit of EUR 24 875 000 in favour of Biria GmbH (‘Measure 3’) which was to take effect on 5 January 2004, in exchange for the return of the guarantee provided to Sachsen Zweirad under Measure 2.

5. Administrative procedure

21 In July 2003 and August 2003, the Commission received complaints concerning a guarantee provided to the Biria Group as well as public participations in companies belonging to the group.

22 By letter of 9 September 2003, the Commission sought clarification from the Federal Republic of Germany, which the latter provided.

23 On 18 October 2004 the Commission called on the Federal Republic of Germany to provide additional information in view of the fact that it had doubts as to whether the aid measures granted to the Biria Group complied with the aid schemes under which they had ostensibly been granted. In response to that mandatory request, the Federal Republic of Germany submitted further information by letter of 31 January 2005 (‘the letter of 31 January 2005’). By that letter, the Federal Republic of Germany informed the Commission that Measure 3 had also been granted on the basis of the approved aid scheme.

24 On 20 October 2005 the Commission initiated the formal investigation procedure with respect to three alleged State aid measures. It found, in the same decision, that several other aid measures that were alleged to have been granted unlawfully either did not constitute State aid or had been granted in compliance with approved aid schemes. That decision was published in the Official Journal of the European Union of 5 January 2006 (OJ 2006 C 2, p. 14). The Commission invited all interested parties to submit comments on the possible aid measures. Various complainant undertakings submitted comments, which were transmitted to the Federal Republic of Germany by letters of 6 February 2006 and 2 March 2006. The Federal Republic of Germany replied by letters of 5 April 2006 and 12 May 2006.

25 The Federal Republic of Germany’s response to the initiation of the formal investigation procedure was submitted by letter of 23 January 2006 (‘the letter of 23 January 2006’).

26 By letter of 6 February 2006, the Commission requested further clarification from the Federal Republic of Germany, which the latter submitted by letter of 5 April 2006. The Commission sent a further request for information on 19 July 2006, to which the Federal Republic of Germany replied by letter of 25 September 2006.

6. Contested decision

27 On 24 January 2007 the Commission adopted Decision 2007/492/EC on the State aid C 38/2005 (ex NN 52/2004) implemented by Germany for the Biria Group (OJ 2007 L 183, p. 27) (‘the contested decision’). The operative part of the contested decision states:

‘Article 1

The State aid [implemented by the Federal Republic of Germany] for [Bike Systems], [Sachsen Zweirad] and Biria GmbH (now Biria AG) is incompatible with the common market. The aid consisted of the following measures:

(a) Measure 1: a silent participation of EUR 2 070 732 provided to [Bike Systems]. The aid element corresponds to the difference between the reference interest rate plus 1 000 basis points and the remuneration against which the silent participation was provided (fixed remuneration plus 50% of the variable remuneration);

(b) Measure 2: a guarantee of EUR 4.480m to [Sachsen Zweirad]. The aid element corresponds to the difference between the reference interest rate plus 800 basis points and the interest rate at which the guaranteed loan was provided;

(c) Measure 3: a guarantee of EUR 19.9m to Biria GmbH (now Biria AG). The aid element corresponds to the difference between the reference interest rate plus 700 basis points and the interest rate at which the guaranteed loan was provided.

Article 2

1. [The Federal Republic of] Germany shall take all necessary measures to recover from the beneficiary the aid referred to in Article 1 and unlawfully made available to the beneficiary.

2. The silent participation and the guarantee for Biria GmbH (now Biria AG) shall be discontinued within two months following notification of this decision.

...’

28 In essence, the following reasons are given for the contested decision. As regards Measure 1, the Commission took the view that the participation provided by gbb was attributable to the State and that it conferred an advantage on Bike Systems, as that company could not have obtained it on the market on the same conditions. Basing itself on point 3.2 of its Notice on the application of Articles 87 [EC] and 88 [EC] to State aid in the form of guarantees (OJ 2000 C 71, p. 14), the Commission took the view that the entire participation had to be considered to be an aid element, because Bike Systems was in difficulty when the participation was provided and the risk associated with it was such that, in a market economy, no investor would have provided it. As regards Measures 2 and 3, the Commission took the view that the beneficiaries were large undertakings which, according to the criteria in the 1999 Guidelines, and in particular paragraph 6 of those guidelines, were in difficulty at the time when the respective guarantees were provided. Those guarantees were therefore not covered by the approved aid scheme and ought to have been notified to the Commission in each individual case. In addition, the Commission found, in respect of Measures 1, 2 and 3, that the exemptions provided for in Article 87(2) and (3) EC did not apply and that, notably, it had not been provided with information, particularly with regard to the implementation of a restructuring plan as required by the 1999 Guidelines. In respect of Measures 2 and 3, the Commission furthermore stated in the contested decision that, given that Sachsen Zweirad had benefited from restructuring aid in April 1996 and March 1998, the ‘one time – last time’ condition was not met in granting the two guarantees, since less than 10 years had elapsed since the end of the restructuring period and there were no exceptional circumstances in the present case. According to the Commission, the 1999 Guidelines had therefore not been complied with.

Procedure and forms of order sought by the parties

29 By applications lodged at the Registry of the General Court on 5 April 2007 and 16 April 2007, and registered, respectively, as Cases T‑102/07 and T‑120/07, Freistaat Sachsen, on the one hand, and MB Immobilien and MB System, on the other hand, brought the present actions.

30 By a separate document lodged at the Registry of the General Court on 13 August 2007, MB Immobilien brought an application for interim measures seeking suspension of the operation of the contested decision. That application was dismissed by order of the President of the General Court of 11 October 2007 and costs were reserved.

31 By order of the President of the Fourth Chamber of the General Court of 24 November 2008, after the parties had been heard, Cases T‑102/07 and T‑120/07 were joined for the purposes of the oral procedure and the judgment pursuant to Article 50 of the Court’s Rules of Procedure.

32 In Case T‑102/07, Freistaat Sachsen claims that the Court should:

– annul the contested decision in so far as it concerns Measures 2 and 3;

– order the Commission to pay the costs.

33 In Case T‑120/07, MB Immobilien and MB System claim that the Court should:

– annul the contested decision;

– order the Commission to pay the costs.

34 In Case T‑102/07, the Commission contends that the Court should:

– dismiss the action;

– order Freistaat Sachsen to pay the costs.

35 In Case T‑120/07, the Commission contends that the Court should:

– dismiss the action;

– order MB Immobilien and MB System to pay the costs.

Law

36 The action in Case T‑102/07 contains three pleas in law. The first plea alleges infringement of Community law by reason of an incorrect interpretation of the approved aid scheme. It comprises three parts. In the first part, Freistaat Sachsen claims that appropriate measure E 16/94 was not applied. In the second part, Freistaat Sachsen alleges a failure to provide a statement of reasons. In the third part, Freistaat Sachsen claims that the undertakings concerned are not firms in difficulty within the meaning of the approved aid scheme. The second plea alleges that the facts regarding the difficulties of the undertakings at issue were incorrectly assessed. This plea comprises two parts. In the first part, Freistaat Sachsen alleges that the contested decision is at variance with the Commission’s practice. In the second part, it claims that the criteria set out in paragraph 6 of the 1999 Guidelines were misconstrued. The third plea alleges that the statement of reasons regarding the amount of the aid element is defective.

37 The action in Case T‑120/07 also involves three pleas in law. The first plea alleges that Community law was infringed by reason of an incorrect interpretation of the approved aid scheme. The second plea alleges misappraisal of the facts regarding the difficulties of the beneficiary undertakings. The third plea alleges a breach of the obligation to state reasons. The third plea consists of four parts. In the first part, MB Immobilien and MB System claim that the Commission did not provide reasons for its departure from the 1999 Guidelines. In the second part, they claim that the contested decision failed to provide reasons based on appropriate measure E 16/94. In the third part, the applicants claim that the Commission failed to state the reasons for its decision to depart from appropriate measure E 16/94. In the fourth part, the applicants claim that the statement of reasons provided in the context of determining the aid amount to be recovered contains a serious error.

