Judgment of the Court of First Instance (First Chamber, extended composition) of 24 October 1997. - British Steel plc v Commission of the European Communities. - ECSC - Action for annulment - State aid - Individual decisions authorizing the grant of State aid to steel undertakings - Lack of competence - Protection of legitimate expectations - Incompatibility with Treaty provisions - Discrimination - Inadequate statement of reasons - Breach of the rights of the defence - Articles 4(b) and (c) and 15 and the first and second paragraphs of Article 95 of the Treaty. - Case T-243/94.



European Court reports 1997 Page II-01887



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

1 Procedure - Intervention - Objection of inadmissibility not raised by the defendant - Inadmissible - Absolute bar to proceeding with a case - Consideration by the Court of its own motion

(ECSC Statute of the Court of Justice, Arts 34, second para., and 46, first para.; Rules of Procedure of the Court of First Instance, Arts 113 and 116(3))

2 ECSC - Aid to the steel industry - Authorization by the Commission - General decisions and individual decisions - Adoption of individual decisions to authorize aid not falling within the categories of aid authorized by a general decision - Whether permissible

(ECSC Treaty, Arts 2, 3, 4, 5 and 95)

3 Community law - Principles - Protection of legitimate expectations - Limits - Prudent and discriminating traders

4 ECSC - Aid to the steel industry - Authorization by the Commission - Conditions - Reconciliation of Treaty objectives - Commission's discretion - Proportionality - Account taken of political, economic and social considerations - Review by the Court

(ECSC Treaty, Arts 2, 3, 4, 5, 33, first para., and 95)

5 ECSC - Aid to the steel industry - Authorization by the Commission - Conditions - No distortion of competition contrary to the common interest

(ECSC Treaty, Arts 3 and 4)

6 Acts of the institutions - Statement of reasons - Obligation - Scope - ECSC decision

(ECSC Treaty, Arts 5, 15 and 33, second para.)

7 ECSC - Aid to the steel industry - Authorization by the Commission - Procedure - Assent of Council - Procedures

(ECSC Treaty, Art. 95)

Summary

8 Pursuant to the second paragraph of Article 34 and the first paragraph of Article 46 of the ECSC Statute of the Court of Justice and Article 116(3) of the Rules of Procedure of the Court of First Instance, interveners are required to accept the case as they find it at the time of their intervention and the submissions made in their applications are to be limited to supporting the submissions of one of the parties. It follows that an intervener has no standing to rely on an objection of inadmissibility that has not been raised in the submissions of the defendant.

On the other hand, those provisions do not prevent an intervener from submitting arguments different from those of the party which it supports, provided that the intervention seeks at all times to support the forms of order sought by that party.

Moreover, under Article 113 of the Rules of Procedure, the Court may at any time of its own motion consider whether there exists any absolute bar to proceeding with a case, including any raised by the interveners.

9 In the scheme of the ECSC Treaty, Article 4(c) does not preclude the Commission from authorizing, by way of derogation, aid envisaged by the Member States and compatible with the objectives of the Treaty, on the basis of the first and second paragraphs of Article 95, in order to deal with unforeseen situations.

The first and second paragraphs of Article 95 empower the Commission to adopt a decision or a recommendation with the unanimous assent of the Council and after the ECSC Consultative Committee has been consulted, in all cases not provided for by the Treaty in which such a decision or recommendation appears necessary in order to attain, within the common market in coal and steel and in accordance with Article 5, one of the objectives of the Community set out in Articles 2, 3 and 4. They provide that any decision or recommendation so made is to determine what penalties, if any, may be imposed.

The Commission is thus competent, in the absence of any specific Treaty provision, to adopt any general or individual decision necessary for attainment of the objectives of the Treaty. The first and second paragraphs of Article 95, which confer that power upon it, do not give any specific indication of the scope of the decisions which the Commission may adopt. In those circumstances, it is for the Commission to assess in each case which of the two kinds of decision, general or individual, is the most appropriate to attainment of the objectives pursued.

A general decision, such as the Steel Aid Code, is only intended to authorize generally, and subject to certain conditions, derogations from the prohibition of aid for certain categories of aid which it lists exhaustively. Aid not falling into categories which the Code exempts from that prohibition therefore remains subject exclusively to Article 4(c). It follows that, where such aid nevertheless proves necessary to attain the objectives of the Treaty, the Commission is empowered to rely on Article 95 of the Treaty in order to deal with that unforeseen situation, if need be by means of an individual decision.

10 There is no justification for economic operators having any 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 is particularly so in a sphere such as that of the common market in steel, the proper functioning of which involves the obvious need for constant adjustments to fluctuations in the economic situation. Moreover, since a prudent and discriminating trader must foresee the adoption of Community measures intended to deal with clear crisis situations, the principle of the protection of legitimate expectations cannot be relied upon.

In that context, a steel undertaking of very substantial economic importance which participates on the ECSC Consultative Committee should realize that an overriding need to adopt effective measures to safeguard the interests of the European steel industry may arise and that recourse to Article 95 of the Treaty may justify the adoption of ad hoc decisions by the Commission, even though a Steel Aid Code is in force, since the decisions and the code pursue different objectives.

11 In the context of implementation of the ECSC Treaty, the Commission considers in its discretion whether aid intended to accompany the restructuring measures in the steel industry is compatible with the fundamental principles of the Treaty. In view of the diversity of the objectives determined by the Treaty, the Commission's role consists in ensuring that those various objectives are reconciled at all times, exercising the discretion available to it in order to meet the requirements of the common interest.

In that regard, the rationalization of the European steel industry through the restructuring of certain groups, the closure of obsolete or uncompetitive plant, the reduction of excess capacity, privatization of a group in order to ensure its viability and, within reasonable limits, the shedding of jobs, contribute to attainment of the objectives of the Treaty, having regard to the sensitive nature of the steel industry and the fact that continuation, or indeed aggravation, of the crisis is liable to give rise to extremely serious and enduring disturbances of the economies of the Member States concerned. It follows that Commission decisions authorizing the grant of State aid for the purposes of such rationalization are intended to safeguard the common interest, in accordance with the objectives of the Treaty.

However, the Commission would under no circumstances be entitled to authorize the granting of State aid which was not necessary to attain the objectives of the Treaty and would be likely to give rise to distortions of competition on the common market in steel.

Since the exercise of the Commission's discretion in relation to State aid involves complex economic and technical assessments, the Court's review of the legality of decisions adopted under the first paragraph of Article 33 of the ECSC Treaty must be limited to verifying that the facts are materially accurate and that there has been no manifest error of assessment.

Moreover, for those decisions, adopted in relation to a steel market characterized by excess production capacity, to be regarded as in conformity with the principle of proportionality, it is necessary to verify whether they require the beneficiary undertakings to make appropriate closures and reductions of capacity as a counterpart to the aid authorized.

To that end, no exact quantitative ratio has to be established between the amount of the aid and the size of the required cuts in production capacity. On the contrary, the factors which are liable to influence the exact amounts of the aid to be authorized do not consist simply in the number of tonnes of production capacity having to be cut; there are other factors, too, which vary from one region of the Community to another, such as the restructuring effort made, the regional and social problems occasioned by the crisis in the steel industry, technical change and the adaptation of undertakings to suit market requirements. It follows that the Commission's assessment cannot be subjected to a review based solely on economic criteria. The Commission may legitimately take account of a wide variety of political, economic and social considerations in exercising its discretion under Article 95 of the Treaty.

12 Although any aid to the steel industry is likely to favour one undertaking in relation to another, the Commission cannot approve aid the grant of which may result in distortions of competition to an extent contrary to the common interest. Specifically, the Commission's obligation under Article 3 of the Treaty to act in the common interest does not mean that it must act in the interest of all those involved without exception, for its function does not entail an obligation to act only on condition that no interest is affected. On the other hand, when taking action it must weigh up the various interests, avoiding harmful consequences where the decision to be taken reasonably so permits. The Commission may, in the general interest, exercise its decision-making power according to the requirements of the situation, even to the detriment of certain individual interests.

13 It is clear from the fourth indent of the second paragraph of Article 5 and the first paragraph of Article 15 of the Treaty, and from the general principles thereof that the Commission has an obligation to state reasons when adopting general or individual decisions, whatever the legal basis chosen for that purpose.

The statement of reasons must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the Community judicature to carry out its review. It is not necessary for the reasoning to go into all the relevant facts and points of law. The act in question must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. Moreover, the statement of the reasons on which a measure is based must be appraised in relation, inter alia, to the interest which the addressees or other persons concerned by the measure for the purposes of the second paragraph of Article 33 of the ECSC Treaty may have in obtaining an explanation. Where there was close involvement in the procedure preparatory to the adoption of the decisions, there is less need for an extremely detailed statement of reasons concerning the facts on which the contested decisions were based.

14 Whilst Article 95 provides that a Commission decision authorizing aid to the steel industry must be taken with the unanimous assent of the Council, it does not lay down the procedures under which the Commission must seek that assent: in particular, it does not state clearly whether the Commission must submit a draft decision to the Council.

