OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 1 February 2007 1( )

Case C‑260/05 P

Sniace SA

v

Commission

Intervening parties:

Republic of Austria

and

Lenzing Fibers GmbH

(Appeal – Article 87(1) EC – Admissibility – Individual concern – Substantial effect on market position – Aid granted to Lenzing Lyocell GmbH & Co KG by Austria for the construction of a new factory – Market for cellulose fibres)

I – Introduction

1. If the Commission approves aid or does not object to it, the question arises as to the conditions under which potential competitors of the beneficiary may be able to bring an action against that decision. Here the issue of whether the approval of aid is of individual concern to the competitor is often problematic.

2. Accordingly, in the appeal under consideration, the parties dispute whether Commission Decision 2001/102/EC of 19 July 2000 on State aid granted to Lenzing Lyocell GmbH & Co KG (‘Lenzing Lyocell’) by Austria (‘the contested decision’) ( ) is of individual concern to the Sociedad nacional de Industrias y Aplicaciones de Celulosa Española SA (‘Sniace’). In the judgment under appeal ( ) the Court of First Instance did not accept that Sniace was individually concerned.

II – Facts of the case and proceedings

3. In paragraphs 1 and 2 of the judgment under appeal the Court of First Instance describes the undertakings concerned as follows:

‘1 Sniace SA (...) is a Spanish company whose principal activities are the production and sale of artificial and synthetic fibres, cellulose, cellulose fibres (viscose staple fibres), continuous polyamide thread, unwoven felt and sodium sulphate, forestry and the coproduction of electricity.

2 Lenzing Lyocell GmbH & Co KG (...) is an Austrian company, a subsidiary of the Austrian company Lenzing AG, which produces, among other things, viscose fibres and modal. LLG’s business is the production and sale of lyocell, a new type of fibre made from pure natural cellulose. It is also produced by the British company Courtaulds plc, which markets it under the name “Tencel”.’

4. The Austrian authorities granted Lenzing Lyocell aid from 1995 for the construction of a factory for the production of lyocell in Burgenland. Having made no objections initially, in 1998 the Commission initiated proceedings under Article 88(2) EC in order to investigate the aid’s compatibility with Community law. Sniace submitted observations twice in these proceedings.

5. The Commission adopted the contested decision on 19 July 2000. ( ) According to that decision the various advantages remain with LGG. The operative part of the decision reads:

‘Article 1

The aid which Austria has granted to Lenzing Lyocell GmbH & Co KG (‘LLG’), Heiligenkreuz, through the provision of guarantees amounting to EUR 35.80 million (a guarantee by a consortium of commercial and public‑sector banks amounting to EUR 21.8 million and three guarantees by the Wirtschaftspark Heiligenkreuz Service Gesellschaft mbH (‘WHS’) amounting to EUR 1.4 million, EUR 10.35 million and EUR 2.25 million) and through a land price of EUR 4.4 per m² for the acquisition of 120 hectares of industrial land, through fixed price guarantees by the Province of Burgenland for the provision of process utilities and through the provision of aid of an unknown amount in the form of the creation of company specific infrastructure does not constitute aid within the meaning of Article 87(1) of the EC Treaty.

Article 2

The aid which Austria has granted to LLG through the provision of a guarantee amounting to EUR 14.5 million by [the] WiBAG complies with the guarantee guidelines approved by the Commission under [reference] number 542/95.

The environmental aid amounting to EUR 5.37 million complies with the environmental aid guidelines approved by the Commission under [reference] number N 93/148.

Article 3

The individual aid which Austria has granted in the form of aid amounting to EUR 0.4 million for land acquisition and in the form of equity capital amounting to EUR 21.8 million is compatible with the common market.’

6. Sniace brought an action at the Court of First Instance against that decision. The defendant Commission was supported by Lenzing Lyocell, the Austrian Province of Burgenland and by Austria.