38 The arguments put forward by Freistaat Sachsen in the context of Case T‑102/07 and those put forward by MB Immobilien and MB System in the context of Case T‑120/07 overlap to a large degree, even though the complaints of Freistaat Sachsen concern only Measures 2 and 3, whereas those of MB Immobilien and MB System also relate to Measure 1. Essentially, they claim, first, with regard to Measures 2 and 3, that there has been an infringement of the approved aid scheme because, instead of applying the narrow definition of the concept of a ‘firm in difficulty’ set out in appropriate measure E 16/94, the Commission used the definition in the 1999 Guidelines, in particular the signs set out in paragraph 6 of those guidelines. Second, the applicants claim that the Commission’s assessment, classifying the beneficiary undertakings as firms in difficulty, is manifestly wrong. Third, the applicants allege that the duty to state reasons has been infringed. It is in that order that their complaints will be analysed below.

1. Complaints alleging failure to apply the definition of the concept of a firm in difficulty as set out in appropriate measure E 16/94

Arguments of the parties

39 The applicants do not contest the fact that firms in difficulty are excluded from the regional aid programme under the approved aid scheme. However, they claim essentially that the Commission’s analysis, according to which the undertakings benefiting under Measures 2 and 3 were in difficulty, ought to have been based on the criteria set out in appropriate measure E 16/94 and not on the criteria set out in paragraphs 4 to 6 of the 1999 Guidelines, which are allegedly more extensive.

40 According to Freistaat Sachsen, the Commission was under an obligation, in the light of the case-law, to examine Measures 2 and 3 in the light of the conditions set out in the approved aid scheme (Case C‑47/91 Italy v Commission [1994] ECR I‑4635). However, in the contested decision, the Commission’s finding that Measures 2 and 3 were incompatible with the approved aid scheme was not based on the definition of the concept of a firm in difficulty set out in appropriate measure E 16/94, but rather on the criteria set out in paragraph 6 of the 1999 Guidelines. According to Freistaat Sachsen, the Commission thus overestimated the extent of its discretion in the context of the actual application of an aid scheme which it had, none the less, previously approved.

41 Freistaat Sachsen submits that the approved aid scheme provides for two types of guarantee programmes: a regional aid programme and a rescue and restructuring aid programme. Measures 2 and 3, it submits, were granted under the regional aid programme; therefore, the definition that should have been applied is the definition of the concept of a firm in difficulty laid down in appropriate measure E 16/94.

42 First, Freistaat Sachsen bases itself on the interpretation of the actual facts and the letters exchanged before the 1999 Guidelines were adopted.

43 It thus submits that the concept of a firm in difficulty was defined, initially, in Decision SG (93) D/9273 as being any undertaking of which the guarantor – as a diligent operator – knows, or ought to know, that that undertaking is in difficulty.

44 According to Freistaat Sachsen, the Commission took the view in Decision 96/475 concerning guarantees for measures to restructure large firms in difficulty granted under the State guarantee schemes of several German Länder, including Freistaat Sachsen, that the granting of guarantees to large firms in difficulty had to be notified on a case-by-case basis. It followed that, for the purposes of the rescue and restructuring aid programme under the approved aid scheme, guarantees could from then on be provided only to SMEs in difficulty. According to Freistaat Sachsen, the regional aid programme under the approved aid scheme was not affected, a fact confirmed by the letter of 19 December 1996 (see paragraph 6 above).

45 Furthermore, Freistaat Sachsen submits that a review of the correspondence between the Federal Republic of Germany and the Commission, such as the letter of 2 March 1998 (see paragraph 7 above), indicates that similar guarantee programmes existed in several Länder as well as at federal level. Given the importance of a measure providing regional support, a working definition of the concept of a ‘healthy firm’ should have been found. According to Freistaat Sachsen, the search for a definition was the subject of several discussions and a protracted exchange of correspondence between the Commission and the Federal Republic of Germany which was able to be brought to a close only when the Commission suggested a definition of the concept of a firm in difficulty in appropriate measure E 16/94.

46 Appropriate measure E 16/94 redefined the firms in difficulty to be excluded from regional aid. Henceforth, the following would no longer benefit from regional aid: first, firms that fulfil clear criteria, subsequently reproduced in paragraph 5 of the 1999 Guidelines, and, second, firms at risk of actually calling in the guarantee. That definition has not been amended since.

47 Freistaat Sachsen also submits that, in the letter of 11 November 1998 (see paragraph 10 above), the Commission stated that the question of the definition of the concept of a firm in difficulty had not yet been settled conclusively, but that, in the interest of legal certainty, the criteria of appropriate measure E 16/94 were to be applied.

48 Second, Freistaat Sachsen submits that the exchange of letters between the Federal Republic of Germany and the Commission that took place after the 1999 Guidelines had been adopted reveals that no changes were made to the definition of the concept of a firm in difficulty set out in appropriate measure E 16/94 as applied to the regional aid programme under the approved aid scheme.

49 According to Freistaat Sachsen, the letter of 1 December 1999 relates exclusively to rescue and restructuring aid for firms in difficulty. It claims that the same is true in regard to the letter of 20 January 2000, by which the Federal Republic of Germany accepted the appropriate measures provided for in point 6 of the 1999 Guidelines, since those appropriate measures likewise related only to aid schemes for rescue and restructuring aid. That letter also showed that, as regards SMEs in difficulty, the definition in paragraph 5 of the 1999 Guidelines had to be applied.

50 Furthermore, according to Freistaat Sachsen, the documents sent under cover of the letter of 30 June 2000 concerned exclusively aid schemes for rescue and restructuring aid. The checklist summarised programmes or parts of programmes dedicated to regional aid in point 3.5. By contrast, point 4 dealt exclusively with rescue and restructuring aid. The same was true for subsequent changes to point 4, which were the subject of an ensuing exchange of correspondence between the Commission and the German Government.

51 Third, Freistaat Sachsen submits that the application of two slightly different definitions of the concept of a firm in difficulty in the context of the regional aid programme and in that of the rescue and restructuring aid programme under the approved aid scheme is attributable to the different purposes served by those two types of programme.

52 The rescue and restructuring programme seeks to ensure that only SMEs which satisfy the criteria set out in paragraph 5 of the 1999 Guidelines can benefit from rescue and restructuring aid. Freistaat Sachsen points out that, as regards the regional aid programme, firms could benefit from regional aid if they were not in difficulty according to appropriate measure E 16/94, that is to say, according to criteria that have been clearly defined and which correspond to those set out in paragraph 5 of the 1999 Guidelines, or if it was unlikely that the guarantee would be called in.

53 Finally, Freistaat Sachsen claims that the signs that a firm is in difficulty set out in paragraph 6 of the 1999 Guidelines are too vague for Member States to use them as criteria for the purpose of assessing whether a proposed aid measure is compatible with an existing aid scheme.

54 For their part, MB Immobilien and MB System submit that the Commission ought to have examined Measures 2 and 3 in the light of the conditions of the approved aid scheme, and they also refer in that respect to appropriate measure E 16/94. They point out that the conditions set out in appropriate measure E 16/94 are worded more narrowly than those in the 1999 Guidelines. Rather than applying signs within the meaning of those guidelines, the budget law criterion laid down in appropriate measure E 16/94 ought to be applied in the present case. According to that criterion, guarantees must not be provided where it is to be expected, with a high degree of probability, that the guarantor will have to intervene. The Federal Republic of Germany accepted that definition and Freistaat Sachsen as well as the beneficiaries ought to have been allowed to rely on the fact that the approved aid scheme operated as a special aid scheme.