Parties

In Case T-243/94,

British Steel plc, a company incorporated under English law, established in London, represented by Richard Plender QC, of the Bar of England and Wales, and by William Sibree, Solicitor, with an address for service in Luxembourg at the Chambers of Elvinger, Hoss and Prussen, 15 Côte d'Eich,

applicant,

supported by

SSAB Svenskt Stål AB, a company incorporated under Swedish law, established in Stockholm, represented by John Boyce and Philip Raven, Solicitors, with an address for service in Luxembourg at the Chambers of Elvinger, Hoss and Prussen, 15 Côte d'Eich,

Det Danske Stålvalseværk A/S, a company incorporated under Danish law, established in Frederiksværk (Denmark), represented by Jonathan Alex Lawrence, Solicitor, with an address for service in Luxembourg at the Chambers of Ernst Arendt, 8-10 Rue Mathias Hardt,

interveners,

v

Commission of the European Communities, represented by Nicholas Khan and Ben Smulders, of its Legal Service, acting as Agents, with an address for service in Luxembourg at the office of Carlos Gómez de la Cruz, Wagner Centre, Kirchberg,

defendant,

supported by

Council of the European Union, represented by Rüdiger Bandilla, Director in its Legal Service, and John Carbery, Legal Adviser, acting as Agents, with an address for service in Luxembourg at the office of Alessandro Morbilli, Manager of the Legal Affairs Directorate of the European Investment Bank, 100 Boulevard Konrad Adenauer,

Italian Republic, represented by Umberto Leanza, Head of the Legal Service, 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,

Kingdom of Spain, represented by Alberto Navarro González, Director General for Community Legal and Institutional Coordination, assisted initially by Gloria Calvo Díaz, Abogado del Estado, and then by Luis Perez de Ayala Beccerril, Abogado del Estado, with an address for service in Luxembourg at the Spanish Embassy, 4-6 Boulevard Emmanuel Servais,

Ilva Laminati Piani SpA, a company incorporated under Italian law, established in Rome, represented by Aurelio Pappalardo, of the Trapani Bar, and Massimo Merola, of the Rome Bar, with an address for service in Luxembourg at the Chambers of Alain Lorang, 51 Rue Albert I,

interveners,

APPLICATION for the annulment of Commission Decision 94/258/ECSC of 12 April 1994 concerning aid to be granted by Spain to the public integrated steel company Corporación de la Siderurgia Integral (CSI) and Commission Decision 94/259/ECSC of 12 April 1994 concerning aid to be granted by Italy to the public steel sector (Ilva group) (OJ 1994 L 112, pp. 58 and 64 respectively),

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES

(First Chamber, Extended Composition),

composed of: A. Saggio, President, A. Kalogeropoulos, V. Tiili, A. Potocki and R.M. Moura Ramos, Judges,

Registrar: H. Jung,

having regard to the written procedure and further to the hearing on 25 February 1997,

gives the following

Judgment

Grounds

Legal background

1 The Treaty establishing the European Coal and Steel Community (`the Treaty') prohibits in principle State aid to the steel industry by providing in Article 4(c) that `subsidies or aids granted by States, or special charges imposed by States, in any form whatsoever' are recognized as incompatible with the common market for coal and steel and are accordingly to be abolished and prohibited within the Community, as provided in the Treaty.

2 The first and second paragraphs of Article 95 of the Treaty provide:

`In all cases not provided for in this Treaty where it becomes apparent that a decision or recommendation of the Commission is necessary to attain, within the common market in coal and steel and in accordance with Article 5, one of the objectives of the Community set out in Articles 2, 3 and 4, the decision may be taken or the recommendation made with the unanimous assent of the Council and after the consultative Committee has been consulted.

Any decision so taken or recommendation so made shall determine what penalties, if any, may be imposed'.

3 In order to meet the needs of restructuring the steel sector, the Commission relied on the first two paragraphs of Article 95 of the Treaty in order to establish, from the beginning of the 1980s, a Community scheme under which the grant of State aid to the steel industry could be authorized in a limited number of cases. That scheme has been subject to successive amendments in order to resolve the specific economic difficulties of the steel industry. Thus, the Community Steel Aid Code in force during the period under consideration in this case is the fifth in the series, having been established by Commission Decision No 3855/91/ECSC of 27 November 1991 establishing Community rules for aid to the steel industry (OJ 1991 L 362, p. 57; hereinafter `the Aid Code'). The recitals in the preamble to that decision show that that code, like its predecessors, establishes a Community system intended to cover aid, whether specific or non-specific, financed by Member States in any form whatsoever. The Code does not authorize either operating or restructuring aid, save in the case of aid for closure.

The facts

4 In view of the deterioration of the economic and financial situation in the steel industry, the Commission presented a restructuring plan to the Council and the European Parliament on 23 November 1992 in its Communication SEC (92) 2160 final entitled `Towards greater competitiveness in the steel industry: the need of further restructuring'. That plan was prompted by the finding that structural overcapacity persisted, and was aimed primarily at achieving, through the voluntary participation of steel companies, a substantial and definitive capacity reduction of the order of at least 19 million tonnes. With that aim in view, it proposed a series of accompanying measures in the social field, together with financial incentives including Community aid. In parallel with that plan, the Commission gave an exploratory mandate to an independent expert, Mr Braun, former Director General of the Directorate-General for industry at the Commission, his essential task being to list projects for the closure of steel undertakings over the period envisaged in the above communication, which covered the years 1993 to 1995. On 29 January 1993 Mr Braun, having contacted the heads of some 70 steel undertakings, submitted his report, entitled `Current or Planned Restructuring in the Steel Industry'.

5 In its Conclusions of 25 February 1993 the Council welcomed the broad outlines of the programme submitted by the Commission following the Braun Report, with a view to achieving a substantial reduction in excess production capacity. The enduring restructuring of the steel industry was to be facilitated by `a package of supporting measures of limited duration which strictly comply with the rules on control of State aids', it being understood in relation to such aids that `the Commission [confirmed] its commitment to rigorous and objective application of the aids code and [would] ensure that any derogations proposed to the Council under Article 95 of the Treaty contribute fully to the required overall effort to reduce capacity. The Council [would] act promptly on [those] proposals, on the basis of objective criteria'.

6 Accordingly, the Council and the Commission indicated in their joint statement entered in the minutes of the Council meeting of 17 December 1993 - which refer to the global agreement reached within the Council to grant assents under the first and second paragraphs of Article 95 of the Treaty for State aid for the public undertakings Sidenor (Spain), Sächsische Edelstahlwerke GmbH (Germany), Corporación de la Siderurgia Integral (CSI, Spain), Ilva (Italy), EKO Stahl AG (Germany) and Siderurgia Nacional (Portugal) - that they `[believed] that the only way to secure a healthy EC steel industry, able to compete on the world market, [was] to put a permanent end to State subsidization of the steel industry and to close loss-making capacity. In giving its unanimous consent to the current Article 95 proposals, the Council [reaffirmed] its commitment to a strict application of the Steel Aid Code [...] and, in the absence of authorization under the Code, Article 4(c) of the ECSC Treaty. Without prejudice to the right of any Member State to request a decision under Article 95 of the ECSC Treaty, and in accordance with the Council conclusions of 25 February 1993, the Council [declared] its firm commitment to avoid any further Article 95 derogations in respect of aid for any individual companies'.

7 On 22 December 1993 the Council gave its assent in accordance with the first two paragraphs of Article 95 of the Treaty as regards the grant of the abovementioned aid intended to accompany the restructuring or privatization of the public undertakings concerned.

8 It was against that legal and factual background and with a view to facilitating further restructuring of the steel industry that, on 12 April 1994, following the Council's assent, the Commission adopted six ad hoc decisions on the basis of the first and second paragraphs of Article 95 of the Treaty, which authorize the granting of State aid not meeting the criteria permitting derogation, pursuant to the Aid Code, from Article 4(c) of the Treaty. In those six decisions the Commission authorized, respectively, the aid which Germany planned to grant to EKO Stahl AG, Eisenhüttenstadt (Decision 94/256/ECSC, OJ 1994 L 112, p. 45), the aid which Portugal planned to grant to Siderurgia Nacional (Decision 94/257/ECSC, OJ 1994 L 112, p. 52), the aid which Spain planned to grant to Corporación de la Siderurgia Integral (CSI) (Decision 94/258/ECSC, OJ 1994 L 112, p. 58, hereinafter `Decision 94/258'), the grant by Italy of State aid to the public steel sector (Ilva steel group) (Decision 94/259/ECSC, OJ 1994 L 112, p. 64, hereinafter `Decision 94/259'), the aid which Germany planned to grant to Sächsische Edelstahlwerke GmbH, Freital/Sachsen (Decision 94/260/ECSC, OJ 1994 L 112, p. 71) and the aid which Spain planned to grant to Sidenor, an undertaking producing special steels (Decision 94/261/ECSC, OJ 1994 L 112, p. 77).

9 Those authorizations were made the subject, in accordance with the Council's assent, of `obligations corresponding to net capacity reductions of at least 2 million tonnes of crude steel and a maximum of 5.4 million tonnes of hot-rolled products' on the basis of the Commission's Communication to the Council and the European Parliament of 13 April 1994 [COM (94) 125 final], presenting an intermediate report on the restructuring of the steel industry and making suggestions for the consolidation of that process in the spirit of the conclusions reached by the Council on 25 February 1993.

Procedure

10 It was in those circumstances that, by application lodged at the Registry of the Court of First Instance on 27 June 1994, British Steel plc (hereinafter `British Steel') applied under Article 33 of the ECSC Treaty for the annulment of Decisions 94/258 (concerning the Spanish undertaking CSI) and 94/259 (concerning the Ilva group) of 12 April 1994, referred to above.

11 In parallel, two other actions were brought, one by the European Independent Steelworks Association (EISA) against the six decisions referred to above - 94/256 to 94/261 - (Case T-239/94), and the other by Wirtschaftsvereinigung Stahl, Thyssen Stahl AG, Preussag Stahl AG and Hoogovens Groep BV against Decision 94/259, authorizing the granting of State aid to the Ilva group (Case T-244/94).

