Judgment of the Court of 5 October 1994. - Italian Republic v Commission of the European Communities. - Action for annulment - State aid - Letter initiating the procedure provided for in the first subparagraph of Article 93 (2) of the Treaty - Suspension of aid - Description of aid: new aid. - Case C-47/91.



European Court reports 1994 Page I-04635

Swedish special edition Page I-00145

Finnish special edition Page I-00147



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

++++

1. State aid ° General scheme of aid approved by the Commission ° Notification of individual implementing measures ° Obligation ° None

(EEC Treaty, Art. 93)

2. State aid ° General scheme of aid approved by the Commission ° Individual aid measure presented as coming within the scope of the approval ° Examination by the Commission ° Assessment primarily in the light of the approval decision, and only on an ancillary basis under Article 92 of the Treaty ° Application of scheme of new aid and prohibition on implementation before the final decision ° Conditions

(EEC Treaty, Arts 92 and 93)

Summary

1. Once a general scheme of aid has been approved by the Commission, the individual implementing measures do not need to be notified to it, unless the Commission has issued certain reservations to that effect in the approval decision. In fact since the individual grants of aid are merely measures implementing the general aid scheme the factors to be taken into consideration by the Commission in assessing that aid are the same as those which it applied on examining the general scheme. It is therefore unnecessary for the individual grants of aid to be subject to examination by the Commission.

2. When the Commission has before it a specific grant of an aid alleged to be made in pursuance of a previously authorized scheme, it cannot at the outset examine it directly in relation to the Treaty. Prior to the initiation of any procedure, it must first examine whether the aid is covered by the general scheme and satisfies the conditions laid down in the decision approving it. If it did not do so, the Commission could, whenever it examined an individual aid, go back on its decision approving the aid scheme which already involved an examination in the light of Article 92 of the Treaty. This would jeopardize the principles of the protection of legitimate expectations and legal certainty from the point of view of both the Member States and traders since individual aid in strict conformity with the decision approving the aid scheme could at any time be called in question by the Commission.

If following the examination thus circumscribed the Commission finds that the individual aid is in conformity with its decision approving the scheme it must be regarded as authorized aid, and thus as existing aid. Therefore the Commission is not entitled to order the suspension thereof since Article 93(3) of the Treaty empowers it to do so only in regard to new aid. Conversely, where the Commission finds that the individual aid is not covered by its decision approving the scheme, which it cannot do by basing itself on mere doubts as to its conformity with that decision, the aid must be regarded as new aid. Where such aid was not notified to it, the Commission has the power, after giving the Member State in question an opportunity to submit its comments on the matter, to issue an interim decision requiring it to suspend immediately the payment of such aid pending the outcome of the examination of the aid and to provide the Commission, within such period as it may specify, with all such documentation, information and data as are necessary in order that it may examine the compatibility of the aid with the common market.

If the Commission has doubts as to the conformity of individual aids with its decision approving the general scheme, it is up to it to order the Member State concerned to supply to it, within such period as it may specify, all such documentation, information and data as are necessary in order that it may form a view on the compatibility of the aid in question with its decision approving the aids scheme. Should the Member State fail, notwithstanding the Commission' s injunction, to supply the information requested, the Commission may order the suspension thereof and directly assess compatibility with the Treaty as if it was a new aid.

Parties

In Case C-47/91,

Italian Republic, represented by Professor Luigi Ferrari Bravo, Head of the Department for Legal Affairs of the Ministry of Foreign Affairs, acting as Agent, assisted by Pier Giorgio Ferri, avvocato dello Stato, with an address for service in Luxembourg at the Italian Embassy, 5 Rue Marie Adélaïde,

applicant,

v

Commission of the European Communities, represented by Antonino Abate, Principal Legal Adviser, acting as Agent, with an address for service at the office of Georgios Kremlis, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

APPLICATION for the annulment of the decision of the Commission of the European Communities, notified to the Italian Government by letter of 23 November 1990, to initiate the procedure provided for in the first subparagraph of Article 93(2) of the Treaty against the grant of aid by the Italian authorities to Italgrani SpA, together with the order to suspend that aid,