55 MB Immobilien and MB System submit that adapting the approved aid scheme in the light of the 1999 Guidelines affected the rescue and restructuring aid programme alone. The Commission had suggested that all guarantees benefiting large undertakings be notified irrespective of the type of aid involved, but made no mention of the fact that the Federal Republic of Germany had rejected that proposal. That question has not yet been settled conclusively.

56 According to MB Immobilien and MB System, guarantees supporting rescue and restructuring measures in favour of firms in difficulty within the meaning of the approved aid scheme were limited to SMEs. The criteria to be applied to regional aid in the form of operating aid and aid for investment, as set out in appropriate measure E 16/94, are the strict criteria laid down in paragraph 5 of the 1999 Guidelines complemented by the twin condition under budgetary law according to which a guarantee cannot be provided if it is very likely that it will be called in and that, therefore, guarantees cannot be provided to firms in difficulty unless the guarantor finds, on the basis of an expert’s report prepared by an (independent) accountant, that, taking into account the guaranteed loan, the beneficiary undertaking stands a good chance of carrying on its activities. Furthermore, as regards the obligation to notify rescue and restructuring aid for large firms in difficulty resulting from Decision 96/475, MB Immobilien and MB System submit that the Federal Republic of Germany accepted that obligation in respect of both programmes for Baden-Württemberg (Germany) and Hamburg (Germany) only. As regards the regional aid programme, the approved aid scheme was not affected by Decision 96/475. Consequently, the criterion to be used to check whether such guarantees were permissible continued to be the budgetary criterion mentioned above, which was not replaced by the signs set out in the 1999 Guidelines.

57 The Commission contends that the complaints should be rejected. The Commission disputes the applicability of appropriate measure E 16/94 and claims that, in the contested decision, it was fully entitled in law to apply the criteria set out in paragraphs 4 to 6 of the 1999 Guidelines.

Findings of the Court

58 The applicants do not contest the fact that firms in difficulty are excluded from the regional aid programme under the approved aid scheme. However, they submit that the Commission was not entitled, in respect of Measures 2 and 3, to base the contested decision on the definition of the concept of a firm in difficulty contained in paragraphs 4 to 6 of the 1999 Guidelines in order thus to exclude the undertakings at issue from the regional aid programme, but ought rather to have applied the definition in appropriate measure E 16/94, which is narrower. The Federal Republic of Germany did not accept that allegedly broader definition in the 1999 Guidelines for the regional aid programme under the approved aid scheme. Furthermore, they submit, the signs in paragraph 6 of the 1999 Guidelines are not precise enough to enable Member States to assess the compatibility of financial measures with an approved aid scheme.

59 As regards the Commission’s margin of discretion, it must be recalled that, when the Commission has before it a specific grant of aid alleged to have been made in pursuance of a previously authorised scheme, it cannot at the outset examine it directly in relation to the EC Treaty. Prior to the initiation of any procedure, it must first confine itself to examining whether the aid is covered by the general scheme and satisfies the conditions laid down in the decision approving that general scheme. If it did not do so, the Commission could, whenever it examined an individual aid measure, go back on its decision approving the aid scheme, which had already involved an examination in the light of Article 87 EC (see, to that effect, Italy v Commission, cited in paragraph 40 above, paragraph 24).

60 Aid which constitutes the strict and foreseeable application of the conditions laid down in the decision approving the general aid scheme is thus considered to be existing aid which does not need to be notified to the Commission or examined in the light of Article 87 EC (Case C‑321/99 P ARAP and Others v Commission [2002] ECR I‑4287, paragraph 83, and Case T‑176/01 Ferriere Nord v Commission [2004] ECR II‑3931, paragraph 51).

61 By contrast, measures that are not covered by the general aid schemes relied on constitute new aid the compatibility of which with the common market has to be examined by the Commission. Article 2 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88] EC (OJ 1999 L 83, p. 1) states that ‘any plans to grant new aid shall be notified to the Commission in sufficient time by the Member State concerned’.

62 In addition, a Commission decision ruling on whether an aid measure is consistent with the relevant scheme falls within the scope of the Commission’s obligation to ensure the application of Articles 87 EC and 88 EC. Consequently, the Commission’s examination of the conformity of an aid measure with that scheme does not constitute a step that exceeds its powers. Therefore, the Commission’s assessment cannot be limited by the assessment of the national authorities which granted the aid.

63 As regards the argument that the Federal Republic of Germany did not accept the definition of firms in difficulty emerging from paragraphs 4 to 6 of the 1999 Guidelines for the regional aid programme under the approved aid scheme, Article 17(1) of Regulation No 659/1999 states that the Commission is to obtain from the Member State concerned all necessary information for the review, in cooperation with the Member State, of existing aid schemes pursuant to Article 88(1) EC. Where the Commission, in the light of the information submitted by the Member State, concludes that an existing aid scheme is not, or is no longer, compatible with the common market, it is required to issue a recommendation proposing appropriate measures to the Member State concerned, in order to either amend or abolish the aid scheme in accordance with Article 18 of Regulation No 659/1999.

64 In that respect, Article 19 of Regulation No 659/1999 states that ‘[w]here the Member State concerned accepts the proposed measures and informs the Commission thereof, the Commission shall record that finding and inform the Member State thereof’. That article also states that ‘[t]he Member State shall be bound by its acceptance to implement the appropriate measures’.

65 In the present case, in accordance with the appropriate measures in the 1999 Guidelines (see paragraph 4 above), the Federal Republic of Germany sent to the Commission, by letter of 1 December 1999, a list of aid schemes that would remain in force after 30 June 2000 and which, according to that letter, had to be brought into line with the appropriate measures. The approved aid scheme appeared on that list. By letter of 20 January 2000, the Federal Republic of Germany accepted the appropriate measures proposed in point 6 of the 1999 Guidelines.

66 However, according to the applicants, the Federal Republic of Germany accepted the appropriate measures only in respect of aid schemes covering rescue and restructuring and, consequently, only in respect of the rescue and restructuring aid programme under the approved aid scheme. The applicants take this to mean that it was the definition of the concept of a firm in difficulty that appears in appropriate measure E 16/94 that continued to apply to the regional aid programme under the approved aid scheme.

67 That reasoning must be rejected.

68 The Commission rightly states that the letters from the Federal Republic of Germany in the file do not make a distinction between the different programmes under the approved aid scheme. Moreover, that aid scheme is mentioned in the letter of 1 December 1999 without further explanation. The letter of 20 January 2000 is also general in nature. Therefore, it has not been shown that application of the 1999 Guidelines to the regional aid programme under the approved aid scheme had in any way been expressly excluded.

69 Moreover, the checklist which, as per the letter of 30 June 2000, constitutes an integral part of the German guarantee schemes and transposes the appropriate measures with respect to those schemes, and in particular point 4.1 of that checklist, expressly refers to the obligation to notify in each individual case rescue and restructuring aid intended for large firms in difficulty within the meaning of the 1999 Guidelines. It thus follows from point 4.1 of the checklist that the Federal Republic of Germany accepted that any guarantee that may be classified as rescue and restructuring aid (with the exception of guarantees provided under an aid scheme for SMEs that satisfy at least one of the three criteria set out in paragraph 5 of the 1999 Guidelines; see paragraph 78 below) must be the subject of individual notification to the Commission, in accordance with the 1999 Guidelines.

70 It is true that, as Freistaat Sachsen submits, the correspondence at issue explicitly refers, in certain respects, to ‘rescue or restructuring aid schemes’. By way of example, the letter of 1 December 1999 mentions that all ‘existing rescue or restructuring aid schemes’ in force after 30 June 2000 had been brought into line with the 1999 Guidelines. The same is true for the checklist. That is entirely consistent with the wording of point 6.3 of the 1999 Guidelines, which requires adaptation of ‘existing rescue or restructuring aid schemes in the light of these Guidelines’.