12 In these proceedings the Council, the Italian Republic, the Kingdom of Spain and Ilva Laminati Piani SpA (hereinafter `Ilva') lodged applications at the Registry of the Court of First Instance on 25 October, 11 and 13 November and 19 December 1994 respectively for leave to intervene in support of the defendant. On 8 and 15 December 1994 respectively SSAB Svenskt Stål AB and Det Danske Stålvalseværk A/S lodged applications for leave to intervene in support of the applicant. By orders of 13 February and 6 March 1995, the President of the Second Chamber, Extended Composition, of the Court of First Instance granted those applications to intervene in support of the defendant and the applicant.

13 On 28 October 1994 British Steel lodged an application at the Registry of the Court of First Instance for measures of organization of procedure under Article 64(4) of the Rules of Procedure to the effect that the Court should order the Commission to produce the expert's reports drawn up by W.S. Atkins at the Commission's request concerning the feasibility of the plans for the restructuring of Ilva and CSI and the reports concerning those undertakings which Italy and Spain are required to submit to the Commission twice a year pursuant to Article 4 of the contested decisions to enable it to monitor compliance with the conditions laid down by those decisions. After receiving the observations of the Commission lodged on 9 December 1994, the Court of First Instance put a series of questions to the applicant, the Commission and Ilva concerning, first, the need to have access to the abovementioned reports in order to assess the propriety of the contested decisions and safeguard the rights of the defence and, secondly, the confidential nature or otherwise of the information contained in those reports, and invited the interveners to submit their observations on the applicant's request. The applicant, the Commission and Ilva replied to the questions and the interveners lodged their observations within the prescribed time-limit. In addition, as regards the question of confidentiality, the Commission forwarded to the Court of First Instance on 30 June 1995 the Atkins expert's report concerning CSI, with the information which the latter considered confidential deleted from it. The Commission explained that that report had been drawn up on the basis of an SRI expert's report and therefore did not contain the same kind of detailed analyses as the Atkins report on Ilva, which examined the possibilities of restructuring that undertaking on the basis of confidential commercial information, that being the reason for which a non-confidential version of it could not be disclosed. The Court took the view that the case should proceed before any decision was given on the application for measures of organization of procedure and notified that decision to the applicant by letter from the Registry of 20 July 1995.

14 On 8 August 1995 British Steel lodged a second application for measures of organization of procedure to the effect that the Court should order the Commission to produce the Atkins expert's report concerning Ilva and the SRI expert's report concerning CSI, if necessary after the two companies had respectively deleted all confidential information. The interveners were given an opportunity to submit their observations. The Court considered that it was unnecessary to give a decision on the second request at that stage of the procedure and notified that decision to the applicant by letter from the Registry of 26 October 1995.

15 By letter from the Registry of 3 December 1996 the Court put a series of questions to the Commission relating essentially to the information of which the applicant, in the alternative, sought disclosure in its first application for measures of organization of procedure, in the event of the Court's not considering it appropriate to accede to its request for production of the abovementioned expert's reports and to order other measures of organization of procedure. The Commission gave answers to those questions within the time allowed. Having regard to those answers, the Court took the view that it had at its disposal all the information necessary to assess the pleas in law put forward by the applicant and that production of the Atkins expert's reports concerning Ilva and the SRI report concerning CSI or the abovementioned reports from the Member States concerned was not necessary to ensure that the rights of the defence were safeguarded. Upon hearing the report of the Judge-Rapporteur it was decided to open the oral procedure without any preparatory inquiries. The parties presented oral argument and answered the questions put to them orally at the hearing on 25 February 1997.

Forms of order sought

16 The applicant, supported by SSAB Svenskt Stål, claims that the Court should:

- annul Decisions 94/258 and 94/259;

- order the Commission to pay the costs.

17 The intervener Det Danske Stålvalseværk claims that the Court should:

- annul Decisions 94/258 and 94/259;

- order the Commission to pay the costs, including those of the intervener.

18 The defendant, supported by the Council, the Italian Republic, and the Kingdom of Spain, contends that the Court should:

- dismiss the application;

- order the applicant to pay the costs.

19 Ilva claims that the Court should:

- dismiss the application as inadmissible and/or unfounded;

- order the applicant to pay the costs, including those incurred by Ilva.

Admissibility of the application

Arguments of the parties

20 British Steel maintains that it is an undertaking which is concerned, within the meaning of the second paragraph of Article 33 of the Treaty, by the contested decisions, which enable benefits to be conferred on undertakings in competition with it. Accordingly, it rejects Ilva's argument to the effect that the six decisions mentioned above, adopted by the Commission on 12 April 1994, constitute an indivisible whole resulting from a political compromise within the Council, with the result that this application, concerned only with the annulment of two of those decisions, cannot be regarded as admissible because any annulment of the two contested decisions would lead to an unacceptable modification of a political agreement of the highest level. In particular that argument has no relevance to the admissibility of the application since the applicant's right to challenge the two decisions which it considers to be of direct and individual concern to it cannot be called in question merely because of a political connection between the contested decisions and other decisions adopted by the Commission in the same context.

21 For its part, Ilva concedes first of all that in its capacity as an intervener it is not entitled to raise the question of the admissibility of the application in this case, since the Commission did not do so in the written procedure. It points out however that, under Article 113 of its Rules of Procedure, the Court of First Instance may at any time of its own motion consider whether there is any absolute bar to proceeding with the case, and should therefore consider Ilva's arguments.

22 In the event, it maintains that the two decisions contested by British Steel constitute important aspects of an overall political agreement concluded within the Council with a view to restructuring the Community steel industry. The application in this case should therefore be declared inadmissible, to the extent to which it is not limited to challenging the criteria used by the Commission in evaluating the conditions for the grant of the specific aid authorized by the two contested decisions but challenges the very basis of the political agreement reached at Community level and endorsed by the six decisions adopted by the Commission on 12 April 1994. Indeed, the annulment of either or both of the decisions concerned would lead to a change in the political compromise reached within the Council. Accordingly, in its view, the applicant may only contest all six decisions together.

Findings of the Court

23 It is appropriate, before examining whether there is a bar to proceeding with the case, as suggested by the intervener Ilva, to consider whether in the light of the applicable Rules of Procedure it is permissible for Ilva to raise such a matter.

24 Pursuant to the second paragraph of Article 34 and the first paragraph of Article 46 of the ECSC Statute of the Court of Justice, submissions made in an application to intervene are to be limited to supporting the submissions of one of the parties. Moreover, Article 116(3) of the Rules of Procedure requires interveners to accept the case as they find it at the time of their intervention.

25 It follows that, since the defendant did not raise the question of admissibility of the application in the written procedure, the intervener Ilva has no standing to submit that there is a bar to proceeding with the case and the Court of First Instance is not therefore required to consider the grounds of inadmissibility on which it relies (see, in that connection, Case C-313/90 CIRFS and Others v Commission [1993] ECR I-1125).

26 However, under Article 113 of the Rules of Procedure, the Court may at any time of its own motion consider whether there exists any absolute bar to proceeding with a case, including any raised by the interveners (see, in that connection, Joined Cases C-305/86 and C-160/87 Neotype Techmashexport v Commission [1990] ECR I-2945 and Case C-225/91 Matra v Commission [1993] ECR I-3203).

27 A bar to proceeding with the case is absolute only if it relates to an essential condition for the admissibility of an action brought under the second paragraph of Article 33 of the Treaty.

28 In this case the ground of inadmissibility to which the intervener refers does not relate to any such essential condition and it is not therefore appropriate for the Court to consider it of its own motion. Essentially, Ilva merely contends that an undertaking concerned by a decision forming part of a `package' is not entitled to challenge separately the decision affecting it but is required, in order to contest it, to bring proceedings for annulment against all the decisions in the `package'. However, not only is no such condition of admissibility imposed by the relevant provisions of the Treaty but, in addition, it would conflict entirely with the wording and spirit of the second paragraph of Article 33 of the Treaty, which expressly upholds the right of undertakings and associations of undertakings to institute proceedings against individual decisions concerning them.

29 It follows that the Court cannot in any event find the action inadmissible on the ground referred to by Ilva, since the alleged condition of admissibility on which it is based is incompatible with the right conferred on undertakings by Article 33 of the Treaty to bring proceedings against any individual decisions of concern to them.

Substance

30 In support of its action for annulment, the applicant relies on four pleas in law, alleging respectively lack of competence of the Commission to adopt the contested decisions, breach of the principle of the protection of legitimate expectations, infringement of the ECSC Treaty or rules of law concerning its application, and infringement of essential procedural requirements.

1. The first plea in law: lack of competence of the Commission

Arguments of the parties

31 British Steel considers that the Commission was not competent to adopt the contested decisions. The Aid Code constitutes an exhaustive and binding legal regime, in that it prohibits the authorization of any aid incompatible with its provisions. In particular, Article 1 of the Code expressly prohibits all operating and investment aid. The Commission therefore lacked the power to authorize the grant of such aid by the two contested decisions. The Commission cannot purport to arrogate such a power to itself under the first paragraph of Article 95 of the Treaty since the Aid Code itself was adopted by the Commission under Article 95 and constitutes a definitive assessment of what is necessary to achieve the objectives of the Treaty, unless it is itself amended by a general decision.

32 In that connection, the applicant states that, if the Commission envisages authorizing aid not fulfilling the conditions laid down in the Code, it must modify the actual text of the Code by a general decision applying to all the undertakings concerned. Indeed, the Aid Code would become completely useless if it were circumvented by individual decisions which the Commission was prompted to adopt to take account of particular cases. In this case, the Commission did not amend the Aid Code but merely adopted decisions which, contravening the rules of the Code, improperly granted benefits to certain public undertakings at the expense of competitors which were not granted the benefit of State aid.

