Cases T-30/01 to T-32/01 and T-86/02 to T-88/02

Territorio Histórico de Álava — Diputación Foral de Álava and Others

v

Commission of the European Communities

‛State aid — Tax advantages granted by a territorial entity within a Member State — Tax exemptions — Decisions declaring aid schemes incompatible with the common market and requiring recovery of aid paid out — Classification as new aid or as existing aid — Operating aid — Principle of the protection of legitimate expectations — Principle of legal certainty — Decision initiating the formal investigation procedure under Article 88(2) EC — No need to adjudicate’

Judgment of the Court of First Instance (Fifth Chamber, Extended Composition), 9 September 2009 II ‐ 2929

Summary of the Judgment

The fact that the Court of First Instance has by an earlier order granted to a person leave to intervene in support of a party’s forms of order does not preclude the Court undertaking a fresh examination of the admissibility of its intervention. (see para. 95)

The adoption of a broad interpretation of the right to intervene of representative associations whose object is to protect their members in cases raising questions of principle liable to affect those members is intended to facilitate assessment of the context of such cases whilst avoiding multiple individual interventions which would compromise the effectiveness and proper course of the procedure. Accordingly, where actions for annulment are directed against Commission decisions declaring a tax exemption scheme illegal and incompatible with the common market and ordering recovery of aid paid out, a trade organisation which is a cross-sectoral confederation set up, inter alia, to represent and defend the interests of undertakings some of which are the actual beneficiaries of aid granted in accordance with those tax schemes and which, moreover, took part in the administrative procedure which led to the adoption of the decisions at issue, has an interest to intervene in such actions. (see paras 97-104)

The Treaty establishes different procedures according to whether the aid is existing or new. Whereas new aid must, under Article 88(3) EC, be notified in advance to the Commission and cannot be implemented before the procedure has culminated in a final decision, existing aid may, under Article 88(1) EC, be duly implemented as long as the Commission has not found it to be incompatible. Existing aid may therefore only be the subject, should the situation arise, of a decision of incompatibility producing effects for the future. Under Article 1(b)(v) of Regulation No 659/1999, in relation to the application of Article 88 EC, existing aid is, inter alia, ‘aid which is deemed to be an existing aid because it can be established that at the time it was put into effect it did not constitute an aid, and subsequently became an aid due to the evolution of the common market and without having been altered by the Member State’. In the context of control of State aid established by the Treaty and Regulation No 659/1999 it cannot be accepted, for the purposes of classifying a measure as existing aid, that the Commission can, by an implicit decision, adopt a position to the effect that a particular measure which has not been notified does not constitute State aid at the time when it is put into effect. Mere silence on the part of an institution cannot produce binding legal effects capable of affecting the interests of an individual other than where that result is expressly contemplated by a provision of Community law. Community law provides that, in certain specific instances, silence on the part of an institution is deemed to constitute a decision where the institution has been called upon to express its view and has not done so by the end of a given period. Where there are no such express provisions laying down a deadline by which an implied decision is deemed to have been taken and prescribing the content of the decision, an institution’s inaction cannot be deemed to be equivalent to a decision without calling into question the system of remedies instituted by the Treaty. The applicable rules in relation to State aid do not provide that the Commission’s silence is equivalent to an implicit decision that there has been no aid, in particular when the measures at issue have not been notified to it. The Commission, which has exclusive jurisdiction to determine whether aid is incompatible with the common market, has a duty, at the end of the preliminary stage of the investigation into a State measure, to adopt a decision vis-à-vis the Member State concerned: either that the State measure concerned does not constitute aid or that the measure, although constituting aid, is compatible; or that it is necessary to initiate the formal investigation procedure under Article 88(2) EC. Such a decision cannot be tacit and implied from the Commission’s silence. The mere fact that for a relatively long period the Commission did not initiate the formal investigation procedure in relation to a State measure cannot in itself confer on that measure the objective nature of existing aid, if it does constitute aid. Any uncertainty which may have existed in that regard may at most be regarded as having given rise to a legitimate expectation on the part of the recipients so as to prevent recovery of the aid paid in the past. (see paras 133, 134, 148-153)