7. The Court of First Instance dismissed the action as inadmissible on the basis that the approval of the aid was not of individual concern to Sniace. It had only played a minor role in the pre-litigation procedure and its market position was not substantially affected either, since the lyocell exclusively manufactured by Lenzing Lyocell did not compete with the viscose manufactured by Sniace.

III – Form of order sought

8. By its appeal Sniace claims that the Court should:

– annul the judgment of 14 April 2005 of the Court of First Instance in Case T‑88/01;

– allow the form of order sought at first instance or, in the alternative, refer the case back to the Court of First Instance for the latter to give a decision on the merits of the case;

– allow the appellant’s request for measures of organisation of procedure made on 16 October 2001, and the request for the parties to appear in person, for witnesses to give evidence and for an expert’s report, made by the appellant on 20 April 2001;

– order the respondent (the defendant at first instance) to pay the costs.

9. The Commission claims, in contrast, that the Court should:

– dismiss the first three grounds of appeal as inadmissible or, in the alternative, as unfounded;

– dismiss the fourth ground of appeal as unfounded;

– order the appellant to pay the costs;

– or, in the alternative, in the event that the appeal is allowed, refer the case back to the Court of First Instance for the latter to give a decision on the substance of the case.

10. Lenzing Fibers GmbH (‘Lenzing Fibers’), the legal successor of Lenzing Lyocell, and the Republic of Austria claim that the Court should dismiss the appeal in full.

IV – Legal assessment

11. Sniace submits four grounds of appeal. The Court erred firstly when it declined to find a substantial effect on Sniace’s market position and secondly when it regarded Sniace’s participation in the review procedure as minor. Thirdly the judgment under appeal infringes the right to effective legal protection. By its fourth ground of appeal Sniace objects to the alleged unequal treatment of Lenzing Lyocell, since the Court allowed an action by its parent company Lenzing AG (‘the Lenzing group’) relating to the approval of aid granted to Sniace. ( )

A – Individual concern

12. Before considering this ground of appeal in detail, it is necessary to make some preliminary observations on individual concern.

13. It is settled case-law that persons other than those to whom a decision is addressed may (successfully) claim to be individually concerned within the meaning of the fourth paragraph of Article 230 EC only if the decision affects them by reason of certain attributes peculiar to them or by reason of factual circumstances in which they are distinguished from all other persons and, by virtue of those factors, distinguishes them individually in the same way as the person addressed. ( )

14. The requirements for competitors to be individually concerned for the purposes of the law on State aid vary considerably depending on the stage of proceedings at which an action is brought and the objective of that action.

15. Recently in the ARE judgment, the Court summarised the conditions under which (potential) competitors of the beneficiary may be able to bring an action against Commission decisions, where there has been no formal review procedure under Article 88(2) EC and the Commission does not object to the measures of the Member State. ( ) In this regard there are two possible types of action: on the one hand, the action may be aimed at compelling a formal review procedure; on the other hand, it may challenge the Commission’s substantive decision.

16. If the action is aimed at compelling a formal review procedure, it is sufficient if the applicants are persons, undertakings or associations whose interests might be affected, in particular competing undertakings and trade associations. ( ) The standing to bring an action in this respect is made relatively extensive in order to safeguard the procedural rights of potential competitors in the formal procedure which are guaranteed under Article 88(2) EC. ( )

17. By contrast, the situation is different where the action seeks to have a contested decision, which was adopted without a formal review procedure, annulled on substantive grounds. In that case it is not sufficient that the applicant may be regarded as being potentially concerned within the meaning of Article 88(2) EC. It must, rather, demonstrate that it is individually concerned. This requires that its market position is substantially affected by the aid scheme to which the decision at issue relates. ( )

18. This stricter criterion also applies after the formal review procedure has been conducted pursuant to Article 88(2) EC. According to the Cofaz judgment, in these circumstances the approval of aid on the basis of a formal review procedure pursuant to Article 88(2) EC will be of individual concern to a competitor applicant if it played an active role in that procedure, provided that its market position is substantially affected by the aid which is the subject of the contested decision. ( ) This is the measure against which Lenzing’s individual concern must be assessed.

