Parties

Grounds

Operative part



Parties

In Case T‑442/03,

SIC – Sociedade Independente de Comunicação, SA, established in Carnaxide (Portugal), represented by C. Botelho Moniz, E. Maia Cadete and M. Rosado da Fonseca, lawyers,

applicant,

v

Commission of the European Communities, represented initially by M. Balta and F. Florindo Gijón, subsequently by M. Niejahr, J. Buendía Sierra and G. Braga da Cruz, and latterly by B. Martenczuk and G. Braga da Cruz, acting as Agents,

defendant,

APPLICATION for annulment of Commission Decision 2005/406/EC of 15 October 2003 on ad hoc measures implemented by Portugal for RTP (OJ 2005 L 142, p. 1) inasmuch as that decision declares that certain of those measures do not constitute State aid and that the others are compatible with the common market,

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber),

composed of M. Vilaras (Rapporteur), President, M.E. Martins Ribeiro and K. Jürimäe, Judges,

Registrar: J. Palacio González, Principal Administrator,

having regard to the written procedure and further to the hearing on 22 November 2007,

gives the following

Judgment

Grounds

Legal context

1. Article 16 EC states:

‘Without prejudice to Articles 73 [EC], 86 [EC] and 87 [EC], and given the place occupied by services of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion, the Community and the Member States, each within their respective powers and within the scope of application of this Treaty, shall take care that such services operate on the basis of principles and conditions which enable them to fulfil their missions.’

2. Article 86(2) EC states:

‘Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.’

3. Article 87(1) EC states:

‘Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.’

4. The protocol on the system of public broadcasting in the Member States (OJ 1997 C 340, p. 109; ‘the Amsterdam Protocol’), introduced by the Treaty of Amsterdam as an annex to the EC Treaty, states:

‘[The Member States,] considering that the system of public broadcasting in the Member States is directly related to the democratic, social and cultural needs of each society and to the need to preserve media pluralism, have agreed upon the following interpretative provisions, which shall be annexed to the [EC] Treaty:

The provisions of the [EC Treaty] shall be without prejudice to the competence of Member States to provide for the funding of public service broadcasting in so far as such funding is granted to broadcasting organisations for the fulfilment of the public service remit as conferred, defined and organised by each Member State, and in so far as such funding does not affect trading conditions and competition in the Community to an extent which would be contrary to the common interest, while the realisation of the public service remit of that public service shall be taken into account.’

5. On 15 November 2001, the Commission published a communication on the application of State aid rules to broadcasting (OJ 2001 C 320, p. 5; ‘the Communication on broadcasting’) in which the Commission set out the principles to be followed by the Commission in the application of Articles 87 EC and 86(2) EC to State financing of public service broadcasting (point 4 of that communication).

Facts of the case

6. RTP – Radiotelevisão Portuguesa, SA, is a limited liability company with public capital entrusted with providing the Portuguese public television service, pursuant to contracts entitled ‘concession contracts for public service television’, concluded, successively, on 17 March 1993 and 31 December 1996 (together ‘the public service contracts’).

7. The applicant, SIC − Sociedade Independente de Comunicação, SA, is a commercial television company which runs one of the main private television channels in Portugal.

8. By three complaints submitted by the applicant, dated 30 July 1993 and 12 February 1994 (NN 133/B/01), 16 October 1996 (NN 85/B/2001) and 18 June 1997 (NN 94/B/99) respectively, the Commission was informed that the Portuguese Republic had implemented a number of ad hoc measures and annual compensation measures in favour of RTP which constituted State aid incompatible with the common market.

9. On 3 March 1997, the applicant brought Case T‑46/97 before the Court of First Instance for the annulment of the Commission decision of 7 November 1996 taken without prior initiation of the formal investigation procedure laid down in Article 93(2) of the EC Treaty (now Article 88(2) EC), concerning a proceeding under Article [88] EC on the financing of public television channels, along with the annulment of a decision allegedly contained in a letter from the Commission of 20 December 1996. By that decision and by that letter, the Commission found that certain measures challenged in the complaints did not constitute State aid and requested information from the Portuguese authorities in respect of certain other of those measures.