33 The intervener Det Danske Stålvalseværk supports the applicant's view that the Aid Code constitutes a binding and exhaustive legal regime. The Commission is therefore required scrupulously to behave in the manner which it itself prescribed under Article 95 of the Treaty and is not competent to adopt an individual decision conflicting with the criteria of the Aid Code. That code is intended to regulate a sector which is extremely sensitive as far as the proper functioning of the common market in steel is concerned, in that State aid contrary to the fundamental objectives of the Treaty is liable to create difficulties for undertakings which have used their own resources to undertake restructuring and privatization efforts. It provides the appropriate legal basis for the adoption of individual decisions conforming with its provisions. However, in this case, the Commission adopted the contested decisions on the basis of Article 95 of the Treaty for the sole purpose of evading the procedure and rules laid down by the Aid Code.

34 The Commission states that the various aid codes were adopted under Article 95 of the ECSC Treaty and thus have the same legal basis as the contested decisions. The legal value of those measures is therefore the same and the aid code in force cannot be regarded as definitive and binding. On the contrary, it merely makes clear the Commission's position when it was adopted concerning the aid which it regarded as compatible with the Treaty. The Commission is entitled to examine the compatibility with the Treaty of other forms of aid not provided for by the Code itself, having regard in particular to the fact that the steel market often experiences extremely serious crises. In this case, the course of amending the Aid Code, proposed by the applicant, would not have been practicable in that it would have led to general authorization for restructuring aid, whereas the adoption of the contested individual decisions, in the Commission's view, constitutes a much more restrictive route to the authorization of aid. The Commission was therefore not indifferent as between the amendment of the Aid Code and the adoption of the decisions at issue; each course of action constituted a response to a very different situation.

35 The Council considers that, in adopting the Aid Code, the Commission did not exhaust its powers under the first and second paragraphs of Article 95 of the Treaty and that it therefore was empowered to authorize the grant of aid of the kind covered by the decisions at issue. According to the Council, cases may arise where a further Commission decision is necessary to attain one of the objectives of the Community set out in Articles 2, 3 and 4 of the Treaty, even where there is an aid code laying down the rules intended to apply to all State aid to the steel industry. In particular, the Fifth Aid Code merely set out the measures which the Commission then considered compatible with the Treaty but that was not an exhaustive statement and the Commission was therefore free, should the need arise, to have recourse to Article 95 for other decisions, provided that they conformed with the conditions laid down by that article. In this case, it was necessary, in the Council's opinion, to adopt a global strategy to cope with the increasingly serious crisis in the steel industry and to achieve reductions in the capacity of the European steel undertakings; however, such a strategy did not preclude assistance being granted to undertakings through the accompanying measures adopted as part of the overall programme of capacity reductions.

36 According to the Italian Republic, the implication of the applicant's view would be to confer on the Aid Code the power to amend substantially the first and second paragraphs of Article 95 of the Treaty. In other words, according to that view, that code has the effect of exhausting the source from which it derives. However, Article 95 is a general provision whose application cannot be prohibited or limited by a provision of a lower order. It follows that both the Aid Code and the contested decisions at issue are of the same rank in the hierarchy of norms and have the same legal status. Moreover, the Aid Code is concerned only with certain categories of aid, defined in Articles 2 to 5 thereof. No other kind of public financial intervention in favour of steel undertakings is regulated by, or, therefore, subject to, the Aid Code. In conclusion, the legality of the individual decisions at issue can be assessed not by reference to that code but only on the basis of Article 95 of the Treaty.

37 According to the Kingdom of Spain, the Commission legitimately used the powers conferred on it by the Treaty, without at any time overstepping the prescribed limits. Article 95 is the appropriate basis for the adoption of decisions intended to remedy situations calling for effective Community action with a view to attainment of the objectives set out in the Treaty, where the Community institutions are not vested with the requisite powers for that purpose. In that connection, there is a parallel between that article and Article 235 of the EC Treaty. The Aid Code, on the one hand, and the contested decisions, on the other, have the same legal basis but differ in scope: they both constitute a response to the market situation prevailing in the steel industry when they were adopted. Against that background, the Commission was empowered (and required) to adopt the measures necessary to deal with crises, relying on Article 95 as a legal basis, and it cannot be inferred from the existence of an aid code that the Commission wished to relinquish its discretionary power.

38 Ilva too contends that the Commission was competent to adopt the contested decisions under Article 95 of the Treaty. That provision enables it to deal, by means of exceptional decisions, whether of a general or individual nature, with any unforeseeable and extraordinary situation which might arise. Thus, if Article 95 constitutes an adequate legal basis for the Aid Code, there is no reason, in Ilva's view, for the position to be any different regarding the adoption of individual decisions. It is for the Commission to decide whether it is appropriate to adopt a general decision or an individual decision, according to the circumstances. The Aid Code is of only limited scope. It indicated that certain categories of aid pursuing certain Treaty objectives were compatible with the Treaty and was not intended to prohibit aid not falling within its scope. Consequently, aid not conforming with the provisions of the Code may be authorized under the procedure provided for in Article 95 of the Treaty.

Findings of the Court

39 It must first be pointed out that, in fact, although alleging that the Commission `lacks competence' to adopt the decisions at issue, the applicant maintains, essentially, by its first plea that the two contested decisions run counter to the Aid Code and thereby contravene the principle that an act of general application cannot be amended by an individual decision.

40 It is appropriate first to consider the legal context of the contested decisions. Article 4(c) of the Treaty prohibits, in principle, State aid within the European Coal and Steel Community to the extent to which it is liable to undermine attainment of the essential objectives of the Community laid down by the Treaty, in particular the establishment of conditions of free competition. According to that provision, `[t]he following are recognized as incompatible with the common market for coal and steel and shall accordingly be abolished and prohibited within the Community, as provided in this Treaty: ... (c) subsidies or aids by States ... in any form whatsoever'.

41 However, the existence of such a prohibition does not mean that all State aid within the sphere of the ECSC must be regarded as incompatible with the objectives of the Treaty. Article 4(c), interpreted in the light of all the objectives of the Treaty, as defined by Articles 2 to 4 thereof, is not intended to impede the grant of State aid capable of contributing to attainment of the objectives of the Treaty. It reserves to the Community institutions the right to assess the compatibility with the Treaty and, if appropriate, to authorize the grant of such aid, in the area covered by the Treaty. That analysis is confirmed by the judgment in Case 30/59 Steenkolenmijnen in Limburg v High Authority [1961] ECR 1, legal grounds, part B.I.1.b, at p. 22, in which the Court held that, just as certain non-State financial assistance to coal and steel-producing undertakings, authorized by Articles 55(2) and 58(2) of the Treaty, can be allocated only by the Commission or with its express authorization, Article 4(c) must similarly be interpreted as conferring on the Community institutions exclusive competence with regard to aid within the Community.

42 In the scheme of the Treaty, Article 4(c) does not therefore prevent the Commission from authorizing, by way of derogation, aid envisaged by the Member States and compatible with the objectives of the Treaty, on the basis of the first and second paragraphs of Article 95, in order to deal with unforeseen situations (see Case 9/61 Netherlands v High Authority [1962] ECR 213, at 233).

43 The abovementioned provisions of Article 95 empower the Commission to adopt a decision or a recommendation with the unanimous assent of the Council and after the ECSC Consultative Committee has been consulted, in all cases not provided for by the Treaty in which such a decision or recommendation appears necessary in order to attain, within the common market in coal and steel and in accordance with Article 5, one of the objectives of the Community set out in Articles 2, 3 and 4. They provide that any decision or recommendation so made is to determine what penalties, if any, may be imposed. It follows that, to the extent to which, in contrast with the EC Treaty, the ECSC Treaty confers on the Commission or the Council no specific power to authorize State aid, the Commission is empowered, by the first and second paragraphs of Article 95, to take all measures necessary to attain the objectives of the Treaty and, therefore, to authorize, under the procedure thereby established, such aid as seems to it to be necessary to attain those objectives.

44 The Commission is thus competent, in the absence of any specific Treaty provision, to adopt any general or individual decision necessary for attainment of the objectives of the Treaty. The first and second paragraphs of Article 95, which confer that power upon it, do not give any specific indication of the scope of the decisions which the Commission may adopt. In those circumstances, it is for the Commission to assess in each case which of the two kinds of decision, general or individual, is the most appropriate to attainment of the objectives pursued.

45 In the sphere of State aid, the Commission has used the legal instrument constituted by the first and second paragraphs of Article 95 of the Treaty in two different ways. First, it has adopted general decisions - the `Aid Codes' - allowing a general derogation from the prohibition of State aid regarding certain specified categories of aid. Secondly, it has adopted individual decisions authorizing certain types of specific aid on an exceptional basis.

46 In this case, the problem is, therefore, to determine the respective object and scope of the Aid Code and of the contested individual decisions.

47 It should be borne in mind that the aid code applicable in the period covered by the contested decisions was established by Commission Decision No 3855/91 of 27 November 1991, cited above. This was the Fifth Aid Code which, as provided in Article 9 thereof, entered into force on 1 January 1992 and applied until 31 December 1996. Based on the first and second paragraphs of Article 95 of the Treaty, that code was expressly stated to continue the series of earlier codes (see, in particular, Commission Decisions Nos 3484/85/ECSC of 27 November 1985 and 322/89/ECSC of 1 February 1989 establishing Community rules for aid to the steel industry, OJ 1985 L 340, p. 1, and OJ 1989 L 38, p. 8, respectively) by reference to which it may therefore be interpreted. It may be seen from its preamble (see in particular point I of the grounds of Decision No 3855/91) that it was intended in the first place `not to deprive the steel industry of aid for research and development or for bringing plants into line with new environmental standards'. In order to reduce production overcapacity and restore balance to the market, it also authorized, under certain conditions, `social aid to encourage the partial closure of plants or finance the permanent cessation of all ECSC activities by the least competitive enterprises'. Finally, it expressly prohibited operating or investment aid, with the exception of `regional investment aid in certain Member States'. The possibility of such regional aid was available to undertakings established in Greece, Portugal or the former German Democratic Republic.