B – First ground of appeal: substantial effect on market position

19. The first ground of appeal is directed against the Court of First Instance’s finding that Sniace did not demonstrate a substantial effect as a result of the aid. The criterion of substantial effect serves to identify competitors who, as a result of aid which is approved, are distinguished individually in such a manner that they fulfil the requirements for admissibility listed in the Plaumann case. ( ) Accordingly, competitors who have standing to bring an action are affected by that aid by being differentiated from all other persons and distinguished individually just as in the case of the person to whom the decision under challenge is addressed. This individually identifying effect distinguishes a substantial effect on a market position, which, according to the Cofaz case, gives rise to an entitlement to bring an action, from an effect which is not substantial in this sense.

20. In basic terms, every advantage which is conferred on selectively determined market operators affects the market position of all competitors who do not enjoy this advantage. However, its market position is also positively or negatively influenced by many other factors. Thus, the mere fact that a measure may exercise an influence on the competitive relationships existing on a particular market cannot in itself suffice to allow every trader in any competitive relationship whatever with the addressee of the measure to be regarded as being directly and individually concerned by that measure. ( )

21. Rather, an effect of the aid which distinguishes one of the competitors individually can be assumed only if the aid favours the recipient over the competitor in such a way that this factor occupies a special position. This special position must allow the Community judicature to separate the effects of the advantage for the recipient from the other circumstances influencing the market position of the competitor bringing the action and to attribute a separate weight to them for the competitor. Accordingly, it may be inferred from the Court’s wording in the order in Deutsche Post and DHL that the applicant must show the magnitude of the prejudice to its market position. ( )

22. Consequently, the Commission is correct to stress that the substantial effect on the market position of a competitor who is bringing an action may not be confused with the – possibly only threatened – distortion of competition under Article 87 EC, which is a feature of prohibited aid. Of course, the prohibition of aid is not merely limited to aid whose competition-distorting effect distinguishes particular competitors individually. ( )

23. Consequently it is necessary to consider the structure of the relevant market and the effect of the alleged aid. ( ) In paragraph 61 of the judgment under appeal the Court of First Instance assumes that the aid exclusively benefited a factory manufacturing lyocell and that Sniace neither manufactures that material nor intends doing so in the future. It is further stated in paragraphs 62 to 78 that lyocell and the viscose produced by Sniace were not in competition with each other. Consequently it held that the aid granted to Lenzing Lyocell for the manufacture of lyocell could not have a substantial effect on Sniace’s market position. ( ) The Court relies, in essence, on the different characteristics of the two fibres, which are no longer disputed by Sniace, and in particular on the higher price of lyocell.

1. Evaluation of evidence by the Court of First Instance

24. Nevertheless Sniace pleads – like it did at first instance – that Lenzing Lyocell sold sub-standard lyocell, namely products of lower quality, and ‘proviscose’, a mixed fibre made from lyocell and viscose. It argues that both products compete with the viscose produced by Sniace.

25. However, as Sniace expressly acknowledges, an appeal pursuant to Article 25 EC and the first paragraph of Article 58 of the Statute of the Court of Justice is restricted to points of law. The Court of First Instance alone is competent to establish and appraise the relevant facts and to assess the evidence. Accordingly, unless the facts and the evidence have been distorted, their appraisal does not constitute a question of law which would as such be subject to review by the Court of Justice in the context of an appeal. ( )

26. Sniace’s objections with regard to the competition between lyocell and viscose relate, as the Commission and Austria also stress, exclusively to the findings of fact made by the Court of First Instance. Accordingly they are only admissible to the extent that Sniace alleges that the facts and the evidence have been distorted by the Court.

