Keywords

Summary



Keywords

1. State aid - Prohibition - Derogations - Aid which can be regarded as compatible with the common market - Commission's discretion - Judicial review - Limits

(EC Treaty, Art. 93(3) (now, after amendment, Art. 87(3) EC))

2. State aid - Prohibition - Derogations - Aid which can be regarded as compatible with the common market - Aid for rescuing an undertaking in difficulty - Conditions - Exceptional measure needed to keep an undertaking in business and applied for a limited time - Manifest error of assessment by the Commission - None

(EC Treaty, Art. 92(3) (now, after amendment, Art. 87(3) EC))

3. State aid - Definition - Taking into account of the situation existing at the time the measure was adopted

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

4. State aid - Prohibition - Derogations - Aid which can be regarded as compatible with the common market - Restructuring aid for an undertaking in difficulty - Conditions - Implementation, under the supervision of the Commission, of a restructuring plan approved by it

(EC Treaty, Art. 92(3) (now, after amendment, Art. 87(3) EC))

5. State aid - Prohibition - Derogations - Restructuring aid for an undertaking in difficulty in an assisted region - Special conditions - Assessment

(EC Treaty, Art. 92(3)(a) and (c) (now, after amendment, Art. 87(3)(a) and (c) EC))

6. State aid - Definition - Conversion into capital of part of an undertaking's debts to a public body - Criterion of assessment - Private investor criterion - Commission's discretion - Judicial review - Limits

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

7. State aid - Definition - Selective nature of the measure - Financial advantages granted in a discretionary manner by a public body to an undertaking - Included

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

8. State aid - Definition - Remission of debts granted by public bodies to an undertaking in difficulty in the context of judicial proceedings and in conformity with applicable national law - Included

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

9. State aid - Definition - Legal nature - Interpretation on the basis of objective elements - Judicial review - Scope

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

10. State aid - Definition - Remission of debts granted by public bodies to an undertaking in difficulty - Proportion of the remissions granted to the total debts of the undertaking - Irrelevant - Assessment criterion - Private investor criterion

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

11. State aid - Effect on trade between Member States - Prejudice to competition - Assessment criteria

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

12. State aid - Commission decision finding aid which has not been notified incompatible with the common market - Obligation to state reasons - Scope

(EC Treaty, Arts 92 (now, after amendment, Art. 87 EC), 93(3) and 190 (now, after amendment, Arts 88(3) and 253 EC))

Summary

$$1. The Commission has wide discretion in its assessments under Article 92(3) of the EC Treaty (now, after amendment, Article 87(3) EC). Judicial review by the Community Court must, therefore, be limited to checking that the rules on procedure and the statement of reasons have been complied with, that the facts are materially accurate, and that there has been no manifest error of assessment and no misuse of powers. It is not for the Community judicature to substitute its economic assessment for that of the Commission.

( see para. 48 )

2. The Commission did not commit a manifest error of assessment in finding that the loan and guarantees granted by a public body to the undertaking in question between May and December 1995 could not be termed rescue aid within the meaning of the Community guidelines on State aid for rescuing and restructuring firms in difficulty, because it has been established that that public body had already granted loans and guarantees to the applicant in 1993 and 1994, which were of the same type and for the same reason as the alleged rescue aid, and that those measures were already intended to enable the undertaking to overcome its financial difficulties and stay in business. Accordingly, the Commission was right in finding that the requirement that rescue aid should be an exceptional measure needed to keep the undertaking in business and applied for a limited time was not met in the case at hand.

( see paras 50-51 )

3. The question of whether a measure constitutes aid within the meaning of Article 92(1) of the EC Treaty (now, after amendment, Article 87(1) EC) must be resolved having regard to the situation existing at the time the measure was implemented. If the Commission took subsequent factors into account, it would confer an advantage on Member States which fail in their obligation to give notice at the planning stage of aid they intend to grant. Consequently, the fact that the rate of interest applied to loans granted by a public body to an undertaking in difficulty was subsequently fixed at the market rate - whether or not one qualifies this as a mere accounting adjustment - is of no relevance.

( see para. 53 )

4. The Community guidelines on State aid for rescuing and restructuring firms in difficulty require restructuring aid to an undertaking in difficulty to be part of a plan, the Commission's approval of which is subject to three substantive conditions: it must enable long-term restoration of viability of the undertaking, avoid undue distortions of competition and ensure the proportionality of the aid in relation to the restructuring costs and benefits. Moreover, it is incumbent on the firm to implement the restructuring plan, as accepted by the Commission, and the implementation and satisfactory progress of the plan must be monitored by the Commission, to which detailed annual reports must be submitted.

( see para. 78 )

5. As is apparent from the Community guidelines on State aid for rescuing and restructuring firms in difficulty, the fact that an ailing undertaking is located in an assisted area does not justify a wholly permissive approach to aid, and the guidelines state that distortions of competition must be minimised even in the case of aid to firms in assisted areas. Likewise, the possibility, which amounts to an exception, of relaxing the requirement for reducing capacity where the market concerned shows structural excess capacity does not call into question the primary requirement that there be a coherent and realistic restructuring plan enabling the undertaking to be restored to viability. Accordingly, the Commission cannot be criticised for having refused to allow a firm an exemption based on regional development needs when that firm, even supposing it has carried out reductions in capacity which - on a relaxed reading of the rules - could be found to be sufficient, does not meet one or more of the conditions imposed by the guidelines.