The concept of ‘evolution of the common market’ in Article 1(b)(v) of Regulation No 659/1999, relating to the application of Article 88 EC, can be understood as a change in the economic and legal framework of the sector concerned by the measure in question. Such a change can, in particular, be the result of the liberalisation of a market initially closed to competition. On the other hand, that concept does not cover the situation where the Commission alters its appraisal on the basis only of a more rigorous application of the Treaty rules on State aid. In that connection, whether a State measure is existing or new aid cannot depend on a subjective assessment by the Commission and must be determined independently of any previous administrative practice the Commission may have had. It follows that the mere finding that there has been a development of State aid policy is not, in itself, sufficient to constitute an ‘evolution of the common market’ within the meaning of Article 1(b)(v) of Regulation No 659/1999, provided that the objective concept of State aid, as defined by Article 87 EC, is not itself altered. (see paras 173-175, 186)

Article 1(b)(ii) of Regulation No 659/1999, relating to the application of Article 88 EC, which provides that existing aid is to mean ‘authorised aid, that is to say, aid schemes and individual aid which have been authorised by the Commission or by the Council’, covers, inter alia, aid measures which have been the subject of a decision by the Commission declaring their compatibility, a decision which is, of necessity, explicit. The Commission must rule on the compatibility of the measures at issue in the light of the conditions laid down in Article 87 EC and, pursuant to Article 253 EC, state the reasons for such a decision. In addition, where it is claimed that individual measures have been granted pursuant to a previously authorised scheme, the Commission must, before initiating the procedure laid down in Article 88(2) EC, first examine whether or not the measures are covered by the scheme concerned, and, if they are, whether they satisfy the conditions laid down in the decision approving it. Only if a negative conclusion is reached after that examination can the measures concerned be regarded by the Commission as new aid. Conversely, if a positive conclusion is reached, the Commission must treat those measures as existing aid in accordance with the procedure laid down in Article 88(1) and (2) EC. So that it can be determined whether or not individual measures satisfy the conditions set in the decision approving the scheme at issue, that decision of approval must, of necessity, be explicit. (see paras 194-197)

The Commission is bound by the guidelines or notices that it issues in the area of supervision of State aid where they do not depart from the rules in the Treaty. Since the 1998 Guidelines on national regional aid provide that the Commission is to assess the compatibility of regional aid with the common market on the basis of those Guidelines from the time of their adoption, with the exception of aid proposals notified before their communication to the Member States and on which the Commission has not yet adopted a final decision, the application by the Commission of those Guidelines in decisions declaring to be illegal and incompatible with the common market general aid schemes which were put into effect, without being notified, before that adoption, cannot constitute an infringement of the principle of legal certainty. In any event, even if it could be held that there might have been an irregularity in the application of those Guidelines, that would render the decisions at issue unlawful and, consequently, lead to their annulment only in so far as that irregularity might affect their content. If it were established that, in the absence of that irregularity, the Commission would have arrived at exactly the same conclusion since the irregularity in question was, in any event, incapable of influencing the content of the contested decisions, it would not be necessary to annul those decisions. (see paras 214-220)

The Commission has, when applying Article 87(3) EC, a wide discretion, the exercise of which involves complex economic and social assessments which must be made in a Community context. Judicial review of the manner in which that discretion is exercised is confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with and to verifying the accuracy of the facts relied on and ascertaining that there has been no error of law, manifest error in the assessment of the facts or misuse of powers. (see para. 223)

Operating aid is intended to release an undertaking from costs which it would normally have to bear in its day-to-day management or normal activities. Tax schemes which partly relieve the recipient companies of tax on profits should be described as operating aid and not aid for investment or employment notwithstanding the fact that eligibility for those schemes is subject to obligations to make a minimum investment and to create a minimum number of jobs, since quantification of the tax exemptions at issue is based on the profits made by the recipient companies, without any correspondence to the size of the investment made or the number of jobs created. (see paras 226-229)

Since breach of the rights of the defence of a Member State is an irregularity which by its nature is subjective, such a breach, in an action for annulment of a Commission decision declaring aid measures illegal and incompatible with the common market and addressed to that Member state, can be raised only by the Member State concerned. (see paras 238, 239)

In the context of the Commission’s examination of aid proposals, the principle of observance of the rights of the defence requires that the Member State concerned be placed in a position in which it may effectively make known its views on the observations submitted by concerned third parties under Article 88(2) EC and on which the Commission proposes to base its decision and that, in so far as the Member State has not been afforded the opportunity to comment on such observations, the Commission may not incorporate them in its decision against that State. However, if such an infringement of the right to be heard is to result in an annulment, it must be established that, had it not been for such an irregularity, the outcome of the procedure might have been different. Such an irregularity cannot reside in the fact that the Commission did not take into account the comments of a Member State responding to a request by a concerned third party that the aid wrongly granted should be recovered, since that decision is not based on the request which was the subject of those observations and since the order for recovery of aid is the consequence which, logically, follows necessarily and solely from the fact that the Commission has first established that the aid at issue is illegal and incompatible with the common market. (see paras 241-244)