27. The Court of Justice has recently stated that there is a distortion if it is obvious, without taking further evidence, that the appraisal of the available evidence is incorrect. ( )

28. Measured against that test, Sniace’s allegation, that in paragraph 72 the Court of First Instance wrongly found that the evidence in the file did not establish the existence of different qualities of lyocell, is correct. It is in fact apparent from an article about the Lenzing Lyocell conference, lodged by Sniace as Annex 17 to the application, that Lenzing Lyocell has developed different types of lyocell fibres which have different characteristics.

29. Nevertheless this error is not crucial to the legal validity of the judgment under appeal, since the existence of various types of lyocell is not evidence for the assertion that Lenzing Lyocell actually sells lyocell of lower quality which competes on price with viscose.

30. Sniace further complains that in paragraphs 74 to 77 the Court of First Instance did not make an adequate assessment of the alleged competition between viscose and proviscose, a mixture of lyocell and viscose. However, the submission in relation to this is confined to submitting that proviscose exists. Sniace does not show that the evidence already submitted at first instance would prove competition between proviscose and viscose.

31. Neither does anything else follow from the Commission decision published in March 2004 in merger proceedings concerning the Lenzing group, to which Sniace refers. It is correct that in the merger proceedings the Lenzing group tried to prove that lyocell and viscose belong to the same market. However, this evidence clearly did not succeed, since in that decision the Commission found that a separate market exists for lycocell fibres, on which, apart from the Lenzing group, there is only one other active group, Acordis. ( )

32. The views of the United Kingdom merger control authority with regard to the Lenzing group’s acquisition of that competitor manufacturing lyocell cannot be taken into account in the present proceedings. At a later date that authority accepted that there are other fibres which could be substituted for lyocell. ( ) Sniace did not substantiate these arguments and it did not use them in order to show, in relation to the various applications, that its market position would be substantially affected. Consequently they are not the subject of the present proceedings.

33. Accordingly it cannot be established that the Court of First Instance distorted the evidence by denying the existence of direct competition between viscose and lyocell. This part of the first ground of appeal should therefore be dismissed.

2. Competition between Sniace and the Lenzing group

34. Sniace also submits that the Court of First Instance did not even evaluate a number of grounds to suggest that the approval of the aid distinguished it individually. It submits that like the Lenzing group it is one of a limited circle of cellulose fiber manufacturers and one of three competitor undertakings which had taken part in the proceedings pursuant to Article 88(2) EC to investigate the aid granted to Lenzing Lyocell. The Commission also assumed, in recital 45 of its decision, that aid granted to Lenzing Lyocell could possibly affect competitors in other Member States. Sniace argues that there is overcapacity on this market, which the Commission also recognised. ( ) Finally, Sniace submits that in the first instance proceedings it also proved that it suffered losses due to the aid granted to Lenzing Lyocell.

35. However, this submission is not material. Consequently the lack of an express assessment of it does not constitute a failure to provide adequate reasoning. ( )

36. It must be remembered that the aid directly benefited only the production of lyocell, that Sniace does not manufacture that product but viscose, and that no direct competition exists between viscose and lyocell.

37. Sniace’s statements do not relate to the market for lyocell. Consequently they could only constitute pertinent reasons if aid for the manufacture of lyocell can have a significant effect on the market position of a manufacturer which produces cellulose fibres for other markets. For this purpose it would be necessary for the aid granted in one market on which the competitor of the beneficiary is not active to have such a differentiating effect on the competitor on other markets that the competitor is distinguished individually just as in the case of the person addressed.

38. However, Sniace’s submissions do not contain any grounds to suggest that the aid granted for the manufacture of lyocell did in fact affect other markets in this way. In particular there is a lack of evidence of losses in selling viscose due to competition with lyocell. As the Commission also stresses, the document submitted by Sniace at first instance in relation to this is in fact based on the unproven premise that lyocell is actually in direct competition with viscose.