( see para. 114 )

6. Investment by public authorities in the capital of undertakings, in whatever form, may constitute State aid.

In order to determine whether the conversion into capital of part of an undertaking's debts to a public body constitutes State aid, it is appropriate to apply the private investor criterion. Thus, it is necessary to consider whether in similar circumstances a private investor of a size comparable to that of the public investor might have provided capital of such an amount. Although the conduct of a private investor with which the intervention of a public investor pursuing economic policy aims must be compared need not be the conduct of an ordinary investor laying out capital with a view to realising a profit in the relatively short term, it must at least be the conduct of a private holding company or a private group of undertakings pursuing a structural policy - whether general or sectoral - and guided by prospects of profitability in the longer term.

The assessment by the Commission of the question whether an investment satisfies the private investor criterion involves a complex economic appraisal. When the Commission adopts a measure involving a complex economic appraisal, it enjoys a wide discretion and judicial review of that measure on this point is limited to verifying whether the Commission complied with the relevant rules governing procedure and the statement of reasons, whether the facts on which the contested finding was based have been accurately stated and whether there has been any manifest error of assessment or a misuse of powers. In particular, the Court is not entitled to substitute its own economic assessment for that of the Commission.

( see paras 125-127 )

7. The specific nature of a State measure, namely its selective application, constitutes one of the characteristics of State aid within the meaning of Article 92(1) of the EC Treaty (now, after amendment, Article 87(1) EC). In that regard, it is necessary to determine whether or not the measure in question entails advantages accruing exclusively to certain undertakings or certain sectors of activity.

Where the public body granting financial assistance enjoys a degree of latitude which enables it to choose the beneficiaries or the conditions under which the financial assistance is provided, that assistance cannot be considered to be general in nature. This is the case where debt remissions do not flow automatically from the application of national legislation governing suspension of payments and instituting a general procedure applicable to all undertakings in difficulty, but from the discretionary decisions made by the public bodies in question.

( see paras 156-157 )

8. Article 92(1) of the EC Treaty (now, after amendment, Article 87(1) EC) does not distinguish between measures of State intervention by reference to their causes or aims but defines them in relation to their effects. Accordingly, the fact that the debt remissions at issue here were granted by public bodies to undertakings in difficulty in the course of judicial proceedings and in accordance with the applicable national law does not by itself make them a general measure falling outside the scope of Article 92(1) of the EC Treaty.

( see para. 158 )

9. State aid, as defined in the Treaty, is a legal concept which must be interpreted on the basis of objective factors. For that reason, the Community courts must, in principle, having regard both to the specific features of the case before them and to the technical or complex nature of the Commission's assessments, carry out a comprehensive review as to whether a measure falls within the scope of Article 92(1) of the EC Treaty (now, after amendment, Article 87(1) EC).

( see para. 159 )

10. The share of the overall debt of an undertaking in difficulty represented by the claims of public bodies does not in itself constitute a decisive factor for determining whether the debt remissions granted by those bodies to the undertaking bear some of the hallmarks of State aid. Taking this factor into account amounts to an unjustified restriction on the possibilities of debt arrangement for an undertaking in difficulty when the total amount of public claims is higher than the private claims. Conversely, when the total amount of private claims is higher than the public claims, it is difficult to conceive of a measure for debt arrangement taken by a public body as constituting State aid.

By granting the debt remissions, the public bodies in question did not have to act like public investors whose behaviour should be compared to the conduct of a private investor pursuing a structural policy - whether general or sectoral - guided by the longer term prospects of profitability of the capital invested. Those bodies should actually be compared to a private creditor who is seeking to obtain payment of sums owed to it by a debtor in financial difficulties.

Consequently, it is for the Commission to determine, for each of the public bodies in question, whether the debt remissions granted by them were manifestly more generous than those which would have been granted by a hypothetical private creditor in a situation comparable vis-à-vis the undertaking to that of the public body in question and seeking to recover the sums owed to it.

Although an apparent lack of proportion between the respective debt remissions by public and private creditors may be indicative of the existence of State aid, this factor in itself does not free the Commission from its obligation to examine, having regard to the circumstances of the case, whether the remissions granted by the public creditors go beyond what is justified by commercial constraints and thus can only be explained by an intention to confer an advantage on the undertaking in question.

( see paras 166-167, 170-171 )

11. When State aid strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid. Furthermore, an aid may be of such a kind as to affect trade between Member States and distort competition even if the recipient undertaking, which is in competition with undertakings from other Member States, does not itself participate in crossborder activities. Where a Member State grants aid to an undertaking, internal supply may be maintained or increased, with the consequence that the opportunities for undertakings established in other Member States to offer their services to the market of that Member State are reduced.

Likewise, the relatively small size of the undertaking which receives aid does not as such exclude the possibility that intra Community trade might be affected.

( see paras 220-221 )

12. In its reasons in a decision concerning State aid, and more specifically with respect to the condition that trade between Member States be affected, the Commission is not required to carry out an economic analysis of the actual situation on the relevant market, of the market share of the undertaking in question, of the position of competing undertakings and of trade flows of the products and services in question between Member States, once it has explained how the aid in question distorts competition and affects trade between Member States.

Furthermore, in the case of aid granted illegally, the Commission is not required to demonstrate the actual effect which that aid has had on competition and on trade between Member States. Such an obligation would ultimately favour Member States which pay aid without complying with the duty to notify the aid laid down in Article 93(3) of the EC Treaty (now, after amendment, Article 88(3) EC), to the detriment of those which notify the aid at the proposal stage.

( see paras 223, 225-226 )