THE COURT,

composed of: G.F. Mancini, President of Chambers, acting as President, J.C. Moitinho de Almeida and M. Diez Velasco (Presidents of Chambers), C.N. Kakouris, R. Joliet (Rapporteur), F.A. Schockweiler, G.C. Rodríguez Iglesias, F. Grévisse, M. Zuleeg, P.J.G. Kapteyn and J.L. Murray, Judges,

Advocate General: W. Van Gerven,

Registrar: H.A. Ruehl, Principal Administrator,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 2 February 1994,

after hearing the Opinion of the Advocate General at the sitting on 22 March 1994,

gives the following

Judgment

Grounds

1 By application lodged at the Court Registry on 31 January 1991, the Italian Republic sought under Article 173 of the EEC Treaty the annulment of the Commission' s decision notified to it by letter of 23 November 1990, to initiate the procedure provided for in the first subparagraph of Article 93(2) of the EEC Treaty against the grant of aid by the Italian authorities to Italgrani, together with an order to suspend that aid (hereinafter the "decision initiating the procedure"). That decision was published in the Official Journal of the European Communities No C 11 of 17 January 1991, p. 32.

2 It is apparent from the documents before the Court that Italian Law No 64 of 1 March 1986 established a general scheme of aid for the Mezzogiorno. In accordance with Article 93(3) of the Treaty, that scheme was notified to the Commission on 2 May 1986.

3 By Decision 88/318/EEC of 2 March 1988 (OJ 1988 L 143, p. 37) (hereinafter the "decision approving the general scheme"), the Commission approved the general scheme of aid in favour of the Mezzogiorno. Article 9 of that decision however required Italy to comply with the Community legislation and provisions in force or to be introduced in the future to control aid to particular sectors of industry or agriculture and fisheries.

4 Following that decision, the Italian Minister for Intervention in the Mezzogiorno granted aid to the Neapolitan company, Italgrani, by concluding with it a "programme contract". That contract was approved on 12 April 1990 by the inter-Ministerial Committee for Industrial Policy (hereinafter "CIPI").

5 The programme contract comprised various facets: the construction of industrial installations using raw material of agricultural origin (cereals, beet, soya and fruits) including a starch and glucose factory, the production of seed oils, and of meal and flour, the establishment of stocks of agricultural products, a research programme and training for the staff of the company.

6 On 26 July 1990, following a complaint lodged by Casillo Grani, a competitor of Italgrani, the Commission asked the Italian authorities to send information concerning the aid. On 7 September 1990 the Italian authorities notified the CIPI' s decision approving the programme contract entered into with Italgrani. Additional information was provided at a meeting in September 1990 and by letters during October of the same year.

7 By letter of 23 November 1990, the Commission informed the Italian Government of its decision to initiate the adversarial investigation procedure provided for in the first subparagraph of Article 93(2) of the Treaty in regard to the majority of the aids granted to Italgrani and ordered it to suspend the grant thereof.

8 In the grounds of its decision the Commission set forth its doubts as to the observance by the Italian authorities of two conditions which it had imposed in the decision approving the general scheme. Those authorities were said to have misconstrued the Community provisions and regulations concerning the coordination of different types of aid in the agricultural sector contrary to Article 9 of the decision approving the general scheme (paragraph D of the decision initiating the procedure). Moreover, the Commission pointed out that the information in its possession did not enable it to verify whether the maximum intensity rates which according to it had been mentioned in its decision approving the general scheme had been complied with.

9 Upon examination the Commission concluded that the various aids granted to Italgrani did not appear to fall within any of the derogations in Article 92(3)(a) (aid in favour of under-developed or troubled regions) and (c) (sectoral or regional aid) of the Treaty (point I.1. of the decision). It added that "under Article 93(3) of the EEC Treaty, proposed measures may not be put into effect until the procedure provided for in Article 93(2) has resulted in a final decision" (point I.3. of the decision). It also pointed out that if any aid had been paid illegally a request might be made for reimbursement from the recipients and that EAGGF financing could be refused for Community expenditure in connection therewith (point I.4. of the decision).