71 Contrary to the submission of Freistaat Sachsen, however, it does not follow from those references to ‘rescue or restructuring aid schemes’ that the Federal Republic of Germany’s acceptance of the appropriate measures was limited to the rescue and restructuring aid programme under the approved aid scheme.

72 Even if it were to be assumed that acceptance of the appropriate measures in the 1999 Guidelines related only to existing rescue or restructuring aid schemes, that would none the less not have implied that Freistaat Sachsen could disregard the 1999 Guidelines – after they had entered into force on 9 October 1999 and after the Federal Republic of Germany had accepted the appropriate measures contained in them – when it granted financial benefits to undertakings that were potentially in difficulty. That is true even where those benefits appeared, at first sight, to fulfil the conditions of an existing regional aid scheme for a region that, as stated in recital 10 to the contested decision, lies in an assisted area for the purposes of Article 87(3)(a) EC.

73 In that respect, it must be recalled that the exception concerning regional aid provided for by Article 87(3)(a) and (c) EC requires, as far as rescue aid is concerned, the existence of a genuine restructuring plan, so that the positive effects of the aid on regional development can be of a lasting nature (see, to that effect, Case C‑305/89 Italy v Commission [1991] ECR I‑1603, paragraph 36) and offset any distortion of competition.

74 Similarly, according to paragraph 3 of the 1999 Guidelines, which the Commission was entitled to adopt in order to exercise the wide discretion that it enjoys for the purposes of the application of Article 87(3) EC and by which it is governed (see, to that effect, Case T‑171/02 Regione autonoma della Sardegna v Commission [2005] ECR II‑2123, paragraphs 94 and 95 and the case-law cited), ‘State aid for rescuing firms in difficulty from bankruptcy and helping them to restructure may only be regarded as legitimate subject to certain conditions’. That is the reason why the 1999 Guidelines provide, in particular in paragraph 17, that there is a duty to notify the Commission in advance of any funding provided or guaranteed by the State to an enterprise that is in financial difficulties, and also why, in the context of the examination of that notification, the Commission will take into account the regional considerations mentioned in Article 87(3)(a) and (c) EC, as stated in paragraphs 19 and 20 of the 1999 Guidelines.

75 It follows from the foregoing that, at the material time, prior to granting aid to a large firm which found itself in an economic situation that was – to say the least – problematic, which in the case of the Biria Group cannot be denied, the Federal Republic of Germany ought first to have determined whether it was dealing with a firm in difficulty according to the criteria set out in paragraphs 4 to 6 of the 1999 Guidelines. If that had been the case, individual notification of the aid would have been mandatory.

76 It also follows that the applicants’ argument that there was a specific definition of the concept of a firm in difficulty for the purposes of the regional aid programme under the approved aid scheme must be rejected. Accepting that different definitions of the concept of a firm in difficulty can exist alongside each other might, in fact, create a situation in which a firm that is in difficulty according to the 1999 Guidelines might nevertheless benefit from State aid without that aid having to be notified and without the 1999 Guidelines being complied with. Such a situation would, however, be contrary to the broad logic of Article 87(1) and (3) EC and Article 88(3) EC as clarified by the 1999 Guidelines (see paragraph 74 above).

77 Next, as regards the applicants’ argument that the signs listed in paragraph 6 of the 1999 Guidelines are too vague to be capable of use by a Member State for the purpose of assessing the compatibility of a planned aid measure with an existing aid scheme, it must be noted, as the Commission correctly points out, that, in the case of doubt as to the classification of the situation of a beneficiary undertaking, the Member State must notify the measure at issue.

78 Moreover, as regards the applicants’ arguments relating to a comparison between the criteria in appropriate measure E 16/94 and those in paragraph 5 of the 1999 Guidelines, as well as to the fact that certain correspondence between the Commission and the Federal Republic of Germany that was exchanged after the 1999 Guidelines had been adopted referred only to the criteria of that paragraph 5, it must be stated that it is clear from the wording of the 1999 Guidelines, and particularly from point 4 of those guidelines (see paragraph 3 above), that the only aid schemes for firms in difficulty that are still permitted are those which relate to SMEs. It also follows that, in order to determine whether those SMEs are in difficulty, a priori only the strict criteria of paragraph 5 of the 1999 Guidelines are relevant. Where those strict criteria do not apply, individual notification is mandatory. Even though the correspondence between the Commission and the Federal Republic of Germany exchanged after the 1999 Guidelines had been adopted may thus have contained a discussion as to the definition of the concept of a firm in difficulty as it appears in paragraph 5 of the 1999 Guidelines in order to define the context in which aid schemes that were still authorised were to be assessed, that provides no ground for inferring, as the applicants appear to claim, that the Federal Republic of Germany accepted that definition only, or that it refused the possibility of using the definition of a firm in difficulty that appears in paragraph 6 of the 1999 Guidelines outside the specific context of a rescue and restructuring aid scheme for SMEs.

79 Finally, it must also be stated that, as the Commission contends and as is clear from the letter of 23 January 2006, the Federal Republic of Germany agreed with the assessment of Measures 2 and 3 in accordance with paragraph 6 of the 1999 Guidelines. Furthermore, neither the contested decision nor the file indicates that the Federal Republic of Germany relied on appropriate measure E 16/94 during the administrative procedure, and the applicants, moreover, do not make any claim to the contrary.

80 It follows from the foregoing that all correspondence between the Commission and the Federal Republic of Germany prior to 1999 must be disregarded. Furthermore, the allegedly narrower definition of the concept of a firm in difficulty set out in appropriate measure E 16/94 must be disregarded on the ground that it is irrelevant to the outcome of the present case.

81 Consequently, the Commission infringed neither Community law nor the approved aid scheme when, in the contested decision, it assessed the situation of the undertakings at issue in the light of the criteria in the 1999 Guidelines, including paragraph 6 of those guidelines, and not in the light of the criteria in appropriate measure E 16/94.

82 The complaints submitted in the actions in Cases T‑102/07 and T‑120/07 alleging an infringement of the approved aid scheme in this respect must therefore be rejected.

2. Complaints concerning the classification of the beneficiary undertakings as firms in difficulty

83 First, MB Immobilien and MB System submit that the undertaking which benefited from Measure 1, Bike Systems, was not in difficulty in March 2001. Given that the approved aid scheme concerns State guarantees, and given also that Measure 1 is a silent participation granted outside that aid scheme, MB Immobilien and MB System do not dispute the applicability to that aid scheme of the definition of the concept of a firm in difficulty contained in the 1999 Guidelines.

84 Second, Freistaat Sachsen and MB Immobilien both submit that the two undertakings which benefited from Measures 2 and 3, namely Sachsen Zweirad and Biria GmbH respectively, were not in difficulty within the meaning of appropriate measure E 16/94 at the time when the guarantees were granted. In this respect, the above analysis shows that the Commission was right to base the contested decision on the definition of the concept of a firm in difficulty contained in the 1999 Guidelines. It follows that the complaints alleging that the beneficiary undertakings were not in difficulty according to the criteria of appropriate measure E 16/94 must be rejected as ineffective.

85 Third, Freistaat Sachsen submits that Sachsen Zweirad and Biria GmbH were also not firms in difficulty, within the meaning of the criteria set out in the 1999 Guidelines, in March 2003 and December 2003, respectively.