10. In its judgment in Case T‑46/97 SIC v Commission [2000] ECR II‑2125, the Court of First Instance noted that serious difficulties remained at the end of the Commission’s preliminary investigation, which had lasted considerably longer than normally necessary, justifying the initiation, by the Commission, of the formal investigation procedure (paragraphs 105 to 109 of the judgment) and annulled the decision of 7 November 1996. By contrast, the Court dismissed as inadmissible the action brought against the letter of 20 December 1996, since that letter did not constitute a decision (paragraph 49 of the judgment).

11. Following that judgment, the applicant sent the Commission three letters dated 26 July 2001 each containing a request to act in respect of a different one of its three complaints and seeking to initiate the formal investigation procedure in respect of the measures of which they complained.

12. Those requests to act were followed by two actions for failure to act brought by the applicant before the Court of First Instance on 6 December 2001 and lodged under case numbers T‑297/01 and T‑298/01. Following a Commission initiative of 7 November 2001 and that institution’s statements of its position of 13 November 2001 and 30 September 2003 (paragraphs 13 and 14 below), it was held that there was no need to adjudicate in those cases (Joined Cases T‑297/01 and T‑298/01 SIC v Commission [2004] ECR II‑743).

13. By letter of 7 November 2001, the Commission requested, pursuant to Article 10(3) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88] EC (OJ 1999 L 83, p. 1), that the Portuguese Republic communicate information regarding the annual compensation measures mentioned in paragraph 8 above in order to enable it to determine the classification of those payments as new or existing aid. Thus, by letter of 30 September 2003, the Commission notified the Portuguese Republic of a request for observations, in accordance with Article 17(2) of Regulation No 659/1999, and initiated, in so doing, the first stage of the investigation of those measures as existing aid. Those annual compensation measures and the procedure initiated in respect of them by the decision of 30 September 2003 is not the subject of this action.

14. By letter of 13 November 2001, the Commission informed the Portuguese Republic of its decision to initiate the formal investigation procedure pursuant to Article 88(2) EC regarding a number of ad hoc measures adopted by the Portuguese Republic for RTP between 1992 and 1998. Those measures are the following:

– the exemption from the duties and expenses relating to the registration of the legal document creating the undertaking in the amount of Portuguese escudos (‘PTE’) 33 million (‘the tax exemptions’);

– the grant by Portugal Telecom to RTP of payment facilities for the fees for the use of the television broadcasting network (‘the payment facilities for the fee’);

– the amicable settlement concluded between the body responsible for social security and RTP, whereby RTP’s debt was rescheduled and the social security body’s claim for default interest was waived;

– the increase in RTP’s capital of PTE 5 400 million in 1993 as compensation for the sale of the television broadcasting network by RTP;

– the issue of bonds in 1994 for PTE 5 000 million, allegedly guaranteed by the Portuguese Republic (‘the 1994 bond issue’);

– the protocol between RTP and the Portuguese Ministry of Culture, concluded in 1996, to support promotion of cinema by RTP;

– the restructuring plan for the period from 1996 to 2000;

– increases in RTP’s capital by the Portuguese Republic between 1994 and 1997, amounting to PTE 52 200 million;

– loans granted by the Portuguese Republic to RTP in 1997 and 1998 in the amount of PTE 20 000 million.

15. The decision to initiate the formal investigation procedure was published in the Official Journal of the European Communities (OJ 2002 C 85, p. 9) and was notified to the applicant by letter of 8 January 2002. In that decision, the Commission requested the interested parties to submit their observations.

16. By letters of 8 February 2002 (ref. 1543.003.CA.001) and 9 May 2002 (ref. 1543.003.OB.001), the applicant submitted its observations to the Commission.

17. In those observations, it called on the Commission to request the Portuguese authorities to disclose the external audit reports on RTP, provided for in Article 19 of the 1993 public service contract and by Article 25 of the 1996 public service contract (‘the contractual external audit reports’). The applicant requested permission to submit observations on the content of those reports.

18. The Commission did not respond to those requests by the applicant.

19. From the month of March 2003 and in order to obtain disclosure of the contractual external audit reports or a statement to the effect that they did not exist, the applicant initiated, at a national level, several successive sets of proceedings, first before the Minister for State and Finance, the minister responsible for carrying out the duties of the President and the President of the Board of Management of RTP, later before the Portuguese Commission for Access to Administrative Documents and lastly before the Tribunal Administrativo de Círculo de Lisboa (Administrative Circuit Court for Lisbon) (Portugal).

