Case C-276/03 P

Scott SA

v

Commission of the European Communities

(Appeal – Unlawful State aid – Temporal application of Regulation (EC) No 659/1999 – Decision on incompatibility and recovery of aid – Limitation period – Interruption – Need to inform the beneficiary of the aid of an interrupting action)

Opinion of Advocate General Jacobs delivered on 14 April 2005

Judgment of the Court (First Chamber), 6 October 2005

Summary of the Judgment

State aid – Recovery of unlawful aid – Ten-year limitation period of Article 15 of Regulation No 659/1999 – Interruption of the limitation period – Need to inform the beneficiary of the aid of an interrupting action – None

(Art. 88(2) EC; Council Regulation No 659/1999, Art. 15)

Article 15(2) of Regulation No 659/1999, in accordance with which the limitation period to which the powers of the Commission to recover unlawful aid are subject is interrupted by any action taken by the Commission or by a Member State, acting at the request of the Commission, with regard to the unlawful aid, cannot mean, either having regard to its wording or its purpose, that a request for information addressed by the Commission to the Member State concerned constitutes ‘action taken by the Commission’ only provided it has been notified to the beneficiary of the aid.

It is true that the beneficiary of the aid has a practical interest in being informed of action taken by the Commission which is capable of interrupting the limitation period, but that interest cannot have the effect of making the application of the provision cited above subject to the requirement that that action be notified to it. Even if the status of party could justify such a requirement, the procedure provided for in Article 88(2) EC takes place primarily between the Commission and the Member State concerned and is initiated against that State and not against the beneficiaries which, although they have certain procedural rights, do not have the status of a party to the procedure.

(see paras 27-35)

JUDGMENT OF THE COURT (First Chamber)

6 October 2005 ( )

(Appeal – Unlawful State aid – Temporal application of Regulation (EC) No 659/1999 – Decision on incompatibility and recovery of aid – Limitation period – Interruption – Need to inform the beneficiary of the aid of an interrupting action)

In Case C-276/03 P,

APPEAL under Article 56 of the Statute of the Court of Justice, brought on 24 June 2003,

Scott SA, established in Saint-Cloud (France), represented by J. Lever QC, G. Peretz, Barrister, A. Nourry, R. Griffith and M. Papadakis, Solicitors, with an address for service in Luxembourg,

appellant,

the other parties to the proceedings being:

Commission of the European Communities, represented by J. Flett, acting as Agent, with an address for service in Luxembourg,

defendant at first instance,

French Republic,

intervener at first instance,

THE COURT (First Chamber),

composed of P. Jann (Rapporteur), President of the Chamber, N. Colneric, K. Schiemann, E. Juhász and E. Levits, Judges,

Advocate General: F.G. Jacobs,

Registrar: M.-F. Contet, Principal Administrator,

having regard to the written procedure and further to the hearing on 3 February 2005,

after hearing the Opinion of the Advocate General at the sitting on 14 April 2005,

gives the following

Judgment

1 By its appeal, Scott SA (‘Scott’) requests the Court to set aside the judgment of the Court of First Instance of the European Communities in Case T‑366/00 Scott v Commission [2003] ECR II-1763 (‘the judgment under appeal’), by which that court dismissed its application for the annulment in part of Commission Decision 2002/14/EC of 12 July 2000 on the State aid granted by France to Scott Paper SA Kimberly-Clark (OJ 2002 L 12, p. 1) (‘the contested decision’), in so far as that action alleged that the Commission of the European Communities had infringed Article 15 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83, p. 1).

Relevant provisions

2 Article 15 of Regulation No 659/1999 provides:

‘ 1. The powers of the Commission to recover aid shall be subject to a limitation period of 10 years.

2. The limitation period shall begin on the day on which the unlawful aid is awarded to the beneficiary either as individual aid or as aid under an aid scheme. Any action taken by the Commission or by a Member State, acting at the request of the Commission, with regard to the unlawful aid shall interrupt the limitation period. Each interruption shall start time running afresh. The limitation period shall be suspended for as long as the decision of the Commission is the subject of proceedings pending before the Court of Justice of the European Communities.

3. Any aid with regard to which the limitation period has expired shall be deemed to be existing aid.’

Facts

3 According to points 12 and 13 of the contested decision and paragraphs 1 to 10 and 13 to 19 of the judgment under appeal, the facts are, essentially, as follows.

4 In 1969, Scott Paper Company, established in the United States of America, acquired Bouton Brochard, a company governed by French law, and created a separate company, Bouton Brochard Scott SA (‘Bouton Brochard Scott’), which took over the business of Bouton Brochard.

5 In 1986, Bouton Brochard Scott decided to establish a factory in France and for that purpose chose a site in the département of Le Loiret on La Saussaye industrial estate.

6 On 31 August 1987, the city of Orléans and Le Loiret granted Bouton Brochard Scott certain concessions. First, those local authorities sold it a 48-hectare plot on La Saussaye industrial estate on preferential terms. Secondly, they undertook to calculate the water treatment levy at a similarly preferential rate.