39. In order to demonstrate that as a competitor of the Lenzing group on other markets it was substantially affected by the aid for the manufacture of lyocell, i.e. that it was distinguished individually, Snaice would have had to show effects on those markets. Such effects could result, for example, from cross-subsidies between the sector of activity benefiting from the aid and other activities of the recipient of the aid, but this would undoubtedly be difficult to demonstrate. However, Sniace did not provide any grounds to suggest this.

40. Portfolio effects, ( ) which consist of the beneficiary offering products from the market of the promoted activities together with products from other markets on which it competes with the applicant would also be conceivable. This is the gist of the submissions on proviscose and other fibre mixtures using lyocell. However, Sniace has not shown that these mixtures are in direct competition with the viscose it sells, or that its competitive position would be affected by such portfolio effects having regard to the advantages for the production of lyocell.

41. Consequently the Court of First Instance did not have to give its opinion in relation to Sniace’s statements about the general competition between the cellulose fibre manufacturers.

42. Accordingly this part of the first ground of appeal should also be dismissed.

C – Second ground of appeal: participation in the procedure

43. By the second ground of appeal Sniace objects to the finding in paragraph 59 of the judgment under appeal that it played only a minor role in the pre‑litigation procedure.

44. However, this ground of appeal is ineffective, that is, it is a ‘moyen inopérant’, a ground of appeal which is inappropriate to achieve the objective of the appeal. Consequently it is unfounded.

45. It is apparent from the ARE judgment that the exercise of the procedural rights granted to parties concerned by Article 88(2) EC is not in itself sufficient to distinguish them individually just as in the case of the addressee of the decision on the aid. ( ) By participating in this procedure a party does give notice of its particular interest in the advantage conferred on the recipient of the aid. However, this interest alone does not distinguish that party individually like the addressee of the decision on the aid. Consequently, even intensive involvement in the formal review procedure would not suffice.

46. In particular the question, which was debated by Sniace, the Commission and Lenzing Fibers, as to whether, conversely, it is possible for a competitor applicant to be distinguished individually without having participated in the Commission’s review procedure, can remain open in this case.( ) The same applies to the question of whether more intensive participation in the procedure could have been expected from Sniace at all.

47. By its ground of appeal Sniace further submits that it is distinguished individually at least in relation to the observance of its procedural rights in the review procedure pursuant to Article 88(2) EC. It argues that by adopting the contested decision the Commission infringed Sniace’s procedural rights. Since the Commission completely changed its assessment of the measures in comparison with the notice initiating the procedure and the notice extending the review to additional measures, it should have given Sniace the opportunity to submit additional observations before the final decision.

48. Nevertheless, this submission is inadmissible pursuant to Article 113(2) of the Rules of Procedure. According to this provision the subject-matter of the proceedings before the Court of First Instance may not be changed in the appeal. However, Sniace did not plead this alleged breach of procedure at first instance. At first instance Sniace criticised the Commission’s change of opinion only to the extent that the Commission did not give adequate reasons for it. However, the allegation of a failure to provide adequate reasoning and the allegation of the omission of a fresh hearing are different pleas. Consequently, the consideration of this submission in the appeal would extend the subject-matter of the proceedings.

49. Furthermore, to date it has not yet been established that the competitors of the parties to the procedure pursuant to Article 88(2) EC must be heard again. Rather, according to Article 6 and Article 20 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88] of the EC Treaty, ( ) their rights are limited to making a complaint about aid, submitting comments after the initiation of the procedure, and information about the Commission’s decision.

50. Moreover, as Lenzing Fibers submits, Sniace even had the opportunity to comment on the Commission’s change in its assessment with regard to the different markets for viscose and lyocell. In a supplementary notice in relation to the review procedure pursuant to Article 88(2) EC, the Commission had already given notice that viscose and lyocell were two different products and provided an opportunity to submit further comments. ( )

51. Consequently the second ground of appeal should also be dismissed.

D – Third ground of appeal: effective legal protection

52. By the third ground of appeal Sniace submits, in the alternative, that it would be denied effective legal protection if the action were inadmissible.