20. By letter of 16 May 2003, the applicant repeated its request for the Commission to require the Portuguese authorities to disclose the contractual external audit reports.

21. By letter of 19 June 2003, the Commission turned down that request.

22. By letter of 4 August 2003 to the Commission, the applicant criticised the position which that institution had adopted.

23. By Commission Decision 2005/406/EC of 15 October 2003 on ad hoc measures implemented by Portugal for RTP (OJ 2005 L 142, p. 1; ‘the contested decision’), the Commission decided that certain of the ad hoc measures constituted State aid compatible with the common market (Article 1 of the contested decision), whilst the other ad hoc measures did not constitute State aid (Article 2 of the contested decision).

24. By letter of 4 December 2003, following the judgment of the Tribunal Administrativo de Círculo de Lisboa of 16 October 2003, the Portuguese authorities sent the applicant one of the contractual external audit reports carried out in 2001 by a firm of auditors and relating to the 1998 tax year (‘the contractual external audit report for 1998’). The Portuguese authorities informed the applicant that, with regard to the contractual external audit reports for the years 1993 to 1997, ‘as they are not in the possession of the minister responsible for carrying out the duties of the President, it is impossible for him to issue a statement, since the existence or non-existence of those reports cannot be established with certainty’.

25. By letter of 11 December 2003, the Commission communicated the contested decision to the applicant.

Procedure and forms of order sought

26. By application lodged at the Registry of the Court of First Instance on 31 December 2003, the applicant brought this action.

27. The composition of the Chambers of the Court of First Instance changed with effect from 13 September 2004, resulting in the appointment of the Judge-Rapporteur as President of the Fifth Chamber, to which this case was, consequently, assigned.

28. In the annex to the reply, the applicant produced a management audit report for RTP, No 08/2002 of 6 June 2002, drawn up by the Tribunal de Contas (Court of Auditors) (Portugal) (‘the report of the Tribunal de Contas’). In addition, pursuant to Article 65(b) of the Rules of Procedure of the Court of First Instance, the applicant requested the Court to require the Commission to produce the detailed information which, according to the defence, the Portuguese authorities had sent to that institution.

29. The applicant claims that the Court of First Instance should:

– annul Article 1 of the contested decision inasmuch as it does not satisfy the criteria necessary for Article 86(2) EC to apply;

– annul Article 2 of the contested decision inasmuch as it establishes that the tax exemptions, the payment facilities for the fee and the 1994 bond issue do not constitute State aid;

– order the Commission to pay the costs.

30. The Commission contends that the Court of First Instance should:

– dismiss the action;

– order the applicant to pay the costs.

Law

31. This action, in addition to presenting four pleas in law – alleging, first, breach of the obligations of diligence and impartiality, second, errors of fact and breach of the duty to state reasons, third, an error of law resulting from the failure to classify certain measures as State aid and, fourth, errors of law as to the conditions for the application of Article 86(2) EC – turns, essentially, on two main disputes corresponding to the two articles of the operative part of the contested decision and to the third and fourth pleas in support of annulment.

32. The first main dispute, corresponding to the third plea in support of annulment, relates to the Commission finding, appearing in Article 2 of the contested decision, that certain of the measures adopted by the Portuguese Republic do not constitute State aid within the meaning of Article 87(1) EC.

33. The second main dispute, corresponding to the fourth plea in support of annulment, relates to the Commission finding that other measures, which, it is not disputed, constitute State aid within the meaning of Article 87(1) EC, might benefit from the derogation laid down in Article 86(2) EC (Article 1 of the contested decision).

34. In connection with the second dispute in particular, the applicant relies, both in the first plea as well as in respect of certain parts of the second plea, on the Commission’s breach of its obligation to undertake a diligent and impartial investigation.

35. It is necessary, initially, to examine the first main dispute and, accordingly, the third plea in support of annulment.

The third plea in law, alleging that the Commission erred in law in failing to classify certain measures as State aid

The first part, alleging the failure to classify the tax exemptions as State aid

– Arguments of the parties

36. According to the applicant, the measure, provided for in Article 11(1) of Lei n o 21/92, transforma a Radiotelevisão Portuguesa, E.P., em sociedade anónima, of 14 August 1992 (Portuguese Law No 21/92 on the transformation of Radiotelevisão Portuguesa, E.P., into a public limited company) ( Diário da República I, Series I‑A, No 187, of 14 August 1992; ‘Law No 21/92’) authorising the official registration without notarial deed of RTP’s transformation into a public limited company, accorded an advantage to RTP which was denied to other economic operators on the market. It consisted in RTP’s exemption from payment of the registration charges and fees connected with that transformation. It is alleged that that exemption was worth PTE 33 million.