7 Bouton Brochard Scott became Scott in November 1987.

8 In January 1996, the shares in Scott were acquired by Kimberly-Clark Corporation.

9 In January 1998, Kimberly-Clark Corporation announced the closure of the factory in question, the assets of which, namely the site and the paper mill, were bought by Procter & Gamble in June 1998.

10 Following a complaint, by letter of 17 January 1997 the Commission requested the French Republic for information on the abovementioned concessions. There followed an exchange of correspondence with the French authorities.

11 By decision of 20 May 1998, the Commission decided to initiate the procedure provided for in Article 93(2) of the EC Treaty (now Article 88(2) EC) and informed France thereof by letter of 10 July 1998, which was published in the Official Journal of the European Communities on 30 September 1998 (OJ 1998 C 301, p. 4).

12 On the same day as that publication, the French authorities informed Scott by telephone of the decision to initiate the procedure.

13 On 12 July 2000, the Commission adopted the contested decision, under which the State aid in the form of the preferential land price and preferential rate of water treatment levy granted to Scott by the French Republic was declared incompatible with the common market and its recovery was ordered.

Procedure before the Court of First Instance and the judgment under appeal

14 By application lodged at the Registry of the Court of First Instance on 30 November 2000, Scott brought an action against the contested decision for the annulment in part of that decision.

15 The French Republic intervened in the proceedings in support of the form of order sought by Scott.

16 At the request of Scott, the Court of First Instance decided to rule on the plea alleging infringement of Article 15 of Regulation No 659/1999 before examining the other pleas in the action.

17 In that regard, the plea raised by Scott was broken down into two limbs, alleging:

– infringement by the Commission of Article 15 in that it considered that the limitation period could be interrupted by an action which has not been notified to the beneficiary of the unlawful aid, in this case the request for information of 17 January 1997, or, in the alternative,

– infringement by the Commission of Article 15 in that it considered that the limitation period could be interrupted by an action adopted and notified after expiry of that period, in this case the decision of 20 May 1998 to initiate the procedure.

18 By the judgment under appeal, the Court of First Instance dismissed the application in so far as it alleged infringement of Article 15 of Regulation No 659/1999 and ordered that the remainder of the proceedings be continued.

19 Pending the present judgment, the Court of First Instance suspended proceedings in Case T-366/00 Scott v Commission and in Case T-369/00 Département du Loiret v Commission, the subject of which is also annulment of the contested decision.

Form of order sought before the Court

20 Scott claims that the Court should:

– set aside the judgment under appeal;

– annul Article 2 of the contested decision, in so far as it concerns the aid granted in the form of a preferential land price; and

– order the Commission to pay the costs of both sets of proceedings.

21 The Commission contends that the Court should:

– dismiss the appeal in its entirety or, failing that, if it should uphold any part of the appeal,

– refer the case back to the Court of First Instance for judgment or, failing that,

– dismiss the application brought before the Court of First Instance inasmuch as it relates to the pleas alleging infringement of Article 15 of Regulation No 659/1999.

The appeal

Arguments of the parties and the judgment under appeal

22 In support of its appeal, Scott relies, essentially, on a single plea alleging misinterpretation of Article 15 of Regulation No 659/1999 by the Court of First Instance, which held that the limitation period could be interrupted by an action which has not been notified to the beneficiary of the aid, in this case the request for information of 17 January 1997.

23 In paragraphs 58 to 60 of the judgment under appeal, the Court of First Instance held that the mere fact that the beneficiary of the aid was not aware of the existence of a request for information made by the Commission to the Member State concerned does not have the consequence of depriving that request of effect in respect of the limitation period prescribed in Article 15 of Regulation No 659/1999. That article introduced a single limitation period which applies in the same way to the Member State concerned and to third parties. In addition, the procedure laid down in Article 93(2) of the Treaty takes place primarily between the Commission and the Member State concerned, while interested third parties, including the beneficiary of the aid, are for their part entitled to be warned and to have the opportunity to put forward their arguments, thereby having in essence the role of ‘information sources’ for the Commission. However, the Commission is not under a duty to warn potentially interested persons, including the beneficiary of the aid, of the measures which it is taking in respect of unlawful aid before it initiates the procedure laid down in Article 93(2) of the Treaty.

24 In paragraph 61 of the judgment under appeal, the Court of First Instance added that the beneficiary of unnotified aid, such as that at issue in the main proceedings, cannot have a legitimate expectation that the aid was properly granted. Moreover, in paragraph 62 of the same judgment, it found that, before Regulation No 659/1999 entered into force, the beneficiary of such aid could not have had any legal certainty with regard to a limitation period applicable to the power to recover aid and, accordingly, the interruption of that limitation period before that regulation entered into force did not have the effect of depriving the beneficiary of such legal certainty.