Whilst, until the adoption of Regulation No 659/1999 relating to the application of Article 88 EC, the Commission was not bound by any specific time-limits in respect of its examination of aid measures, the fundamental requirement of legal certainty nevertheless had the effect of preventing the Commission from indefinitely delaying the exercise of its powers. Since the assessment of the compatibility of State aid with the common market falls within its exclusive competence, the Commission is bound, in the interests of sound administration of the fundamental rules of the Treaty relating to State aid, to conduct a diligent and impartial examination of a complaint alleging the existence of aid that is incompatible with the common market. It follows that the Commission cannot prolong indefinitely its preliminary investigation into State measures that have been the subject of a complaint. Whether or not the duration of the investigation of a complaint is reasonable must be determined in relation to the particular circumstances of each case and, especially, its context, the various procedural stages to be followed by the Commission and the complexity of the case. A period of six and a half years between the time when the Commission became aware of the aid schemes at issue and the time when the Commission initiated the formal investigation procedure provided for in Article 88(2) EC does not, having regard to the background to those aid schemes, constitute an unreasonable delay which vitiates the preliminary examination procedure by infringing the principles of legal certainty and good administration, since, first, the tax measures at issue required a thorough examination of the national legislation as well as considerable work of gathering and analysing information both in relation to the tax system of the Member State concerned and the systems of fiscal autonomy in force in other Member States, and, second, the length of the procedure is largely attributable to the national authorities which, having failed to notify the schemes at issue, then declined to provide the appropriate information to the Commission, and because the Commission might, during that period, within the scope of its discretion in relation to State aid, have taken the view that other procedures concerning measures of a different nature but adopted by the same authorities and likely to raise the same type of legal issues, needed to be dealt with more quickly. (see paras 259-277)

A legitimate expectation that aid is lawful cannot be invoked unless that aid has been granted in compliance with the procedure laid down in Article 88 EC. In fact, a regional authority and a diligent businessman should normally be able to determine whether that procedure has been followed. Furthermore, since Article 88 EC makes no distinction between aid schemes and individual aid, those principles are equally applicable to aid schemes. However, a recipient of aid which is granted unlawfully, because it was not notified, is not precluded from relying on exceptional circumstances on the basis of which the recipient legitimately assumed the aid to be lawful, in order to oppose repayment of the aid. (see paras 278-282)

Failure to publish in the Official Journal of the European Union a specific notice warning recipients of aid granted illegally, that is when the Commission has not reached a final decision on its compatibility with the common market, as provided for in the 1983 Commission communication on illegal aid, cannot constitute an exceptional circumstance capable of justifying any expectation whatever that aid granted in such circumstances and without prior notification was lawful. Any other construction would amount to giving that communication a significance which is contrary to Article 88(3) EC. The Commission may adopt a policy as to how it will exercise its discretion in the form of measures such as guidelines, in so far as those measures contain rules indicating the approach which the institution is to take and do not depart from the rules of the Treaty. The risk attaching to illegally granted aid is a consequence of the practical effect of the obligation to notify laid down in Article 88(3) EC and does not depend on whether or not the notice provided for in the abovementioned communication is published in the Official Journal. In particular, if the system of monitoring State aid established by the Treaty is to be maintained, the recovery of illegally granted aid cannot be rendered impossible merely because there was no publication of such a notice by the Commission. (see paras 305-308)

Whilst the principle of the protection of legitimate expectations is one of the fundamental principles of the Community, traders cannot have a legitimate expectation that an existing situation which is capable of being altered by the Community institutions in the exercise of their discretionary power will be maintained. That principle clearly applies in the field of competition policy, which is characterised by a wide discretion on the part of the Commission. That is the situation when the question is whether the conditions under which no recovery of aid granted illegally will be sought, depending on whether there are exceptional circumstances, are satisfied. Accordingly, decisions concerning other cases in the same area merely provide guidance and cannot justify any legitimate expectation, since the circumstances are specific to each case. (see paras 310-312)

In the procedure for controlling State aid, the parties concerned, within the meaning of Article 88(2) EC, cannot themselves claim a right to debate the issues with the Commission in the same way as may the Member State responsible for granting the aid. (see para. 332)