10 The present application is directed against that decision.

11 The Italian Government criticizes the Commission for regarding the aid initially planned for Italgrani as new aid, that is to say as unauthorized aid and consequently for ordering the suspension of payment thereof in pursuance of the last sentence of Article 93(3) of the Treaty.

12 According to the Italian Government the programme contract entered into with Italgrani and approved on 12 April 1990 by the CIPI in fact constitutes no more than the implementation of the general scheme of aid. Since the Commission had given its approval for that scheme in Decision 88/318 mentioned above without reserving the possibility of a subsequent examination of the specific implementation measures, the Italian Government maintains that the aid granted to Italgrani did not need to be notified because it was already authorized and was therefore to be treated as existing aid within the meaning of Article 93(1) of the Treaty. Consequently, the Commission was not entitled to order suspension thereof since that measure is available under the last sentence of Article 93(3) of the Treaty only in respect of new aid.

13 The Italian Government is also of the opinion that the Commission was only able to order suspension of the aid because, although it stated in the decision initiating the procedure that it had merely examined whether the aids granted to Italgrani were covered by its decision approving the general scheme, in actual fact it assessed those aids under Article 92 of the Treaty. In so doing it implicitly went back on Decision 88/318 of 2 March 1988 in which it had adjudged the general scheme to be compatible with the Treaty. It thus infringed the principles of legal certainty and of the protection of legitimate expectations.

14 On 9 April 1991 the Commission raised an objection of inadmissibility on the ground that the contested decision was merely a preparatory act. The Court dismissed the objection without proceeding to examine the merits of the case in a judgment of 30 June 1992 (Case C-47/91 Italy v Commission [1992] ECR I-4145).

15 In pleadings submitted following that judgment the Commission went on to formulate three further observations which it describes as preliminary.

16 First, the Commission points out that on 16 August 1991 it finally authorized the aid in favour of Italgrani subject to certain qualifications and arrangements proposed by the Italian authorities during the investigation procedure (Commission Decision 91/474/EEC of 16 August 1991 concerning aids granted by the Italian Government to the Italgrani SpA company for the setting up of an agri-foodstuffs complex in the Mezzogiorno, OJ 1991 L 254, p. 14). It argues that the annulment of the decision to initiate the procedure deprives the final authorization of its legal basis and consequently renders it unlawful.

17 Secondly, the Commission maintains that since the application does not submit for judicial review the economic assessments underlying the decision to initiate the procedure and concerns merely marginal aspects of that decision, it cannot lead to its annulment.

18 Thirdly, the Commission observes that since the contested decision no longer has suspensory effect following the modification by the Italian authorities of the aid initially planned for Italgrani, the application has lost its purpose.

19 The Court finds that the Commission' s first two observations are not founded on matters of law or fact which came to light since the proceedings on the admissibility of the Italian Government' s application were terminated by the judgment of 30 June 1992 mentioned above. Those observations must therefore be disregarded. As to the third observation suffice it to state that the suspensory decision remained in effect for a certain period.

20 On the substance it must first be pointed out that the aid granted to Italgrani forms part of the general aids scheme established by the legislation on aid to the Mezzogiorno, as the Commission has itself acknowledged (see paragraph A, fifth subparagraph and paragraph C of the decision initiating the procedure, and paragraph I, third subparagraph of Decision 91/474/EEC).

21 Once a general scheme of aid has been approved, the individual implementing measures do not need to be notified to the Commission, unless the Commission has issued certain reservations to that effect in the approval decision, as the Commission itself acknowledged in its fourteenth report on competition policy (paragraph 203) and in Joined Cases 166 and 220/86 Irish Cement v Commission [1988] ECR 6482. In fact since the individual grants of aid are merely measures implementing the general aid scheme the factors to be taken into consideration by the Commission in assessing that aid are the same as those which it applied on examining the general scheme. It is therefore unnecessary for the individual grants of aid to be subject to examination by the Commission.

