Keywords

Summary



Keywords

1. Actions for annulment – Pleas in law – Lack of or inadequate statement of reasons – Plea distinct from that relating to substantive legality (Arts 230 EC and 253 EC)

2. State aid – Definition – Fiscal measures granting tax exemptions or tax reductions or allowing deferral of payment in respect of certain restructuring operations in the banking sector – Included

(Art. 87(1) EC)

3. State aid – Examination by the Commission – Examination of an aid scheme taken as a whole – Lawfulness – Consequence

(Art. 87(1) EC)

4. State aid – Definition – Selective nature of the measure – Tax measure benefiting only undertakings in the banking sector carrying out certain transactions – Included

(Art. 87(1) EC)

5. State aid – Effect on trade between Member States – Impairment of competition – Criteria for assessment

(Art. 87(1) EC)

6. State aid – Prohibited – Exceptions – Aid contributing to the execution of an important project of common interest – Aid concerning the development of a sector of economic activity – Discretion of the Commission – Judicial review – Limits

(Art. 87(3)(b) and (c) EC)

Summary

1. In an action for annulment, the question whether the reasons given for a measure are correct goes to the substantive legality of that measure. It follows that a challenge to the validity of those reasons cannot be examined when the point under consideration is whether or not the obligation laid down under Article 253 EC has been complied with.

(see paras 26, 55)

2. The definition of aid is more general than that of a subsidy, because it includes not only positive benefits, such as subsidies themselves, but also measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which thus, without being subsidies in the strict sense of the word, are similar in character and have the same effect. It follows that a measure by which the public authorities grant to certain undertakings a tax exemption which, although not involving a transfer of State resources, places the persons to whom the tax exemption applies in a more favourable financial situation than other taxpayers constitutes State aid within the meaning of Article 87(1) EC. Similarly, a measure which grants to certain undertakings a tax reduction or a deferral of liability to tax that would otherwise be payable may constitute State aid.

That is the case, in the context of a tax rule which applies to banking restructuring operations, of measures which comprise either a tax reduction in the form of the application of tax at a reduced rate, or the substitution of a fixed-rate levy for the taxes that would otherwise be payable, or an exemption from tax where a gain arises on the return of ancillary property by a bank to a banking foundation which had previously transferred those assets to it, or in the case of the transfer by a bank of its shareholdings in the central bank of the Member State to the banking foundation which had previously transferred those shareholdings to it, particularly where the shareholding was originally acquired for no consideration and is transferred to the foundation for value or is revalued.

That finding is not called into question, as regards the measures providing for the fiscal neutrality of transactions involving the return of property, by the argument that payment of the tax that would otherwise be due is deferred only until such time as that property may be disposed of. It is not only the deferral of payment of a tax liability that may constitute State aid, but also, in particular, a return of property, such as that covered by the present case, which transfers ownership of such an asset from one legal person to another, so that for the bank which returns the asset to a banking foundation, which is a separate legal person, the exemption is permanent.

(see paras 77-82)

3. In the case of an aid scheme, the Commission may, in order to assess whether that scheme comprises aid elements, confine itself to examining the general characteristics of the scheme in question without being required to examine each particular case in which it applies. Accordingly, where it is not disputed that the tax provision under consideration operates to the benefit of certain undertakings, the fact that, in some circumstances, it may also benefit entities which are not undertakings does not call into question that finding, which is sufficient for Article 87(1) EC to apply to an aid scheme.

(see paras 91-92)

4. Article 87(1) EC prohibits aid which ‘[favours] certain undertakings or the production of certain goods’, that is to say aid which is selective. Aid may be selective for the purposes of that provision even if it concerns a whole economic sector.

That is the case with fiscal measures which comprise either a reduction or a exemption from tax, or which allow liability to tax to be deferred, and which apply solely to the banking sector and, within the banking sector, apply only for the benefit of undertakings carrying out certain operations. As they do not apply to all economic operators, and which are, in fact, an exception to the general tax scheme, they cannot be considered as general measures of fiscal or economic policy.

Such tax measures must therefore be prohibited under Article 87(1) EC, since they do not represent an adaptation of the general system to meet particular characteristics of banking undertakings but were conceived as a means of improving the competitiveness of certain undertakings at a given time in the development of the sector.

(see paras 94-101)

5. Article 87(1) EC prohibits aid which affects trade between Member States and which distorts or threatens to distort competition. In assessing those two conditions, the Commission is required, not to establish that such 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.

It is in short the case that aid is incompatible with the common market where it has or is liable to have an impact on intra-Community trade and distorts or is liable to distort competition in that field. In particular, when aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, those undertakings must be regarded as affected by that aid. In that regard, the fact that an economic sector has been the subject of liberalisation at Community level will suffice to indicate the real or potential effect of the aid on competition and its effect on trade between Member States. Furthermore, it is not necessary that the beneficiary undertaking should itself participate in the intra-Community trade. Where a Member State grants aid to an undertaking, internal activity may be maintained or increased as a result, so that the opportunities for undertakings established in other Member States to penetrate the market in that Member State are reduced as a result. Furthermore, the strengthening of an undertaking which has not previously participated in intra-Community trade may place it in a position which enables it to penetrate the market of another Member State.

Therefore, tax benefits must be prohibited which strengthen the position of the beneficiary undertakings in relation to undertakings which are active in intra-Community trade, particularly in the context of a significant liberalisation process at Community level in the financial services sector which has intensified the competition which may already have resulted from the freedom of movement of capital provided for under the Treaty.

(see paras 110-111, 114-119)

6. In applying Article 87(3) EC, the Commission enjoys a wide discretion, the exercise of which involves assessments of an economic and social nature which must be made within a Community context. The Community judicature, in reviewing whether that freedom was lawfully exercised, cannot substitute its own assessment for that of the competent authority but must restrict itself to examining whether the authority’s assessment is vitiated by a manifest error or misuse of powers.

In failing to apply the classification of ‘project of common European interest’ within the meaning of Article 87(3) EC to certain measures which are essentially aimed at improving the competitiveness of operators established in a Member State in order to strengthen their position on the internal market, the Commission does not commit a manifest error of assessment. It cannot properly be criticised on the ground that those measures are part of the completion of a privatisation process, since a privatisation process undertaken by a Member State cannot, of itself, be considered as constituting a project of common European interest.

Nor does it commit a manifest error of assessment in holding that measures, the principal effect of which is to improve the competitiveness of the beneficiaries in a sector where international competition is strong, and are in fact intended to strengthen the position of the beneficiaries of the aid with regard to competitors which do not benefit from it, do not satisfy the condition that the aid is not adversely to affect trading conditions to an extent contrary to the common interest, which must be satisfied by aid to facilitate the development of certain activities within the meaning of Article 87(3)(c) EC.

(see paras 135, 138-140, 142, 144, 147-149)