86 Furthermore, in their reply, MB Immobilien and MB System also submit, as a subsidiary plea, that, even if the 1999 Guidelines were applied, it would have to be found that Sachsen Zweirad and Biria GmbH were not in difficulty. That complaint must, however, be declared inadmissible because it infringes Article 21 of the Statute of the Court of Justice and Article 44(1)(c) of the Rules of Procedure of the General Court, according to which every application must state the subject-matter of the dispute and provide a brief statement of the pleas in law on which the application is based. That statement must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the application, if necessary, without any further information. In order to guarantee legal certainty and sound administration of justice, it is necessary that the basic legal and factual particulars relied on be indicated, at least in summary form, coherently and intelligibly in the application itself (order in Case T‑294/04 Internationaler Hilfsfonds v Commission [2005] ECR II‑2719, paragraph 23).

87 It follows that a review of possible errors of assessment committed by the Commission in the application of the criteria of the 1999 Guidelines to the situation of Sachsen Zweirad and Biria GmbH must be limited to a review of the arguments submitted in this respect by Freistaat Sachsen.

88 Below, the Court will therefore examine, on the basis of the 1999 Guidelines, whether or not the Commission committed a manifest error of assessment when it classified, first, Bike Systems as having been a firm in difficulty in March 2001 and, second, Sachsen Zweirad and Biria GmbH as having been firms in difficulty in March 2003 and December 2003, respectively.

The question whether Bike Systems was a firm in difficulty in March 2001

Arguments of the parties

89 First, MB Immobilien and MB System submit that the reasons given in recital 61 to the contested decision for taking the view that Bike Systems was a firm in difficulty do not correspond to relevant criteria or symptoms in the 1999 Guidelines and are incomplete. The Commission itself found that Bike Systems was not insolvent, but it did not make any findings in relation to the balance sheets of the beneficiary undertakings and, hence, in relation to the criteria of those guidelines. In addition, it cannot automatically be inferred from the fact that a limited restructuring took place that the future prospects of an undertaking are uncertain; for that purpose, wider-ranging findings would have been necessary. Furthermore, the Commission did not take sufficient account of the fact that Bike Systems was taken over by a healthy undertaking. Since the owner changed as part of the recovery plan, the Commission ought to have examined the economic weight of the buyer in order to be in a position to give a valid opinion on the future prospects of the undertaking. In addition, losses and negative own capital may, but do not necessarily have to, be a sign that an undertaking is in difficulty, as the criteria of the 1999 Guidelines show.

90 Second, MB Immobilien and MB System submit that the Commission did not analyse a binding comfort letter (harte Patronatserklärung) of 6 March 2001 from Biria GmbH (‘the comfort letter’), notwithstanding the fact that the Federal Republic of Germany had mentioned the existence of that document in the letter of 31 January 2005. The Commission ought to have taken into account the fact that Biria GmbH had given a guarantee to gbb in respect of the obligations arising under the silent participation contract, and that, consequently, gbb could, in case of default, turn to an undertaking that was not a firm in difficulty. The Commission, moreover, admits that it did not examine the comfort letter that Biria GmbH had drawn up for the benefit of Bike Systems, even though it knew of its existence. A distinction has to be made between binding comfort letters (harte Patronatserklärungen) and non-binding comfort letters (weiche Patronatserklärungen). In the case of a binding comfort letter, the guarantor does not become liable only after the primary debtor has defaulted; rather, both are jointly and severally liable.

91 That reasoning is not gainsaid by the fact that the German Government stated, in the letter of 23 January 2006, that it agreed with the Commission’s explanation that a silent participation is comparable to a subordinated loan for which the risk, in the absence of collateral, is higher than that associated with a traditional bank loan taken out for the purpose of financing an investment, with the result that remuneration for such a silent participation must be substantially higher than the reference rate of the European Union in force on the date on which it is granted. When the Commission mentions that it had no reason, taking into account that abstract statement, to examine the strength of the comfort letter in greater detail and to ask questions in that regard, it forgets that it knew about it and was therefore under an obligation to examine or at least to put questions to the Member State.

92 Third, MB Immobilien and MB System submit that the Commission did not take into account the audit report relating to the 2002 annual statement of accounts drawn up on 31 December 2002 and to the management report of Bike Systems for 2002 (‘the report on the 2002 accounts of Bike Systems’), of which it was aware and which stated that the presentation and valuation of the assets in the annual report of 31 December 2002 allowed the inference that the prognosis for the undertaking was positive. The Commission at no point mentions the financial strength of the buyer. MB Immobilien and MB System dispute the Commission’s claim that the report on the 2002 accounts of Bike Systems was of no value for the purpose of assessing decisions taken in 2001. Indeed, the Commission itself used that kind of a posteriori justification.

93 Fourth, MB Immobilien and MB System submit that the arguments submitted by the Commission that relate to periods after the contested decision had been adopted cannot be used to justify that decision.

94 The Commission disputes the arguments put forward by MB Immobilien and MB System.

Findings of the Court

95 By way of a preliminary point, it must be pointed out that the application in Case T‑120/07 shows that the complaints of MB Immobilien and MB System, submitted in the context of their second plea in law, concern, first, the classification of Bike Systems as a firm in difficulty and, second, the determination of the aid element, in particular the amount of the premium applied by the Commission.

96 With regard to determination of the aid element in Measure 1, it must be held that the second plea in law has not been developed in relation to the complaint made by MB Immobilien and MB System as part of that plea in the application in Case T‑120/07, according to which the Commission did not adequately take into consideration the fact that remuneration that is more than 600 basis points higher than the reference interest rate takes sufficient account of the higher risk of default of a firm in difficulty. It must for that reason be declared inadmissible, in accordance with the case-law cited in paragraph 86 above. The arguments against determining the aid element by reference to the market reference rate contained in the third plea in law in the application in Case T-120/07 regarding the failure to state reasons will be examined hereinafter as part of the examination of the complaints alleging a failure to provide reasons in the contested decision.

97 The second plea in the application in Case T‑120/07 and the examination of possible errors of assessment are thus limited to the question of whether the Commission committed an error of assessment when it took the view that Bike Systems was a firm in difficulty at the time when Measure 1 was granted, on the basis of the criteria in the 1999 Guidelines.

98 It should be borne in mind, first, that the assessment which the Commission must conduct involves the consideration and assessment of economically complex facts and circumstances. Since the Court may not substitute its assessment of economically complex facts and circumstances for that of the Commission, the Court’s review must be limited to verifying compliance with procedural rules and the obligation to state reasons, as well as the material accuracy of the facts, and ensuring that there has been no manifest error of assessment or misuse of powers (see Joined Cases T‑111/01 and T‑133/01 Saxonia Edelmetalle and ZEMAG v Commission [2005] ECR II‑1579, paragraph 91 and the case-law cited).

99 As regards the situation of Bike Systems in March 2001, it must be recalled that the Commission states the following in recital 61 to the contested decision:

‘… Bike Systems had just come out of insolvency through the adoption of an insolvency plan. Its future prospects were uncertain as only a limited operational restructuring had been carried out. According to the company’s annual report for 2001, the company still recorded losses that year. Its own capital was still negative although, thanks to hidden reserves, this did not trigger insolvency. Bike Systems must, therefore, be regarded as a company in difficulty at that time.’

100 The analysis of Bike Systems’ situation is thus based on the existence of an insolvency plan, the limited nature of its restructuring and the resulting uncertain future prospects of the firm, the losses recorded in the annual report for 2001 and the negative own capital.

101 First, MB Immobilien and MB System submit that those factors cannot be found in the 1999 Guidelines and do not substantiate to the requisite legal standard the Commission’s finding that Bike Systems was in difficulty.

102 That argument cannot be accepted.

103 As regards the framework of analysis provided by the 1999 Guidelines, it must be borne in mind that paragraph 4 of those guidelines merely states in general terms that a firm is regarded as being in difficulty where it is unable, whether through its own resources or with the funds it is able to obtain from its owner/shareholders or creditors, to stem losses which, without outside intervention by the public authorities, will almost certainly condemn it to go out of business in the short or medium term.