37. In addition, Article 11(2) of Law No 21/92 also provides that RTP is to be accorded an unlimited exemption from payment of any charges and fees to all registration departments and to all authorities and public bodies in respect of any act of inscription, registration or annotation.

38. Those State provisions, which confer advantages on the recipient undertaking and are selective in nature, since they apply only to public companies, constitute State aid, contrary to the Commission’s finding in the contested decision (recital 125 et seq. of the contested decision).

39. It is not evident how the grant of such privileges to RTP can be justified by the general principles and overall logic of the legal system applicable in Portugal, as the Commission appears to contend.

40. In reply, the Commission repeats the reasoning it employed in recital 125 et seq. of the contested decision.

41. It notes that RTP’s transformation into a public limited company was not necessary and could not be considered to be an advantage. Its aim was merely to bring the way in which the public operator functioned closer to that of private operators.

42. It adds that, even if the applicant’s position were valid and in the event that RTP had to bear all the notarial and registration charges connected with its change of status, the costs arising would have been borne by the Portuguese Republic itself, without it being possible for such ‘aid’ to be considered unlawful, since, as it is indispensable to the creation of the undertaking, it is directly linked to the fulfilment of RTP’s public service remit.

– Findings of the Court

43. According to settled case-law, classification as State aid requires that all the conditions set out in Article 87(1) EC are fulfilled (Case C‑142/87 Belgium v Commission [1990] ECR I‑959, paragraph 25; Joined Cases C‑278/92 to C‑280/92 Spain v Commission [1994] ECR I‑4103, paragraph 20; and Case C‑482/99 France v Commission [2002] ECR I‑4397, paragraph 68).

44. The principle that State aid is prohibited, laid down in Article 87(1) EC, includes the following requirements. First, there must be an intervention by the State or through State resources. Second, that intervention must confer an advantage on its recipient. Third, it must be liable to affect trade between Member States. Fourth, it must distort or threaten to distort competition.

45. The first of those requirements, concerning the involvement of State resources, is not in dispute in this case. It is not contested that it was fulfilled.

46. The applicant’s arguments concentrate on the second of those requirements. The tax exemptions granted and continue to grant selectively to RTP an economic advantage which other economic operators are denied.

47. The Court notes that the applicant identifies, essentially, two advantages.

48. First, RTP benefited from an ad hoc advantage, consisting of the exemption from payment of registration charges and fees relating to its transformation into a public limited company.

49. Second, RTP benefited from a permanent advantage, consisting of an unlimited exemption from payment to all authorities of any charges and fees in respect of any act of inscription, registration or annotation.

50. It is appropriate, first, to examine the ad hoc advantage from which, according to the applicant, RTP benefited.

51. That advantage, in fact, comprises two parts: first, RTP was exempted from the usual requirement of a notarial deed and, accordingly, from the notarial fees (also referred to as ‘notarial charges’) connected thereto; second, it was exempted from the registration charges and the costs linked to its publication, since the registration formalities relating to RTP’s transformation into a public limited company occurred automatically and compliance with the publication formalities was, according to the Commission, rendered unnecessary by the publication of Law No 21/92 in the Diário da República (paragraph 36 above).

52. In the contested decision, the Commission contended, in relation to those two parts of the ad hoc advantage, that Article 11(1) of Law No 21/92, pursuant to which RTP was exempted from payment of notarial and registration charges, did not confer a specific advantage on RTP. That text merely reaffirms the applicability to the specific case of RTP of Lei n o 84/88 transformação das empresas públicas em sociedades anónimas of 20 July 1988 (Portuguese Law No 84/88 on the transformation of public undertakings into public limited companies) ( Diário da República I, Series I, No 166, of 20 July 1988; ‘Law No 84/88’), under which public undertakings can be transformed into public limited companies by a decree-law which is to constitute the act approving the statutes of the limited company and is to be treated as a sufficient document for all registration requirements (recital 127 of the contested decision). The different treatment for public undertakings whose legal status is changed for the purpose of transforming them into public limited companies arises from the internal logic of the system and does not confer on them a specific advantage to the extent that relevant chargeable events do not exist (recital 128 of the contested decision).