48 The two decisions at issue, for their part, were adopted by the Commission on the basis of the first and second paragraphs of Article 95 of the Treaty for the purpose, according to the preambles to those decisions, of facilitating the restructuring of public steel undertakings experiencing serious difficulties in two Member States, Spain and Italy, in which the steel industry was endangered by the severe deterioration of the Community steel market. With regard more particularly to Ilva, the essential aim of the aid in question was privatization of the steel group which had until then benefited from loans granted as a result of the unlimited liability of the single shareholder provided for in Article 2362 of the Italian Civil Code (points II and IV of the grounds). The Commission made clear that the very difficult economic situation confronting the Community steel industry was accounted for by largely unforeseeable economic factors. It considered therefore that it was facing an exceptional situation not specifically provided for in the Treaty (point IV of the grounds).

49 A comparison of the Fifth Aid Code with the two contested decisions thus makes it clear that those various measures have the same legal basis, namely the first and second paragraphs of Article 95 of the Treaty, and derogate from the general prohibition of aid laid down as a principle by Article 4(c) of the Treaty. Their scope is different: the Code refers in general to certain categories of aid which it regards as compatible with the Treaty and the contested decisions authorize, for exceptional reasons and on one occasion only, aid which could not in principle be regarded as compatible with the Treaty.

50 In that light, the applicant's view that the Code is binding, exhaustive and definitive cannot be upheld. The Code constitutes a binding legal framework only for the types of aid enumerated by it which are compatible with the Treaty. In relation thereto, it establishes a comprehensive system intended to ensure uniform treatment, in the context of a single procedure, for all aid within the categories which it defines. The Commission is only bound by that system when assessing the compatibility with the Treaty of aid covered by the Code. It cannot therefore authorize such aid by an individual decision conflicting with the general rules established by that code (see Case 113/77 NTN Toyo Bearing and Others v Council [1979] ECR 1185 (the `ball bearings case'); Case 118/87 ISO v Council [1979] ECR 1277; Case 119/77 Nippon Seiko and Others v Council and Commission [1979] ECR 1303; Case 120/77 Koyo Seiko and Others v Council and Commission [1979] ECR 1337; Case 121/77 Nachi Fujikoshi and Others v Council [1979] ECR 1363 and Joined Cases 140/82, 146/82, 221/82 and 226/82 Walzstahl-Vereinigung and Thyssen v Commission [1984] ECR 951, and Joined Cases 33/86, 44/86, 110/86, 226/86 and 285/86 Peine-Salzgitter and Hoogovens v Commission [1988] ECR 4309, and CIRFS v Commission, cited above).

51 Conversely, aid not falling within the categories exempted from the prohibition by the provisions of the Code may benefit from an individual derogation from that prohibition if the Commission considers, in the exercise of the discretion which it enjoys under Article 95 of the Treaty, that such aid is necessary for attainment of the objectives of the Treaty. The Aid Code is only intended to authorize generally, and subject to certain conditions, derogations from the prohibition of aid for certain categories of aid which it lists exhaustively. The Commission is not competent under the first and second paragraphs of Article 95 of the Treaty, which are concerned only with cases not provided for by the Treaty (see Netherlands v High Authority, cited above, paragraph 2), to prohibit certain categories of aid, since such a prohibition is already imposed by the Treaty itself, in Article 4(c). Aid not falling into categories which the Code exempts from that prohibition thus remains subject exclusively to Article 4(c). It follows that, where such aid nevertheless proves necessary to attain the objectives of the Treaty, the Commission is empowered to rely on Article 95 of the Treaty in order to deal with that unforeseen situation, if need be by means of an individual decision (see paragraphs 40 to 44 above).

52 In this case, the decisions at issue - authorizing State aid for the restructuring of large public steel groups in certain Member States - do not fall within the scope of the Aid Code. The latter introduces, under certain conditions, derogations of general scope from the prohibition of State aid solely in cases of aid for research and development, aid for environmental protection, aid for closures and regional aid for steel undertakings established on the territory or part of the territory of certain Member States. However, the operating aid and restructuring aid at issue in this case manifestly fall within none of the abovementioned categories of aid. It follows that the derogations authorized by the contested decisions are not subject to the conditions laid down in the Aid Code and therefore supplement it for the purpose of pursuing the objectives set out in the Treaty (see paragraphs 103 to 109 below).

53 In those circumstances, the contested decisions cannot be regarded as unjustified derogations from the Fifth Aid Code but constitute measures based, like that code, on the first and second paragraphs of Article 95 of the Treaty.

54 It follows that the plea alleging lack of competence has no basis: the Commission could not in any circumstances, by adopting the Aid Code, relinquish the power conferred on it by Article 95 of the Treaty to adopt individual measures in order to deal with unforeseen situations. Since in this case the Aid Code does not cover the economic situations which prompted it to adopt the contested decisions, the Commission was entitled to rely on Article 95 of the Treaty in order to authorize the aid in question, provided that it observed the conditions for the application of that provision.

55 It follows that the decisions at issue are not vitiated by any lack of competence on the part of the Commission to adopt them.

2. The second plea in law: frustration of legitimate expectations

Arguments of the parties

56 British Steel considers that the decisions at issue contravene the principle of protection of legitimate expectations. According to well-established case-law, a legitimate expectation may arise as a result of the legislative measures of the Commission, even in the specific field of the grant of State aid (see Joined Cases 205/82 to 215/82 Deutsche Milchkontor and Others v Germany [1983] ECR 2633). In this case, that principle was contravened in so far as the applicant anticipated that the Commission would comply with the Aid Code and if necessary amend it, or even replace it, if it wished to depart from it.

57 In the applicant's view, the Aid Code is a legislative measure expressly designed to prohibit all forms of subsidy with the exception of those which it treats as compatible with the Treaty. A steel undertaking is legitimately entitled to expect that the Commission will not depart from that code whilst it remains in force. Accordingly, any measure contrary to that code should be annulled to the extent to which, in the absence of an overriding public interest, it brings about an unforeseeable change in the situation created by the Code to the detriment of an operator who has acted reasonably in the expectation that the situation brought about by that legislative measure will continue. In this case, British Steel considers that there was no overriding public interest warranting the grant of the contested aid.

58 The authorization of State aid by an individual Commission decision, Decision 89/218/ECSC of 23 December 1988 concerning aid that the Italian Government proposes to grant to the public steel sector (OJ 1989 L 86, p. 76), cited by that institution, is not of such a nature as to affect the applicant's legitimate expectation, in so far as that decision was expressly declared to be exceptional and authorized only part of the aid envisaged by the Italian Government. Moreover, that decision was adopted before the Fourth and Fifth Steel Aid Codes, which reaffirmed the principle that they were exhaustive.

59 The applicant in fact reasonably expected, at the time of its privatization in 1988, that it would be able to build on its strongly cost-competitive position. It made investments in the reasonable hope that an efficient, low-cost producer would be able to expand profitably and would not be thwarted by less efficient producers benefiting from State subsidies. Similarly, in 1991 it reacted to market forces in the legitimate expectation that they would operate elsewhere in the Community, forcing the least efficient producers to withdraw from the market and close plant, thus allowing it and other efficient producers to earn adequate profits and fulfil their shareholders' expectations of a proper return on their investments.

60 British Steel contests the Commission's argument that its legitimate expectation was in any event undermined by the conduct of that institution after 1 January 1992, in so far as several documents from Commission departments, together with the Council's conclusions of 25 February 1993, supported the view that the grant of public aid to certain public undertakings was now inevitable as a result of the seriousness of the crisis afflicting the European steel industry. According to the applicant, even if there was a risk that a political decision might authorize unlawful aid, it was wholly logical to expect the Commission to bear in mind that the Aid Code should be respected without any exception, so as not to give rise to discrimination between the undertakings concerned.

61 The intervener SSAB Svenskt Stål refers to the legal framework established by the agreement on the European Economic Area (hereinafter the `EEA Agreement') and states that, by Decision No 7/94 of 31 March 1994 of the EEA Joint Committee (OJ 1994 L 160), the Fifth Aid Code was integrated into Annex XV to the EEA Agreement in accordance with Article 5 of Protocol XIV to the EEA Agreement. That code was thus applicable to Swedish undertakings one year before the accession of the Kingdom of Sweden to the European Union and, according to the intervener, bolstered its legitimate expectation that the Commission would not authorize operating or investment aid of the kind granted by the contested decisions. In reliance on that expectation, the intervener had undertaken restructuring. By authorizing aid outside the Code, the Commission thus frustrated its legitimate expectations.

62 According to the Commission, a measure of general application such as the Fifth Aid Code cannot validly give rise to a legitimate expectation. The conditions laid down by each code depend on the economic circumstances of the Community steel industry at the relevant time: the situation changed as time went on and became particularly serious around 1992. It was wholly justified, according to the Commission, to adopt measures intended to deal with the threat to the very future of the steel industry in certain countries. Consequently, the mere existence of an aid code could not give rise to legitimate expectations. Furthermore, there is nothing to show that the applicant actually acted in reliance on any legitimate expectation when it closed certain plants. Finally, even if the Aid Code did actually create a legitimate expectation, it would in the Commission's view have been vitiated by the subsequent conduct of the Community institutions. In its correspondence with British Steel, the Commission often emphasized that recourse to Article 95 could not be excluded, even during the period of application of the Aid Code.