104 Furthermore, the wording of paragraphs 5 and 6 of the 1999 Guidelines shows that, although a firm is ‘in any event’ regarded as being in difficulty where a material part of its share capital has disappeared, other evidence, such as the factors set out in paragraph 6, may also be used to establish that it is in financial difficulty for the purposes of the 1999 Guidelines, even if it has not lost a significant part of its share capital (see, to that effect and by analogy, Case T‑349/03 Corsica Ferries France v Commission [2005] ECR II‑2197, paragraph 185).

105 It can be inferred from that case-law, on the one hand, that a material reduction in the share capital is a very serious factor signalling that an undertaking is in difficulty and, on the other hand, that there are a certain number of economic factors, of which paragraph 6 of the 1999 Guidelines contains a non-exhaustive list (see use of the words ‘such as’ in Corsica Ferries France v Commission, cited in paragraph 104 above, paragraph 185), which may also indicate that an undertaking is in difficulty, even if the undertaking has not lost a significant part of its share capital or is not insolvent within the terms of paragraph 5 of the 1999 Guidelines.

106 In the present case, the contested decision refers to the existence of negative own capital which, contrary to what MB Immobilien and MB System claim, may be considered to be an important indicator that an undertaking is in a difficult financial situation, even if it is not one of the specific circumstances set out in paragraph 5 of the 1999 Guidelines.

107 The contested decision also mentions other signs, in particular continued losses in the year in which Measure 1 was provided. Even though this latter factor is not mentioned in the non-exhaustive list of signs in paragraph 6, which refers to increasing losses, its relevance in the context of an analysis of the financial situation of an undertaking cannot be denied, in so far as it concerns the situation before or at the moment the aid is granted, a fact which MB Immobilien and MB System do not dispute.

108 As regards the existence of an insolvency plan, the explanations provided by MB System and the Commission in response to the Court’s written questions in Case T‑120/07 reveal that, under German law, insolvency proceedings are designed to turn around an insolvent undertaking at a moment when compulsory liquidation can still be avoided and require submission of an insolvency plan.

109 In this respect, it must be recalled that paragraph 5(c) of the 1999 Guidelines refers to the situation of an undertaking fulfilling ‘criteria under its domestic law for being the subject of collective insolvency proceedings’ as a factor signalling that it is in any event to be regarded as being in difficulty. It is true that the situation of Bike Systems in March 2001 did not correspond to the situation described in paragraph 5(c), since the undertaking had come out of insolvency proceedings. However, as the Commission confirmed in response to the Court’s written questions and at the hearing, it took the view, in the contested decision, that the insolvency plan had allowed Bike Systems to emerge from insolvency, but that its situation remained delicate, in particular because the restructuring which it had undergone was limited, a factor which was taken into account as a sign of difficulty under paragraph 6 of the 1999 Guidelines.

110 Concerning, next, the extent of that restructuring, while conceding that the initial restructuring of Bike Systems was limited in the sense that the company had to be brought out of insolvency proceedings as quickly as possible in order to allow it to continue its activities and that what took place was therefore essentially a debt write-off, MB System submits that the Commission should have taken into account the fact that the situation of an undertaking which has emerged from insolvency proceedings is similar to that of a new company, since it no longer carries debts. Furthermore, according to MB System, the creditors believed in the possibility of turning Bike Systems around, since they accepted the insolvency plan. According to MB System, given that the Biria Group was number two on the relevant market, Bike Systems had, after its acquisition by the Biria Group, very different economic prospects.

111 In spite of the factors mentioned by MB Immobilien and MB System, it must be held that the insolvency proceedings in respect of Bike Systems were not brought to an end until December 2000, in other words, only three months before Measure 1 was granted. In those circumstances, and taking into account the fact that what was at issue was essentially a debt restructuring that did not involve major operational changes, the Court finds that the Commission was entitled to conclude, without committing a manifest error of assessment, that the situation of Bike Systems in March 2001 remained delicate and that its future prospects were uncertain, notwithstanding the confidence that the banks might have shown with regard to those future prospects.

112 So far as concerns the alleged failure to take into account the situation of the healthy buyer of Bike Systems, a complaint which, as a response to the Court’s written questions demonstrates, refers to the integration of Bike Systems into the Biria Group during the restructuring period, it must be held that MB Immobilien and MB System do very little to substantiate that argument and that they fail to explain, in particular, which of the specific arguments submitted during the administrative procedure were not taken into account by the Commission. The reference made at the hearing, in response to a question from the Court, to the market position of the Biria Group cannot be sufficient in this respect, with the result that this plea must be declared inadmissible, in accordance with the case-law cited in paragraph 86 above. In any event, as the Commission has stated, Bike Systems, and not the buyer, was the company responsible for payment of the remuneration for Measure 1 and it cannot be considered to have been established that a buyer would support its subsidiary for the purposes of settling such a debt.

113 Second, MB Immobilien and MB System claim that the Commission ought to have analysed the comfort letter.

114 In this respect, it must be borne in mind that, in order to fulfil its duty to cooperate with the Commission, the Member State concerned must provide all the information necessary to enable the Commission to verify that the conditions for the derogation from which it seeks to benefit are satisfied (see Case T‑17/03 Schmitz-Gotha Fahrzeugwerke v Commission [2006] ECR II‑1139, paragraph 48 and the case-law cited).

115 It is also settled case-law that the legality of a Community measure must be assessed on the basis of the elements of fact and of law existing at the time when the measure was adopted and that the assessments made by the Commission must be examined solely on the basis of the information available to it at the time when those assessments were made (see Schmitz-Gotha Fahrzeugwerke v Commission, cited in paragraph 114 above, paragraph 54 and the case-law cited).

116 Where the Commission has given the interested parties the opportunity to submit their comments, it cannot be criticised for having failed to take account of any elements of fact which could have been submitted to it during the administrative procedure but which were not, as the Commission is under no obligation to consider, of its own motion and on the basis of prediction, what elements might have been submitted to it (see Schmitz-Gotha Fahrzeugwerke v Commission, cited in paragraph 114 above, paragraph 54 and the case-law cited).

117 In the present case, it must be held that the comfort letter was not communicated to the Commission during the administrative procedure. However, it is true that the Federal Republic of Germany referred to its existence in the letter of 31 January 2005 in the following terms:

‘Given the strategic alliance created by the Biria Group (inter alia, joint purchasing and delivery of materials), it was possible to take the view that the future prospects of Bike Systems were positive and that its restructuring had been a success. A comfort letter which [Sachsen Zweirad] and Biria GmbH had to issue for the purposes of the payment [of the silent participation] was intended to ensure that those undertakings would actively support the future of Bike Systems.’

118 In this respect, it must be observed that, as the Commission submits, the fact that the Federal Republic of Germany mentioned in a single sentence that, in the context of the refinancing of the company at issue, that company received a guarantee of continued assistance from the parent company could not necessarily mean, without other supporting evidence, for example relating to the financial situation of the author of the comfort letter on the date on which Measure 1 was provided, that Bike Systems had to be assessed differently in future or that its future prospects had been altered by that guarantee. In any event, in order to be in a position to evaluate the binding nature of the comfort letter, the Commission would have needed access to the original document.

119 To summarise, in the circumstances of the present cases as described and in accordance with the case-law cited in paragraphs 114 to 116 above, it was not the Commission’s duty to ask the Federal Republic of Germany for explanations regarding the impact of the comfort letter on the financial situation of Bike Systems. It must therefore be held that the Commission did not act unlawfully in not following up the reference to the comfort letter in the letter of 31 January 2005 with an examination of that letter.

