Case T-211/05

Italian Republic

v

Commission of the European Communities

‛State aid — Aid scheme implemented by the Italian authorities in favour of newly listed companies — Decision declaring the aid incompatible with the common market and ordering its recovery — Obligation to state reasons — Selective nature — Effect on trade between Member States — Adverse effect on competition’

Judgment of the Court of First Instance (Third Chamber), 4 September 2009 II ‐ 2783

Summary of the Judgment

State aid — Examination by the Commission — Preliminary review and main review — Compatibility of the aid with the common market — Difficulties of assessment — Commission's duty to initiate the main review procedure — Duty first to raise the subject of the aid measure with the Member State concerned and examine the situation in the light of the information provided by that State

In the context of the procedure for review of State aid laid down in Article 88 EC, the preliminary stage of the procedure for reviewing aid under Article 88(3) EC, which is intended merely to allow the Commission to form a prima facie opinion on whether the measure concerned amounts to State aid and whether the aid in question is partially or totally compatible with the common market, must be distinguished from the formal investigation stage envisaged by Article 88(2) EC. It is only under the latter provision, which is designed to enable the Commission to be fully informed of all the facts of the case, that the EC Treaty imposes an obligation on the Commission to give the parties concerned notice to submit their comments. In accordance with Article 4(4) of Regulation No 659/1999, which relates to the application of Article 88 EC, the Commission is required to open the procedure provided for in Article 88(2) EC if an initial examination has not enabled it to overcome all the difficulties raised by the question whether the State measure under scrutiny constitutes aid for the purposes of Article 87(1) EC, unless, in the course of that initial examination, the Commission has been able to satisfy itself that the measure at issue would in any event be compatible with the common market, even if it were aid. In view of the legal consequences of a decision to initiate the procedure provided for in Article 88(2) EC, provisionally classifying measures as new aid even though the Member State concerned is unlikely to subscribe to that classification, the Commission must first broach the subject of the measures in question with the Member State concerned so that the latter has an opportunity, if appropriate, to inform the Commission that, in its view, those measures do not constitute aid or constitute existing aid. (see paras 35-37)

In any preliminary investigation procedure, in order to comply with the rule that the parties have the right to be heard, the Member State in question must be given the opportunity effectively to make known its views on the evidence on which the Commission based its assessment. However, in order for an infringement of the right to be heard at that stage to result in annulment of the final decision, it must be established that, had it not been for such an irregularity, the outcome of the procedure might have been different. The burden of proof in that regard falls upon the Member State concerned, since any infringement of the rights of the defence constitutes a procedural defect, which means that the party concerned must demonstrate the specific prejudice to its individual rights caused by the breach. (see para. 45)

The right to a fair hearing, which is a fundamental principle of Community law and forms, in particular, part of the rights of the defence, requires that the undertaking concerned must have been afforded the opportunity, during the administrative procedure, properly to make known its views on the truth and relevance of the facts, complaints and circumstances relied on by the Commission to support its claim that there has been an infringement of the EC Treaty. In accordance with Article 6(1) of Regulation No 659/1999, which relates to the application of Article 88 EC, ‘[t]he decision to initiate the formal investigation procedure shall summarise the relevant issues of fact and law, shall include a preliminary assessment of the Commission as to the aid character of the proposed measure and shall set out the doubts as to its compatibility with the common market’. Such a decision to initiate the procedure must give the parties concerned the opportunity effectively to participate in the formal investigation procedure, during which it will be possible for them to put forward their arguments. For that purpose, it is sufficient for the parties concerned to be aware of the reasoning which has led the Commission to conclude provisionally that the measure in issue might constitute new aid incompatible with the common market. The Commission is not required to inform the Member State concerned of its position before adopting its decision where the Member State has been given notice to submit its comments. (see paras 53, 54, 58)

The scope of the obligation to state reasons depends on the nature of the act in question and the context in which it was adopted. The statement of reasons must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in such a way as to enable the Community judicature to review the legality of the measure and the persons concerned to ascertain the reasons for the measure, so that they can defend their rights and ascertain whether or not the decision is well founded. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC 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. In particular, the Commission is not obliged to adopt a position on all the arguments relied on by the parties concerned. It is sufficient if it sets out the facts and the legal considerations having decisive importance in the context of the decision. Moreover, in the case of an aid scheme, the Commission may confine itself to examining the general characteristics of the scheme in question without being required to examine each particular case in which it applies in order to establish whether the scheme involves elements of aid. While the Commission must at the very least refer to the circumstances in which aid was granted in the statement of the reasons for its decision where those circumstances show that the aid is such as to affect trade between Member States and to distort or threaten to distort competition, it is not required to carry out an economic analysis of the actual situation on the relevant markets, of the market share of the undertakings in receipt of the aid, of the position of competing undertakings or of trade flows between Member States. Furthermore, in the case of aid granted illegally, the Commission is not required to demonstrate the actual effect which that aid has had on competition and on trade between Member States. If that were the case, such a requirement would ultimately give Member States which grant unlawful aid an advantage over those which notify the aid at the planning stage. (see paras 68, 69, 87, 158)

Article 87(1) EC requires it to be determined whether, under a particular statutory scheme, a State measure is such as to favour certain undertakings in comparison with other undertakings which are in a legal and factual situation that is comparable in the light of the objective pursued by the scheme in question. That is so in the case of a tax advantage available only to undertakings admitted to listing on a regulated market during the brief period for which an aid scheme was applicable, whereas all other undertakings are excluded from the advantages conferred by that scheme, be they companies that are already listed or those which do not or cannot satisfy the conditions required for listing during the period covered by the aid scheme. As to whether the measures in question may be justified by the nature and overall scheme of the national tax system, where such a differentiation is based on objectives other than those pursued by the overall scheme, the measure in question will, as a general rule, be regarded as satisfying the condition of selectivity laid down in Article 87(1) EC. It is for the Member State which has introduced such a differentiation between undertakings in relation to charges to show that it is actually justified by the nature and general scheme of the system in question. (see paras 119, 120, 125)

Article 87(1) EC prohibits aid which affects trade between Member States and distorts or threatens to distort competition. In its assessment of those two conditions, the Commission is required not to establish that the aid has a real effect on trade between Member States and that competition is actually being distorted, but only to examine whether that aid is liable to affect such trade and distort competition. Even aid of a relatively small amount is liable to affect trade between Member States where there is strong competition in the sectors in which the recipient undertakings operate. Furthermore, where a public authority favours an undertaking operating in a sector which is characterised by intense competition by granting it a benefit, there is a distortion of competition or a risk of such distortion. Where the benefit is limited, competition is distorted to a lesser extent, but it is still distorted. The prohibition in Article 87(1) EC applies to any aid which distorts or threatens to distort competition, irrespective of the amount, in so far as it affects trade between Member States. (see paras 151, 152, 154, 155)