63 The Council also rejects the view that the applicant could have entertained any legitimate expectation, in reliance on the Aid Code, that the aid in question would not be authorized. The idea of legitimate expectations cannot be associated with a measure which may be adapted to take account of changes in the economic situation. Moreover, the applicant contradicts itself in recognizing that the Aid Code could have been amended so as to allow the Commission to adopt the contested decisions under the Code. Since the Aid Code was adopted on the same legal basis as the decisions in question, the Council does not understand why the Commission could not have legitimately adopted the decisions given that the procedures would be the same.

64 According to the Italian Republic, the principle of the protection of legitimate expectations cannot be relied on to contest the adoption of a measure, based on a discretionary power, which departs from the existing regime. To admit otherwise would preclude the adaptation of Community legislation to changes affecting the aims pursued. Moreover, there was no reason for the adoption of the Aid Code to give rise, on the part of the applicant, to any legitimate expectation which has been encroached upon by the contested decisions, since the latter in no way affect the matters laid down and governed by the Code.

65 The Kingdom of Spain observes that the principle of the protection of legitimate expectations cannot be so far extended as generally to impede the application of new rules to the future effects of situations arising under the previous rules, the purpose of which necessarily involves constant adjustment to fluctuations in the economic situation. In this case, the applicant has produced no evidence of circumstances such as to cause it to entertain a legitimate expectation that, because of the existence of an aid code, the contested decisions could never be adopted.

66 Ilva endorses all the arguments put forward by the Commission and the other interveners supporting it. The existence of an aid code cannot legitimately give rise to the expectation that the Commission would authorize no aid measure not covered by that code. The latter is a manifestation of the discretion afforded to the Commission in order to pursue the objectives of the Treaty and reflects the economic conditions prevailing when it was adopted. Furthermore, the applicant has not demonstrated fulfilment of the strict conditions for legitimate expectations to arise. It has not proved that, in its conviction that the Aid Code would not be amended, it placed itself in a situation which could not be changed. In addition, even if the Aid Code could in fact give rise to a legitimate expectation, the applicant has failed to produce any evidence that the contested decisions brought about a sudden or unforeseen change in its circumstances and that consequently its legitimate expectation was frustrated. The applicant was aware of all the relevant initiatives taken by the Commission before the adoption of the decisions and of the events which preceded them.

Findings of the Court

On the admissibility of the new arguments put forward by SSAB Svenskt Stål based on the EEA Agreement

67 The Swedish undertaking SSAB Svenskt Stål, intervening in support of British Steel, has raised arguments concerning the EEA Agreement. As far as frustration of legitimate expectations is concerned, it refers to the ECSC Aid Code, but in the form in which it was included in Annex XV to the EEA Agreement by Article 5 of Protocol XIV to the same agreement. Those arguments have not been raised by the applicant. Furthermore, the intervener alleges only a breach of the principle of protection of legitimate expectations with respect to itself and not with respect to the applicant.

68 The question whether an intervener may rely on certain provisions of the EEA Agreement and allege a breach of the principle of the protection of its legitimate expectations in support of the submissions of an applicant which has not itself referred to that agreement in its plea, as a ground for annulment, of breach of the principle of the protection of legitimate expectations is a matter of Community public policy. The Court therefore considers it necessary to examine, on the basis of Article 113 of its Rules of Procedure, the admissibility of the new arguments put forward by SSAB Svenskt Stål.

69 Pursuant to the second paragraph of Article 34 of the ECSC Statute of the Court of Justice, submissions made in an application to intervene are to be limited to supporting the submissions of one of the parties. Moreover, under Article 116(3) of the Rules of Procedure, the intervener must accept the case as he finds it at the time of his intervention.

70 Those provisions have been interpreted by the case-law as meaning that new arguments put forward by an intervener which do not alter the framework of the dispute are admissible (see Case 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v High Authority, cited above, the order of the Court of Justice in Case 16/62 Confédération Nationale des Producteurs de Fruits et Légumes and Others v Council [1962] ECR 487, at page 488, Case T-459/93 Siemens v Commission [1995] ECR II-1675, paragraph 21, and Joined Cases T-447/93, T-448/93 and T-449/93 AITEC and Others v Commission [1995] ECR II-1971, paragraph 122).

71 In this case, the point is whether SSAB Svenskt Stål's arguments must be regarded as admissible in the light of the procedural provisions and case-law cited above. In other words, the question to be asked is whether, although falling within the scope of the applicant's submissions (that is to say, the form of order sought by it), those arguments seek to alter the `framework of the dispute' or whether they leave it untouched in substance.

72 The Court observes that the intervener examines the Aid Code in relation to the EEA Agreement, in support of its view that its own legitimate expectations have been frustrated. That argument cannot be entertained, since, first, it seeks only to establish a breach of the principle of legitimate expectations as regards the intervener and not the applicant and, secondly, it relates to the EEA Agreement, thus altering the framework of the dispute as defined by the applicant.

73 It follows that the arguments advanced by SSAB Svenskt Stål in connection with the second plea in law cannot be declared admissible.

On the merits of the plea

74 The applicant considers that the contested decisions contravene the principle of the protection of legitimate expectations in that they have the effect of disturbing the common market in steel by introducing, notwithstanding the express prohibition of State aid and the existence of a very strict aid code, confusion liable to render ineffective the industrial strategies of undertakings not in receipt of aid.

75 That argument is based on the mistaken idea - as the Commission and the interveners supporting it have rightly observed - that the existence of the Aid Code gave the undertakings concerned reason to believe that no specific decision authorizing State aid outside the categories covered by the Code would be adopted in special circumstances. However, as the Court has already stated (see paragraphs 46 to 52 above), the Aid Code does not pursue the same object as the decisions at issue, which were adopted to deal with an exceptional situation. It was not, therefore, in any way capable of giving rise to legitimate expectations as to the possibility of granting individual derogations from the prohibition of State aid, on the basis of the first and second paragraphs of Article 95 of the Treaty, in an unforeseen situation such as that which prompted the adoption of the contested decisions (see paragraph 48 above).

76 Furthermore, and in any event, it is settled case-law of the Court of Justice that: `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' (see Case C-350/88 Delacre and Others v Commission [1990] ECR I-395, paragraph 33).

77 The proper functioning of the common market in steel clearly involves the obvious need for constant adjustments to fluctuations in the economic situation and economic operators cannot claim a vested right to the maintenance of the legal situation existing at a given time (see Case 230/78 Eridania v Minister for Agriculture and Forestry [1979] ECR 2749, paragraph 22, and Case T-472/93 Campo Ebro and Others v Council [1995] ECR II-421, paragraph 52). Moreover, the Court of Justice has also used the term `prudent and discriminating traders' to emphasize that, in certain circumstances, it is possible to foresee the adoption of specific measures intended to deal with clear crisis situations, with the effect that the principle of the protection of legitimate expectations cannot be relied upon (Case 78/77 Lührs v Hauptzollamt Hamburg-Jonas [1978] ECR 169).

78 In that context, the applicant should, on any view, having regard to its very substantial economic importance and its participation on the ECSC Consultative Committee, have realized that an overriding need to adopt effective measures to safeguard the interests of the European steel industry would arise and that recourse to Article 95 of the Treaty might justify the adoption of ad hoc decisions by the Commission, as had already happened on several occasions whilst the Aid Code was in force. In that connection, the Commission rightly refers to Decision 89/218 of 23 December 1988, cited above, and Decision 92/411/ECSC of 31 July 1992 on the granting of aid to steel undertakings by the Danish and Dutch Governments (OJ 1992 L 223, p. 28), which authorized certain State aid outside the aid code in force at the time of their adoption.

79 It follows that the decisions at issue do not contravene the principle of the protection of legitimate expectations.

3. The third plea in law: infringement of Article 95 of the Treaty and breach of the principles of non-discrimination and proportionality

80 It is appropriate to examine in turn the applicant's arguments concerning, first, infringement of the Treaty and, second, breach of the fundamental principles relied upon.

The alleged infringement of the first and second paragraphs of Article 95

Arguments of the parties

81 According to British Steel, a measure cannot be validly adopted on the basis of the first two paragraphs of Article 95 unless it is necessary to attain the objectives set out in the Treaty. In this case, the only objective identified in the preamble to the contested decisions is to provide the Italian and Spanish State-owned steel industries with a sound and economically viable structure. The grant of State aid to such industries does not contribute to providing them with such a structure in the long term. The aid granted to the undertakings concerned in the past never attained that objective and it is highly improbable that the aid in question will do so in the future. Conversely, such aid prolongs the existence of inefficient production plants and allows excess capacity to be maintained, thus giving rise to a fall in prices and a loss of profitability in the European steel industry as a whole. British Steel refers in that connection to the aid granted in the past to the Italian undertakings Ilva and its predecessor Finsider, and to the Spanish undertaking CSI: notwithstanding the aid authorized by the Commission in 1989 for Ilva and in 1987 for CSI, their viability was not restored, as the Commission implicitly recognizes in the preamble to the contested decisions.

82 More specifically, the aid authorized by the contested decisions will not enable the viability of Ilva and CSI to be assured, firstly because of the specific economic situation of those two undertakings, which, according to press articles, suffered heavier losses than expected in 1992 and 1993, being forced as a result either to slow down the necessary rationalization or to increase their borrowings, thus compromising their future viability. Secondly, the ineffectiveness of such aid is apparent from the general prospects of the Community steel industry, which is characterized by excess production capacity. In those circumstances, the only effect of the aid in question will be to enable the recipients of it to increase their market shares by selling their products at prices below the actual production costs, to the detriment of more efficient undertakings.