120 Third, as regards the failure to take into account the report on the 2002 accounts of Bike Systems in the contested decision, it is clear that the financial situation of Bike Systems in 2002 is not relevant when it comes to assessing the legality of Measure 1 implemented in March 2001. In this regard, the case-law states clearly that the question whether a measure constitutes aid within the meaning of Article 87(1) EC must be resolved having regard to the situation existing at the time when the measure was implemented. If the Commission took subsequent factors into account, it would be conferring an advantage on Member States which fail in their obligation to give notice at the planning stage of aid which they intend to grant (see, to that effect, Case T‑152/99 HAMSA v Commission [2002] ECR II‑3049, paragraph 53).

121 Fourth, for the same reasons as those set out in paragraph 120 above, the Commission’s references to the situation of Bike Systems in 2002 and in 2003 and the circumstances in which Measure 1 was terminated in 2005 are not relevant for the purpose of assessing the legality of the contested decision.

122 It follows from the foregoing that the factors set out in recital 61 to the contested decision are consistent with the 1999 Guidelines and that the Commission did not commit any manifest errors of assessment when it concluded that Bike Systems was in difficulty in March 2001.

The question whether Sachsen Zweirad and Biria GmbH were firms in difficulty in March 2003 and December 2003, respectively

123 Freistaat Sachsen submits, first, arguments of a general nature concerning the framework for the assessment of the situation of the undertakings that benefited from Measures 2 and 3 and, second, that manifest errors were made in the application of that framework to those undertakings.

Framework for the assessment of the situation of the undertakings that benefited from Measures 2 and 3

– Arguments of the parties

124 Freistaat Sachsen submits that, in recitals 66 to 78 to the contested decision, the Commission merely listed a number of ‘symptoms’ typically shown by firms in difficulty by referring to paragraph 6 of the 1999 Guidelines, in which the category of firms that may be supported with rescue and restructuring aid was expanded to include firms that do not fulfil the criteria set out in paragraph 5. According to Freistaat Sachsen, firms in difficulty which, without State intervention, would become insolvent generally demonstrate the ‘symptoms’ listed in paragraph 6 of the Guidelines, or at least some of them. However, the fact that some of those ‘symptoms’ are present does not suffice for a finding that an undertaking is in such difficulties that, were it not for State aid, it would disappear from the market.

125 Furthermore, according to Freistaat Sachsen, the Commission’s actual practice has been the opposite. In its most recent decisions, in respect of undertakings that did not fulfil the criteria set out in paragraph 5 of the 1999 Guidelines, the Commission did not consider it to be sufficient that they showed some ‘symptoms’.

126 In addition, the Commission overestimated the extent of its discretion. The Commission, it is argued, cannot substitute its assessment for that of the authority that granted the aid, since, in approving the aid scheme, the Commission conferred on the Member State a certain margin of discretion. Therefore, the only task that the Commission still has to accomplish under Article 88(1) EC is the constant monitoring of the application of the approved aid scheme. Consequently, Freistaat Sachsen submits that the assessment by a Member State authority or body for the purposes of granting aid would have to be manifestly wrong at the time when the decision is taken (and not in the light of information that the Commission obtains subsequently when that monitoring is being carried out) for the approved aid scheme not to produce its effects.

127 Freistaat Sachsen submits further that, for the purposes of determining whether an undertaking may be considered to be a firm in difficulty, the margin of discretion is narrower in the context of regional aid schemes than in the context of rescue and restructuring aid. In the case of rescue and restructuring aid, the anti-competitive effect results from the fact that the firm in difficulty receives more favourable treatment in comparison with other undertakings. By contrast, in the case of regional aid, a firm in difficulty is treated less favourably than other undertakings which, for the same project, do receive regional aid.

128 In that context, Freistaat Sachsen submits that it is also necessary to differentiate between the criteria in paragraph 5 and those in paragraph 6 of the 1999 Guidelines. Whereas the criteria in paragraph 5 of the 1999 Guidelines can be checked, the ‘symptoms’ listed in paragraph 6 can be found both in a firm that is in difficulty and in a firm that is not. Therefore, if a firm shows only some of those ‘symptoms’, it cannot be taken as established that the assessment by the authority that granted the aid, according to which the undertaking is not a firm in difficulty, was manifestly wrong. However, given that, at the relevant time, the two undertakings did not fulfil the criteria of paragraph 5 and did not show most of the ‘symptoms’ in paragraph 6, the finding in the contested decision that certain ‘symptoms’ were present is not sufficient to provide a justification, a posteriori, for not applying an approved aid scheme.

129 According to Freistaat Sachsen, the Commission’s claim that the Court found in Corsica Ferries France v Commission, cited in paragraph 104 above, that the presence of two signs, namely increasing losses and mounting debt, sufficed for the assumption that the firm was in difficulty was wrong, because that case concerned a decision in which the Commission had also found that one of the criteria set out in paragraph 5 of the 1999 Guidelines was fulfilled. Furthermore, the two indicia mentioned above were specifically not present in the case of Sachsen Zweirad and Biria GmbH in March 2003 and December 2003, respectively.

130 In addition, it is argued, the Commission did not correctly assess the criteria set out in paragraph 6 of the 1999 Guidelines. In its comments on the opening of the formal investigation procedure, the Federal Republic of Germany submitted a table to the Commission which suggested that those criteria had not been fulfilled. That table concerned, first of all, the situation of Sachsen Zweirad, given that, in 2001 and 2002, that undertaking suffered losses whereas, following the takeover of Biria AG (former name), it once again made a profit in 2003 (as Biria GmbH). The criteria in paragraph 6 of the guidelines are based on a negative trend (increasing losses, growing stock inventories, declining cash flow, mounting debt and rising interest charges, reduction in or loss of capital). However, the table submitted by the Federal Republic of Germany showed that, in 2003, the situation improved and that none of the signs continued to be present. The question of the trend in economic development is crucial to the examination of the undertaking in the light of the criteria in paragraph 6 of the 1999 Guidelines. A solvent undertaking which still has more than half of its capital or which has lost less than a quarter of that capital during the preceding 12 months does not fulfil the criteria of a firm in difficulty within the meaning of paragraph 5 of the 1999 Guidelines. Consequently, as long as the thresholds laid down in paragraph 5 have not been reached, loss of capital cannot suffice to fulfil the loss criterion in paragraph 6 of the 1999 Guidelines and to place the undertaking in the category of a firm in difficulty. On the contrary, there must also be an obvious deterioration in the economic situation. In the contested decision, the Commission failed to recognise that the economic situation of the undertakings at issue had in fact improved since 2001.

131 As regards the Commission’s claim that the proper definition of a firm in difficulty within the meaning of the 1999 Guidelines is set out in paragraph 4 of those guidelines, it suffices to state that it did not apply that definition in the contested decision. In addition, it must be noted that that criterion does not imply that a firm must be considered to be in difficulty as soon as it is incapable of either generating sufficient own capital or borrowing enough funds to finance projects that are necessary to improve its economic situation. That is apparent in particular from Commission document SEC(2005) 795 entitled ‘State aid action plan – Less and better targeted State aid: a roadmap for State aid reform 2005-2009’ (‘the action plan’), according to which such a situation may also be explained by market failures. The regional aid programme under the approved aid scheme may be applied only when no alternative financing for the project can be found, and that applies equally to firms that are not in difficulty. Experience gained as part of the application of that regional support mechanism since 1993 has shown that undertakings that do not experience economic difficulties nevertheless need a guarantee from the Land to implement their projects. That is, for example, the case where the bank which they normally use restructures its portfolio and withdraws financing.

132 The Commission challenges the arguments submitted by Freistaat Sachsen.

– Findings of the Court

133 The analysis in paragraphs 103 to 105 above shows that paragraph 6 of the 1999 Guidelines contains a non-exhaustive list of factors that may help to show that a firm is in difficulty even where its authorised capital has not been drastically reduced or it is not in insolvency proceedings as provided for in paragraph 5 of the 1999 Guidelines, two situations which, according to that paragraph 5, lead in any event to the firm being regarded as being in difficulty. Contrary to what Freistaat Sachsen claims, it is thus possible, within the framework of the 1999 Guidelines, to find on the basis of some of the signs listed in paragraph 6, or even on the basis of other signs, that a firm is in such difficulty that it would not survive the situation without public intervention.