53. However, in so far as Sniace holds the view that it has already demonstrated the requirements for admissibility of the action, reference should be made to the above remarks. Individual concern has not in fact been successfully demonstrated. There is equally no right of action arising from the procedural law position of Sniace in the Commission procedure.

54. Even if, in spite of Sniace not being distinguished individually, the Commission decision infringed Sniace’s rights, then the admissibility of an action in the Community courts would not result from that alone. ( ) Rather it is for the Member States to establish a system of legal remedies and procedures for such cases which ensure respect for the right to effective judicial protection. ( ) In that context, in accordance with the principle of sincere cooperation laid down in Article 5 of the Treaty, national courts are required, so far as possible, to interpret and apply national procedural rules governing the exercise of rights of action in a way that enables the required legal protection to be afforded. ( )

55. It is true that an individual cannot simply, on the basis of Article 87 EC alone, challenge the compatibility of an aid with Community law before national courts or ask them to decide as to any compatibility which may be the main issue in actions before them or may arise as a subsidiary issue. ( ) Pursuant to Article 87 and Article 88 EC only the Commission can make such a finding. ( )

56. However, that should be distinguished from the possibility of challenging the unlawfulness of a Commission decision approving aid before national courts. In principle this possibility exists, ( ) provided that the individual concerned did not have to bring an action in the Community courts within the period for initiating proceedings. ( ) This is not so in the present case for the very reason that the action would not be admissible according to the above findings. If appropriate in those circumstances the national court must refer the case to the Court of Justice for a preliminary ruling on the validity of the decision. ( )

57. Accordingly the Community judicature’s requirements for the admissibility of an action by a competitor in respect of a decision on State aid do not infringe the principle of effective legal protection.

E – Fourth ground of appeal: equal treatment

58. Finally, Sniace takes the view that the dismissal of the action on grounds of inadmissibility would be in breach of the principle of equal treatment. Its competitor, the Lenzing group, has been able to successfully bring an action against a Commission decision which had approved measures for the benefit of Sniace.

59. Without giving further details of this other case, it suffices to say that the aid for the benefit of Sniace also benefited its viscose production and the Lenzing group also sells viscose. As a result of the effect of this direct competition the Court of First Instance was able to establish that the Lenzing group was distinguished individually. ( ) Since the two cases are thus not comparable, inadmissible unequal treatment cannot be established.

60. Nor can Sniace succeed with its complaint that the Court of First Instance rejected its request for a measure of inquiry. The Court of First Instance is the sole judge of any need to supplement the information available to it concerning the cases before it. Whether or not the evidence before it is sufficient is a matter to be appraised by it alone and, according to settled case-law, is not subject to review by the Court of Justice on appeal, except where that evidence has been distorted or the inaccuracy of the Court of First Instance’s findings is apparent from the documents in the case-file. ( )

61. This ground of appeal should accordingly also be dismissed.

F – Conclusion

62. The appeal should therefore be dismissed in full.

V – Costs

63. Under Article 122 of the Rules of Procedure, in conjunction with Articles 118 and 69(2) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since Sniace has been unsuccessful in the appeal, it must bear its own costs as well as the Commission’s costs.

64. The first subparagraph of Article 69(4) provides that Member States which intervene in proceedings are to bear their own costs, including the costs of the appeal proceedings. ( ) Under the third subparagraph of this provision the Court may decide that another intervening party should bear its own costs. This appears appropriate in this case in relation to Lenzing Fibers. Therefore Austria and Lenzing Fibers should bear their own costs.

VI – Conclusion

65. I accordingly propose that the Court of Justice should rule as follows:

1. The appeal is dismissed.

2. Sniace SA shall bear its own costs and the costs of the Commission.

3. The Republic of Austria and Lenzing Fibers GmbH shall bear their own costs.