22 In the present case, the Commission contends that it imposed a reservation on the approval of the general scheme. In its defence it alleges that in a telex which it sent to the Italian Government on 14 November 1986 it reserved the right subsequently to take a view on the provisions of the legislation on aid to the Mezzogiorno concerning agricultural products. Thus it put the Italian Government on notice that it would not take a view on those provisions until it had been notified of "the detailed rules for the implementation of aid to products in the agricultural and agri-foodstuffs sectors to be adopted by the different areas of the Mezzogiorno within the framework of their competences". Since those implementing measures were never adopted the aids granted to Italgrani, which relate to agricultural products, are not exempted from notification under the terms of the decision approving the general scheme.

23 That argument cannot be upheld. Whatever meaning is to be given to that telex, suffice it to state that the Commission did not reproduce the substance thereof in its decision approving the general scheme.

24 Moreover, when the Commission has before it a specific grant of an aid alleged to be made in pursuance of a previously authorized scheme, it cannot at the outset examine it directly in relation to the Treaty. Prior to the initiation of any procedure, it must first examine whether the aid is covered by the general scheme and satisfies the conditions laid down in the decision approving it. If it did not do so, the Commission could, whenever it examined an individual aid, go back on its decision approving the aid scheme which already involved an examination in the light of Article 92 of the Treaty. This would jeopardize the principles of the protection of legitimate expectations and legal certainty from the point of view of both the Member States and traders since individual aid in strict conformity with the decision approving the aid scheme could at any time be called in question by the Commission.

25 If following the examination thus circumscribed the Commission finds that the individual aid is in conformity with its decision approving the scheme it must be regarded as authorized aid, and thus as existing aid. Therefore the Commission is not entitled to order the suspension thereof since Article 93(3) of the Treaty empowers it to do so only in regard to new aid.

26 Conversely, where the Commission finds that the individual aid is not covered by its decision approving the scheme, the aid must be regarded as new aid. Where such aid was not notified to it, the Commission "has the power, after giving the Member State in question an opportunity to submit its comments on the matter, to issue an interim decision requiring it to suspend immediately the payment of such aid pending the outcome of the examination of the aid and to provide the Commission, within such period as it may specify, with all such documentation, information and data as are necessary in order that it may examine the compatibility of the aid with the common market" (see judgment in Case 301/87 France v Commission [1990] ECR I-307, paragraph 19).

27 In that connection the Commission maintains that the programme contract entered into with Italgrani infringed its decision approving the general scheme of State aids since it provided for aid for starch production. In 1987 it announced in a publication entitled "Competition Policy in Agriculture" that the Member States could no longer grant aid in sectors excluded from Community financing. The starch sector was a case in point: Council Regulation (EEC) No 355/77 of 15 February 1977 on common measures to improve the conditions under which agricultural products are processed and marketed (OJ 1977 L 51, p. 1) in fact put an end to Community financing for investments in this sector. Since Article 9 of the decision approving the general scheme required the Italian authorities on implementation thereof to comply with the Community legislation and codes to control aid to particular sectors of agriculture, the aids granted by Italy to Italgrani were to be regarded as prohibited by Community rules and thus not covered by the decision approving the general scheme. Under those circumstances the Commission says that it was entitled to regard them as new aids and to order the suspension thereof.

28 That argument must be dismissed. It is clear from the decision initiating the procedure that the Commission directly assessed the compatibility of the aid for the construction of a starch factory with Article 92 of the Treaty. It pointed out that, since investments concerning starch were excluded from Community financing, it was able to authorize State aids in this sector only if they satisfied the conditions of Article 92 of the Treaty. It considered that in the present case they did not. On the one hand, the starch sector was characterized by major over-capacity and, on the other hand, the creation of additional production capacity of about 357 000 tonnes, with no proven possibility of finding new outlets, was likely to disrupt the starch industry market (paragraph E.1.).