83 Accordingly, the applicant contests the evaluation made by the Commission of Ilva's and CSI's restructuring plans on the basis of the expert's reports prepared by Atkins and CSI (see paragraph 13 above), which are referred to by implication in point III of the grounds of the contested decisions, where mention is made of the assistance of external experts. It submits that there are several alternatives to the State aid option and relies for that purpose on a report drawn up at its request by Professor T.A.J. Cockerill (Annex 9 to the application), which envisages various other means of attaining, in the cases of Ilva and CSI, the objectives pursued. In particular, that report advocates the sale of all or part of the assets of the undertakings in question, the conclusion of joint venture agreements and the sale of individual production units and transfer thereof to steel works established outside the European Union.

84 SSAB Svenskt Stål states that the contested decisions affect trade between the Community and the EFTA countries, covered by the EEA Agreement. The Commission thus failed to comply with the decision-making procedure provided for in Article 97 of the EEA Agreement, which in particular requires that the contracting party concerned inform the other contracting parties of amendments to its domestic legislation and that the EEA Joint Committee should conclude that the amended legislation does not detract from the proper functioning of the agreement.

85 The Commission states, first, that the applicant's arguments in fact constitute a disguised attempt to secure a review of the merits of the economic analysis on which the contested decisions are based, thereby going beyond the scope of the grounds for annulment provided for in Article 33 of the Treaty. Review of the legality of decisions adopted under Article 95 should be limited to the question whether the Commission committed a manifest error in its appreciation of the necessity of the aid authorized for furtherance of the aims of the Treaty.

86 The contested decisions are intended to provide the undertakings concerned with a sound and economically viable structure by means of restructuring measures based on capacity reductions. They thus involve Community aid, in that they pursue objectives that are defined by the Treaty and are compatible with the sound functioning of the Community steel market. The Community's policy on aid for the restructuring of the steel industry must also take account of certain objectives of a social nature defined in Article 3(c), (d), (e) and (g) of the Treaty. In order to deal with the crisis, the Commission thus reconciled the requirements of safeguarding continuity of employment and the need to limit intervention and maintain normal conditions of competition.

87 From that standpoint, the criticisms made of the contested decisions in the Cockerill report are based on a purely theoretical analysis of the economics of the steel industry and an incomplete knowledge of the facts. Moreover, the report fails to acknowledge the complexity and diversity of the aims which the Commission must take into account.

88 The Council endorses the Commission's argument that the applicant should demonstrate that an error was committed in assessing the need for the aid in question to be granted, with a view to attainment of the objectives of the Treaty. The applicant, it maintains, has failed to produce any evidence to that effect.

89 The Italian Republic supports all the Commission's arguments. It emphasizes that the contested decisions took account of the difficulties being experienced throughout the Community steel industry. Neither the circumstances of their adoption nor their content provide any basis for the view that they were influenced by the fact that the undertakings concerned were State-owned. Moreover, the applicant's criticisms concerning the objectives pursued by the contested decisions and the grounds on which it contests their legality go beyond the limits of judicial review defined by Article 33 of the Treaty.

90 According to the Kingdom of Spain, the Commission sought to reconcile several of the essential objectives mentioned in the Treaty, with a view to reorganizing the sectors concerned, which constitute an essential part of the Community steel industry. It is exclusively for the Commission to assess the need for measures and to determine the content of them. It is incumbent upon the applicant to prove the existence of a manifest error or misuse of powers in order to overturn the presumption of legality attaching to acts of the Community institutions.

91 Ilva contests the use made by British Steel of the economic criteria relied on in the Cockerill report. Many of the applicant's criticisms regarding the content of the contested decisions merely seek to cast doubt on the facts on which the Commission based its assessment. However, the Community judicature is not entitled to substitute its assessment for that of the competent authority but must limit its review to ensuring that there has been no manifest error or misuse of powers, relying on the information available when the contested decisions were adopted. In any event, the applicant's allegations that the aid granted to Ilva does not enable the objectives pursued to be attained have no basis. On the contrary, that aid made it possible to achieve a higher ratio between the gross operating margin and the turnover of the beneficiary undertaking, well above the European average. That the aid received by Ilva was properly used was officially confirmed in a report drawn up by an independent consultant appointed by the Commission. Ilva's viability was therefore restored as a result of intervention which will help defend the common market in steel from the disastrous consequences of the world crisis affecting the sector. It should also be borne in mind that, having fulfilled the conditions imposed by the Commission for authorization of the aid, Ilva fully implemented the restructuring plan, and in so doing sold 100% of the capital of Ilva and of Acciai Speciali Terni to private undertakings. As to the argument that Ilva could continue to sell at any price in order to remain in business, the intervener states that the aid authorized by the Commission cannot be used for the purposes of unfair competition and that Article 5(2) of the contested decision relating to it provides for the opening of an investigation pursuant to Article 60 of the ECSC Treaty.

Findings of the Court

- Admissibility of the new arguments put forward by SSAB Svenskt Stål on the basis of the EEA Agreement

92 The Swedish undertaking SSAB Svenskt Stål, intervening in support of British Steel, put forward in its statement in intervention arguments relating to the EEA Agreement: with respect to the plea alleging infringement of Article 95 of the Treaty and breach of the principles of proportionality and non-discrimination, it complained ex novo that there had been a breach of the procedure provided for in Article 97 et seq. of the EEA Agreement, a complaint which was not put forward by the applicant.

93 The entitlement of an intervener to rely on provisions of the EEA Agreement in support of the submissions of an applicant which did not itself mention that agreement, in the context of an action for annulment, is a matter of Community public policy. The Court therefore considers it necessary to examine, on the basis of Article 113 of the Rules of Procedure, the admissibility of the new arguments raised by SSAB Svenskt Stål.

94 According to the second paragraph of Article 34 of the Statute of the Court of Justice, submissions made in an application to intervene are to be limited to supporting the submissions of one of the parties. Moreover, pursuant to Article 116(3) of the Rules of Procedure, an intervener must accept the case as he finds it at the time of his intervention.

95 Having regard to those procedural provisions, as interpreted by the judgments cited in paragraph 70 above, the question to be asked is whether SSAB Svenskt Stål's arguments, although falling within the scope of the applicant's submissions (that is to say, the form of order sought by it), seek to alter the framework of the dispute or whether, on the contrary, they leave it untouched in substance and may therefore be regarded as admissible.

96 In this case the intervener alleges infringement of Article 97 et seq. of the EEA Agreement. The Court considers that, if that argument were to be accepted as admissible, the framework of the dispute would be widened in that a new and independent plea in law would be introduced: new because it relates solely to the decision-making procedure established by Article 97 of the EEA Agreement and was not raised by the applicant at any stage of the written procedure; and independent because it has no connection with the infringement of Article 95 of the Treaty and the fundamental principles referred to by the applicant. SSAB Svenskt Stål is in fact seeking to introduce a new plea alleging infringement of procedural rules relating to the EEA Agreement, whereas the present proceedings are concerned solely with the legal context of the ECSC Treaty.

97 It follows that the arguments put forward by SSAB Svenskt Stål fall outside the framework of the present dispute and cannot therefore be regarded as admissible.

- The merits of the plea

98 It must be borne in mind at the outset that, as held earlier in this judgment (paragraphs 39 to 55), the Commission is empowered, by virtue of the first and second paragraphs of Article 95 of the Treaty, to authorize State aid within the Community whenever the economic situation in the steel industry renders the adoption of measures of that kind necessary with a view to attainment of one of the objectives of the Community.

GROUNDS CONTINUED UNDER DOC.NUM: 694A0243.1

99 That condition is fulfilled in particular where the sector concerned is experiencing situations of exceptional crisis. In that connection, the Court of Justice emphasized in its judgment in Case 214/83 Germany v Commission [1985] ECR 3053, paragraph 30, that `in a situation of crisis there is a close link, for the purposes of the implementation of the ECSC Treaty, between the granting of aid to the steel industry and the restructuring which that industry is required to undertake'. The Commission, for the purpose of such implementation, considers in its discretion whether aid intended to accompany the restructuring measures is compatible with the fundamental principles of the Treaty.

100 In this case, it is not disputed that, at the beginning of the 1990s, the European steel industry was beset with a sudden and serious crisis through the combined effect of several factors such as the international economic recession, loss of traditional export outlets, a steep increase in competition from steel industries in developing countries and the rapid growth of Community imports of steel products from the member countries of the Organization of Petroleum Exporting Countries (OPEC). It is against the background of that crisis that, in this case, it should be considered whether the aid in question was necessary, as required by the first and second paragraphs of Article 95 of the Treaty, with a view to attaining the fundamental objectives of the Treaty.

101 The contested decisions clearly indicate, in point IV of their grounds, that their purpose is to reorganize the steel industry in the Member State concerned. According to the decision concerning aid for CSI, `providing the Spanish public integrated steel industry with a sound and economically viable structure contributes towards the objectives of the ECSC Treaty, in particular Articles 2 and 3'. In Decision 94/259/ECSC concerning aid to be granted to Ilva, the Commission expresses the same idea in slightly different words. It states: `providing the Italian steel industry with a sound and economically viable structure contributes to achieving the objectives laid down in the ECSC Treaty'.

102 It is necessary, therefore, first to verify whether that aim is in line with the objectives of the Treaty and, second, whether authorization for the aid in question was necessary with a view to attaining those objectives.