25 According to Scott, it is apparent both from the wording, in particular the words ‘action taken by … a Member State, acting at the request of the Commission’, and from the purpose of Article 15 of Regulation No 659/1999 that only action which has been notified to the beneficiary of the aid can interrupt the limitation period vis‑à‑vis the beneficiary, even if that entails different limitation periods vis-à-vis the various interested parties. Scott maintains that it is not relevant that, under the procedure initiated pursuant to Article 93(2) of the Treaty, the beneficiary is merely an ‘information source’, that the Commission is not under a duty to warn the beneficiary that an interrupting action has been taken, that the beneficiary cannot have a legitimate expectation that the unlawful aid was properly granted or that, 10 years after the aid in question was granted, that regulation was not yet in force.

Findings of the Court

26 It should be noted that Article 15 of Regulation No 659/1999 lays down a limitation period of 10 years which begins on the day on which the unlawful aid is awarded to the beneficiary. Under the second sentence of Article 15(2), the limitation period is interrupted by ‘[a]ny action taken by the Commission or by a Member State, acting at the request of the Commission, with regard to the unlawful aid’.

27 While that provision indeed contains a reference to both ‘action[s] taken by the Commission’ and ‘request[s] of the Commission’, that cannot mean, however, that a request for information addressed by that institution to the Member State concerned constitutes ‘action taken by the Commission’ only provided it has been notified to the beneficiary of the aid. As the Advocate General stated in points 87 to 90 of his Opinion, one explanation for the dual reference might be an oversight on the part of the legislature, which appears to have copied, without paying attention to the procedural differences, the wording used in Article 2 of Regulation (EEC) No 2988/74 of the Council of 26 November 1974 concerning limitation periods in proceedings and the enforcement of sanctions under the rules of the European Economic Community relating to transport and competition (OJ 1974 L 319, p. 1). Alternatively, there may be situations in which a ‘request of the Commission’ does not automatically and simultaneously constitute ‘action taken by the Commission’. Finally, as the Advocate General observes in point 91 of his Opinion, Regulation No 659/1999 allows for the possibility that there are several (successive) interrupting actions since it provides in Article 15 that each interruption is to start time running afresh.

28 Accordingly, the wording of Article 15 of Regulation No 659/1999 does not give any guidance as to whether there is any requirement to notify the action to the beneficiary of the aid if the limitation period is to be interrupted.

29 It must none the less be determined whether such a requirement does not follow from the objective pursued by Article 15 of the regulation.

30 In that respect, according to recital 14 in the preamble to Regulation No 659/1999, for reasons of legal certainty the limitation period is designed to prevent the recovery of unlawful aid, which can no longer be ordered. The limitation period is therefore intended, in particular, to protect some of the interested parties, including the Member State concerned and the beneficiary of the aid.

31 Those interested parties therefore in fact have a practical interest in being informed of action taken by the Commission which is capable of interrrupting the limitation period.

32 That practical interest cannot, however, have the effect of making the application of the second sentence of Article 15(2) of Regulation No 659/1999 subject to the requirement that that action be notified to the beneficiary of the aid.

33 The procedure provided for in Article 93(2) of the Treaty takes place primarily between the Commission and the Member State concerned. It is initiated against that State and not against the beneficiaries (see, to that effect, Joined Cases C‑74/00 P and C-75/00 P FalckandAcciaierie di Bolzano v Commission [2002] ECR I-7869, paragraphs 81 and 83).

34 It is true that case-law has granted the beneficiary of aid certain procedural rights. However, those rights are designed to enable the beneficiary to provide information to the Commission and to put forward its arguments, but do not confer on it the status of a party to the procedure.

35 Therefore, even if the status of party could justify a notification requirement, it suffices to state that the beneficiary of aid does not have that status.

36 Having regard to the foregoing, the Court of First Instance did not interpret Article 15 of Regulation No 659/1999 incorrectly in holding that the limitation period could be interrupted by an action which has not been notified to the beneficiary of the aid, in this case the request for information of 17 January 1997.

37 It is true that both the fact that the beneficiary could not have a legitimate expectation that the aid was properly granted and the fact that, 10 years after the aid in question was granted, Regulation No 659/1999 was not yet in force are not necessary steps in the reasoning by which that interpretation is reached. However, those findings do not undermine the validity of the interpretation.

38 Consequently, the plea must be rejected as unfounded. The appeal must therefore be dismissed.

Costs

39 Under Article 69(2) of the Rules of Procedure, which applies to the procedure on appeal by virtue of Article 118 of those rules, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Under the third subparagraph of Article 69(5) of those rules, if costs are not claimed, the parties are to bear their own costs. Since the Commission has not applied for costs against Scott, each party must be ordered to bear its own costs.

On those grounds, the Court (First Chamber) hereby:

1. Dismisses the appeal;

2. Orders Scott SA and the Commission of the European Communities to bear their own costs.

[Signatures]