134 Furthermore, as for parallels with other State-aid proceedings that Freistaat Sachsen seeks to draw, it must be borne in mind that the legality of a Commission decision declaring that new aid does not fulfil the conditions under which the exemption in Article 87(3)(c) EC applies must be assessed solely in the context of that article, and not in the light of the Commission’s earlier decision-making practice, assuming that this is established (Regione autonoma della Sardegna v Commission, cited in paragraph 74 above, paragraph 177). Therefore, comparisons with other State-aid proceedings are irrelevant for the purpose of establishing whether there is a minimum number of the criteria in paragraph 6 of the 1999 Guidelines that must be fulfilled, irrespective of whether or not, for the purposes of paragraph 5 of the 1999 Guidelines, the company’s capital is affected.

135 As regards Freistaat Sachsen’s reference to the judgment in Corsica Ferries France v Commission, cited in paragraph 104 above, it must be pointed out that the Court held, in paragraph 191 of that judgment, that the level of losses and of financial indebtedness of the undertaking at issue were criteria that were capable by themselves of establishing that it was a firm in difficulty. However, that cannot be taken to mean that there is a minimum number of criteria that must be fulfilled in order that a firm can be classified as being in difficulty, because the Court’s assessment in that respect related to the specific facts and aspects of that case. However, that case does show that not all the criteria listed in paragraph 6 of the 1999 Guidelines have to be fulfilled before an undertaking may be considered to be in difficulty within the meaning of the 1999 Guidelines.

136 Furthermore, as regards Freistaat Sachsen’s argument that the Commission’s margin of discretion is different in the context of an approved aid scheme, it was pointed out in paragraph 62 above that the Commission’s examination of the conformity of an aid measure with an aid scheme does not constitute a step that exceeds its powers. Given that firms in difficulty are excluded from the regional aid programme under the approved aid scheme, and given that the definition of a firm in difficulty is laid down in the 1999 Guidelines, as is clear from the analysis in paragraphs 58 to 81 above of the legal framework applicable in the present case, the Commission had every right to check whether the 1999 Guidelines had been correctly applied in the present case. The arguments alleging that the Commission’s margin of discretion is narrower in the context of regional aid than in the context of restructuring aid must be rejected for the same reasons.

137 Moreover, as regards Freistaat Sachsen’s argument that, if there is no loss of own capital as described in paragraph 5 of the 1999 Guidelines, it is necessary to show, by means of the criteria in paragraph 6, that there is a negative trend, the case-law demonstrates that the importance which the guidelines attach to trend indicators does not necessarily render other kinds of indicators unsuitable. However, such indicators could appear to be suitable only if it is thereby possible to identify genuine and demonstrable difficulties (see, to that effect and by analogy, Regione autonoma della Sardegna v Commission, cited in paragraph 74 above, paragraph 111). It follows that, even though indicators of a negative trend are, indeed, particularly relevant for the purposes of establishing that a firm is in difficulty, it is not possible to interpret the wording of the criteria in paragraph 6 of the 1999 Guidelines as imposing any obligation on the Commission to prove the existence of a negative trend, on condition that it can demonstrate, to the requisite legal standard, that, without public intervention, the undertaking’s survival would be at risk.

138 Finally, as regards Freistaat Sachsen’s reference to the action plan, that document recommends more frequent use of an economic approach in State aid and indicates that one key element in that respect is the analysis of market failures which may constitute reasons why the markets do not achieve the desired objectives of common interest (paragraphs 22 and 23 of the action plan). It must, however, be held that those statements are very general in nature and bear no relation to the definition of the concept of a firm in difficulty. They do not in any way support Freistaat Sachsen’s contention that the Commission ought to have taken into account the fact that an undertaking’s funding problems may be attributable to periodic economic factors, such as a growth phase. Therefore, that argument must be rejected.

139 It follows that all the arguments raised by Freistaat Sachsen regarding the general analysis framework applied by the Commission to determine whether the beneficiary undertakings at issue were in difficulty must be rejected.

Assessment of the situation of Sachsen Zweirad

– Arguments of the parties

140 Freistaat Sachsen submits that Sachsen Zweirad did not show increasing losses in March 2003. It admits that the company had suffered losses in 2001 and 2002, but that losses in 2002 were lower than in 2001, falling from EUR 1.274 million to EUR 733 000. At the time when Measure 2 was granted, a positive annual result was expected for 2003. Furthermore, the profits of the previous years had not been used up by losses. The own capital of Sachsen Zweirad continued to be positive. In addition, from 2001 to 2002, the undertaking’s turnover decreased by 13.8% to EUR 51 million since, due to an economic situation that continued to be depressed, potential buyers in Germany were extremely cautious. The undertaking expected turnover to improve once again in 2003 and that plan had been judged realistic because, first, buyers’ earlier caution meant that there was a need to catch up and, second, the 10 largest customers of Sachsen Zweirad had already placed firm orders before the beginning of the year for a volume of sales exceeding EUR 30 million. Therefore, the decline in sales did not last long. Freistaat Sachsen submits that, even though the Commission took note of the two signs mentioned above, it did not address their causes or examine their effects on the development of the undertaking. Unless such an examination is carried out, those signs do not allow conclusions to be drawn for the purposes of answering the question of whether or not an undertaking is in difficulty.

141 The Commission also refers to liquidity problems, but those cannot be treated in the same way as payment difficulties. The Commission itself explains that it is necessary to resort to external financing in order to ensure the undertaking’s growth and the related build-up of working capital. However, difficulties in obtaining growth financing on the financial market do not allow classification of an undertaking as a firm in difficulty. That is equally true of the need referred to in the audit report relating to the annual accounts drawn up on 31 December 2002 and the management report of Sachsen Zweirad for 2002 (‘the report on the 2002 accounts of Sachsen Zweirad’) to comprehensively restructure the financing of the company in order to reduce its costs and to allow for secure planning over longer periods of time. A short remaining life of a loan poses above all a risk in terms of costs and is not direct proof of existential difficulties. Moreover, the interest charges borne by Sachsen Zweirad went down (from EUR 2 million in 2001 to EUR 1.8 million in 2002), with the result that there was no reason to expect at the time when the guarantee was granted that those interest charges would lead to payment difficulties.

142 The Commission contests Freistaat Sachsen’s arguments.

– Findings of the Court

143 First of all, it should be noted that, according to settled case-law, the Commission enjoys a wide discretion in the application of Article 87(3) EC. Since the Court may not substitute its assessment of economically complex facts and circumstances for that of the Commission, the Court’s review must consequently be limited to verifying compliance with procedural rules and the obligation to state reasons, as well as the material accuracy of the facts, and ensuring that there has been no manifest error of assessment or misuse of powers (see Case T‑68/03 Olympiaki Aeroporia Ypiresies v Commission [2007] ECR II‑2911, paragraph 150 and the case-law cited).

144 In the present case, as regards Measure 2 and the situation of Sachsen Zweirad in March 2003, the contested decision states the following:

‘(66) [The Federal Republic of] Germany argues that [Sachsen Zweirad] did not show any of the typical signs of a company in difficulty within the meaning of the [1999] Guidelines. The Commission points out that the typical signs of a firm being in difficulty, which are mentioned in [paragraph] 6 of the [1999] Guidelines, give merely an indication of when a company can be considered to be in difficulty and do not have to be met cumulatively. [Sachsen Zweirad] recorded operating losses of EUR 1.274m in 2001 and EUR 0.733m in 2002. The losses were taken over by the parent company Biria under the profits and loss transfer agreement. Turnover decreased in 2002 compared with 2001.

(67) A