103 As to whether, first, the reorganization of the beneficiary undertakings is conducive to the objectives of the Treaty, it is expressly stated in the grounds of the contested decisions that that aim was complex and comprised several components. The aid in question was intended to facilitate the privatization of the beneficiary undertakings, the closure of certain plants, the reduction of excess capacity and reduction of the work force within acceptable limits (see point II of the grounds of the contested decision). The attainment of all those objectives should provide the undertakings concerned with a sound and profitable structure.

104 The aim of the contested decisions thus brings together, under one heading, a wide variety of objectives and it is necessary to verify whether, in the context of the crisis experienced by the steel industry (see paragraphs 98 to 100 above), they come within the scope of those laid down in Articles 2 and 3 of the Treaty, specifically referred to in the grounds of the contested decisions.

105 Against that background, it must be borne in mind first of all that, in view of the diversity of the objectives determined by the Treaty, the Commission's role consists, according to settled case-law, in ensuring that those various objectives are reconciled at all times, exercising the discretion available to it in order to meet the requirements of the common interest (see Case 9/56 Meroni v High Authority [1958] ECR 133, Part B, grounds 3-5, Case 8/57 Aciéries Belges v High Authority [1958] ECR 245, Part B, ground 3, and Joined Cases 351/85 and 360/85 Fabrique de Fer de Charleroi and Dillinger Hüttenwerke v Commission [1987] ECR 3639, paragraph 15). In particular, in Joined Cases 154/78, 205/78, 206/78, 226/78, 227/78, 228/78, 263/78, 264/78, 31/79, 39/79, 83/79 and 85/79 Valsabbia and Others v Commission [1980] ECR 907, paragraph 55, the Court of Justice held `[i]f the need for a compromise between the various objectives is imperative in a normal market situation, it must be accepted a fortiori in the state of crisis justifying the adoption of exceptional measures which derogate from the normal rules governing the working of the common market in steel and which clearly entail non-compliance with certain objectives laid down by Article 3, if only that objective (contained in paragraph (c)) which requires that the establishment of the lowest prices be ensured'.

106 In this case, the Court finds that the contested decisions reconcile various objectives of the Treaty, with a view to safeguarding important interests.

107 The rationalization of the European steel industry through the restructuring of certain groups, the closure of obsolete or uncompetitive plant, the reduction of excess capacity, privatization of the Ilva group in order to ensure its viability and the shedding of jobs, within reasonable limits, mentioned in those decisions contribute to attainment of the objectives of the Treaty, having regard to the sensitive nature of the steel industry and the fact that continuation, or indeed aggravation, of the crisis was liable to give rise to extremely serious and enduring disturbances of the economies of the Member States concerned. It is not disputed that the industry is of essential importance in a number of Member States by reason of the location of steel plants in regions where there is low employment and of the importance of the economic interests at stake. In those circumstances, any decisions to close plant and shed jobs, and the transfer of control of the undertakings concerned to private companies acting exclusively in accordance with the logic of the market, would have been likely to create, without support measures by the public authorities, difficulties of the gravest public importance, particularly by exacerbating the problem of unemployment and creating the risk of a major economic and social crisis.

108 In those circumstances the contested decisions, by seeking to resolve those difficulties by reorganizing the steel undertakings benefiting from the aid in question, are incontestably designed to safeguard `continuity of employment' and to avoid provoking `fundamental and persistent disturbances in the economies of the Member States', as required by the second paragraph of Article 2 of the Treaty. Moreover, they pursue the objectives embodied in Article 3 concerning, inter alia, `maintenance of conditions which will encourage undertakings to expand and improve their production potential' (paragraph (d)) and the promotion of `orderly expansion and modernization of production, and the improvement of quality, with no protection against competing industries' (paragraph (g)). They are designed to rationalize the European steel industry, in particular through definitive closure of obsolete or uncompetitive plant (for example Bagnoli in Italy, Aviles, Gijón, Vizcaya and Ansio in Spain) and the irreversible reduction of production capacity for certain products (for example at Taranto, in Italy) with a view to dealing with excess capacity (see Article 2 of the contested decisions). They, together with the other four individual decisions mentioned above, authorizing State aid and adopted on the same day, thus form part of a comprehensive programme for restructuring the steel industry on an enduring basis and reduction of production capacity in the Community (see paragraphs 4 to 6 above). Accordingly, it must be emphasized that the aim of the aid in question is not simply to ensure the survival of the beneficiary undertakings - which would run counter to the common interest - but to restore their viability whilst keeping the impact of the aid on competition to a minimum and ensuring compliance with the rules of fair competition, in particular regarding the conditions for privatization of the Ilva group.

109 It follows that the contested decisions are intended to safeguard the common interest, in accordance with the objectives of the Treaty. The applicant's view that the decisions are not conducive to the attainment of those objectives must therefore be rejected.

110 It having been found that the contested decisions pursue Treaty objectives, it is necessary, secondly, to verify whether they were necessary in order to attain those objectives. As the Court of Justice held in Germany v Commission, cited above, the Commission `was under no circumstances entitled to authorize the granting of State aid which was not necessary to attain the objectives of the Treaty and would be likely to give rise to distortions of competition on the common market in steel' (paragraph 30).

111 It must be pointed out in that connection that the first paragraph of Article 33 of the Treaty provides that `[t]he Court of Justice may not ... examine the evaluation of the situation, resulting from economic facts or circumstances, in the light of which the Commission took its decision or made its recommendations, save where the Commission is alleged to have misused its powers or to have manifestly failed to observe the provisions of this Treaty or any rule of law relating to its application'.

112 With regard to State aid, the Court of Justice has consistently held that `the Commission has a discretion the exercise of which involves economic and social assessments which must be made in a Community context' (Case 730/79 Philip Morris v Commission [1980] ECR 2671, paragraph 24, Matra v Commission, cited above, and Joined Cases T-244/93 and T-486/93 TWD v Commission [1995] ECR II-2265).

113 As far as the present plea in law is concerned, involving as it does a complex economic and technical assessment, the Court's review must, according to settled case-law, therefore be limited to verifying that the facts are materially accurate and that there has been no manifest error of assessment (see Case T-17/93 Matra Hachette v Commission [1994] ECR II-595, paragraph 104, and Case T-9/93 Schöller v Commission [1995] ECR II-1611, paragraph 140, and Case T-266/94 Skibsværftsforeningen and Others v Commission [1996] ECR II-1399, paragraph 170).

114 In this case, in support of its view that the aid granted to CSI and Ilva is `not necessary', the applicant insists in particular that, in view of past experience and of the excess production capacity in the steel industry, any attempt to restore the viability of the undertakings in question in this case by means of State aid will inevitably fail, with serious repercussions for the general balance of the common market.

115 In that respect, the Court finds, first, that, contrary to the applicant's assertions, the antecedents to the contested decisions and the statement of the reasons on which those decisions are based reveal a thorough analysis of the present crisis in the European steel industry and of the most appropriate means for dealing with it. The Commission directed that an investigation be carried out by an independent expert, Mr Braun, whose task was to list plans for the closure of steel undertakings; his report was submitted on 29 January 1993. That report, produced by the Commission, corroborates the information contained in the communication from the Commission to the Council and the European Parliament of 23 November 1992 (see paragraph 4 above). Moreover, it is clear from documents before the Court and from the answers given by the Commission to the questions put to it by the Court (see paragraph 15 above) that the Commission, with the assistance of outside experts, considered very carefully the restructuring plans accompanying the aid programmes envisaged by the Member States concerned in terms of their capacity to ensure the viability of the beneficiary undertakings (point III of the grounds of each of the contested decisions).

116 Moreover, the applicant has adduced no specific evidence to show that the Commission committed a manifest error in assessing whether the aid in question was necessary and, in particular, whether it could facilitate reorganization of the beneficiary undertakings.

117 A mere assertion, referring only to the ineffectiveness of earlier aid, that the aid in question will probably not be capable of producing the intended results constitutes nothing more than purely speculative and hypothetical conjecture. Any attempt to extrapolate for the future results obtained in the past, without examining in detail the specific conditions imposed by the contested decisions in order to achieve reorganization of the beneficiary undertakings in order to ensure their viability or profitability, cannot constitute evidence of failure by the Commission to comply with the Treaty.

118 As regards the applicant's arguments concerning the alleged unforeseen losses suffered by Ilva and CSI in 1992 and 1993, and the prevailing excess production capacity in the steel industry, they too are without any foundation. The applicant fails to take into account the precautions taken by the Commission in the contested decisions with a view to ensuring the viability of Ilva and CSI, in particular by resolving the problem of those undertakings' debts (see point II of the grounds of the contested decisions), whilst at the same time limiting the financial restructuring measures to the amounts strictly necessary, so as not to `affect the conditions of trade in the Community steel industry to an extent which is incompatible with the common interest' (point VI of the grounds of the contested decisions). In that respect, the Court finds that the Commission, in order not to provide the beneficiary undertakings with an undue advantage over other undertakings in the sector, took care in the contested decisions in particular to ensure that the undertakings concerned did not at the outset have their net financial charges reduced below 3.5% of annual turnover (3.2% in the case of AST, Acciai Speciali Terni) which, according to the Commission, which has not been contradicted on that point by the applicant, represents the present average for Community steel undertakings. More generally, Article 2 of the contested decisions imposes certain conditions intended to ensure that the financing aid is limited to what is strictly necessary. In view of those considerations, the applicant's argument designed to show that in the present situation of overcapacity the aid in question would merely enable the beneficiaries to sell their products at below production cost is entirely unfounded.

119 Moreover, it is apparent from the Commission's communications to the Council in the course of the procedure leading to the adoption of the contested decisions that the Commission analysed in detail the conditions under which the undertakings receiving the aid in question would be viable. In the case of CSI (Decision 94/258) the Comm