29 It is also apparent from the decision initiating the procedure that the Commission examined other planned aid in favour of Italgrani in the light of the Treaty and not in relation to its decision approving the general scheme. Thus the Commission was disposed to declare aid for seed oil production compatible with Article 92 of the Treaty only if its intensity did not exceed 50% and equivalent production capacities were abandoned at the same time (paragraph E.3.). As regards aids for the production of meal and flours it pointed out that there was structural surplus production capacity in this sector and that the grant of aid could disturb trade between Member States (paragraph E.4.). As for research aid the Commission considered that the information available to it was insufficient in order to assess the compatibility thereof with Article 92 of the Treaty (paragraph F).

30 It is clear from these statements that in ordering suspension of payment the Commission considered the aids set out above as new aids without verifying whether they were authorized by the decision approving the general scheme.

31 On the other hand, it is clear from the decision initiating the procedure that the Commission rightly found the aid for formation of stocks of agricultural products to be incompatible with the decision approving the general scheme. In fact it found that the Italian authorities had granted that aid in breach of the common organizations of the markets which they were obliged to observe under Article 9 of the decision approving the general scheme (paragraph G).

32 The Commission goes on to argue that, despite repeated requests between 26 July and 23 November 1990, the Italian Government did not supply it with the information necessary to dispel its doubts as to the compatibility of the aids granted to Italgrani with its decision approving the general scheme. The lack of collaboration on the part of the Italian authorities therefore compelled it to initiate the procedure for the adversarial examination of the aids and to order the suspension thereof.

33 Since Article 93(3) authorizes the Commission to order suspension of payment only of new aids, it is not enough that it should merely have doubts as to the conformity of individual aids with its decision approving the scheme of aids.

34 If the Commission has doubts as to the conformity of individual aids with its decision approving the general scheme, it is up to it to order the Member State concerned to supply to it, within such period as it may specifiy, all such documentation, information and data as are necessary in order that it may examine the compatibility of the aid in question with its decision approving the aids scheme.

35 Should the Member State fail, notwithstanding the Commission' s injunction, to supply the information requested, the Commission may on grounds analogous to those upheld in the France v Commission judgment mentioned above order the suspension thereof and directly assess compatibility with the Treaty as if it was a new aid.

36 Certainly, in the present case, it is apparent from the decision initiating the procedure that the Commission considered the information provided by the Italian authorities to be insufficient to enable it to form a view on the compatibility of isoglucose production with its decision approving the general scheme (point E.2, last paragraph), and aid for training (point H). However, the Italian Government formally refutes any failure on its part to perform its duty of collaboration. Furthermore, the Commission has not produced any document to show that, prior to ordering the suspension of the aid initially planned for Italgrani, it ordered the Italian authorities to supply to it within a certain time-limit all the information necessary to verify conformity of those aids with its decision approving the general scheme.

37 It follows from the foregoing considerations that, by ordering the suspension of aids for the construction of a starch factory and a glucose factory, for seed oil production, for the production of meal and flours, and for research and training, owing simply to doubts as to their conformity with its decision approving the general scheme, the Commission infringed Article 93(2) and (3) of the Treaty. The only matter to which this conclusion does not apply is the order to suspend aid for the formation of stocks of agricultural products, as stated above at paragraph 31.

38 The Italian Government' s criticism relates only to the provisions of the decision initiating the procedure and to the procedure suspending the grant of aids originally planned for Italgrani. Since that part is separable from the rest of the decision, only points I.3. and I.4. of the decision should be annulled, save in so far as they concern aid for the formation of stocks of agricultural products. Point I.3. orders the suspension of payment of aids and point I.4. recalls that reimbursement by the recipients of aids paid notwithstanding that order is likely to be requested and that Community expenditure affected thereby cannot be charged to the EAGGF.

Decision on costs

Costs

39 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Commission has been unsuccessful, it must be ordered to pay the costs.

Operative part

On those grounds,

THE COURT

hereby:

1. Annuls points I.3. and I.4. of the Commission Decision notified to the Italian Government by letter of 23 November 1990 initiating the procedure provided for in the first subparagraph of Article 93(2) of the Treaty against the grant by the Italian authorities of aids to the Italgrani company, save in so far as they concern aid for formation of stocks of agricultural products;

2. Orders the Commission to pay the costs.