53. Before going on to examine those reasons stated by the Commission, it is appropriate to cite the relevant passages of the Portuguese legislation.

54. Article 1 of Law No 84/88 states:

‘Public undertakings … can be transformed by decree-law into public limited companies with public capital or a majority of public capital, in accordance with the terms of the Constitution and of this Law.’

55. Article 3(3) of Law No 84/88 states that ‘the [decree-law effecting that transformation] constitutes a sufficient document for all registration requirements’.

56. Article 11(1) and (2) of Law No 21/92 states:

‘1. The statutes of RTP, SA, annexed to this Law are hereby approved; they do not need to be transformed into a deed, but shall be automatically registered, free of duties and expenses, on the basis of their publication in the Diário da República .

2. All acts of inscription, registration or annotation before all registration departments, all authorities and all public bodies, in particular the national register of legal persons, the register of mortgages and the vehicle registration department shall be carried out on the basis of a simple request signed by two members of the undertaking’s Board of Administration and shall be free of any charges and fees.’

57. First, it is apparent both from the title of Law No 84/88 (see paragraph 52 above) and from Article 1 thereof (see paragraph 54 above) that that law does not introduce a general measure, applicable to all economic operators. It only applies to transformations of public undertakings into public limited companies. Private undertakings are, consequently, excluded from benefiting thereunder.

58. Moreover, the applicant specifically claims in its application that a private undertaking governed by market rules does not benefit from the tax exemptions from which RTP benefited when it changes its legal form.

59. Although the Commission recognises in recital 125 of the contested decision that it is for it ‘to assess whether the measure … applied specifically to RTP (and alternatively, to only public companies) and not to private companies’, it does not deal with that issue in the rest of the contested decision, at least with regard to the ad hoc advantage.

60. Thus, recitals 126 to 129 of the contested decision in no way challenge the claim made in paragraph 57 above to the effect that the provisions of Law No 84/88 are applicable specifically to public undertakings.

61. Recital 126 of the contested decision states that RTP does not enjoy a general exemption from registration charges. However, this does not alter the fact that even if that exemption is not general, it is granted by Law No 84/88 solely to public undertakings and not to all operators.

62. With regard to recital 127 of the contested decision, although it states that Article 11 of Law No 21/92 merely confirms that Law No 84/88 applies to RTP and, thus, that Law No 21/92 does not confer on it a specific advantage, but only applies the general scheme of Law No 84/88, the fact remains, once again, that that scheme is ‘general’ solely in respect of public undertakings. It does not apply to other economic operators. Thus, there really is a specific advantage conferred on certain undertakings within the meaning of the rules applicable to State aid.

63. In recital 128 of the contested decision, the Commission contends, however, that ‘the different treatment for public undertakings when transforming their legal status into a public limited company arises from the internal logic of the system and does not confer on them a specific advantage since relevant chargeable events do not exist’.

64. It is true that a State measure which, despite conferring an advantage on a specific category of economic operators, instead of derogating from the normal application of the system becomes a part of it, constituting, in so doing, a measure inherent to that system, does not fall within the definition of a selective measure. Moreover, this is also the case where the differences of treatment arising from that measure can be justified by the nature or the logic of the system (see the Opinion of Advocate General Tizzano in Case C‑172/03 Heiser [2005] ECR I‑1627, I‑1631, point 47, Opinion of Advocate General Jacobs in Case C‑379/98 PreussenElektra [2001] ECR I‑2099, I‑2103, point 130, and Opinion of Advocate General Léger in Case C‑159/01 Netherlands v Commission [2004] ECR I‑4461, I‑4463, points 36 and 37; Case T‑55/99 CETM v Commission [2000] ECR II‑3207, paragraph 52 and the case-law cited; and Case T‑308/00 Salzgitter v Commission [2004] ECR I‑1933, paragraph 42 and the case-law cited).

65. Nevertheless, in order to be able to find, in that event, that the exemption from notarial charges – the first part of the ad hoc advantage – did not constitute State aid, but was justified by the nature and the general logic of the system of which it was a part, it was not sufficient to find, as the Commission did, that the recourse to legislation for the purpose of transforming public undertakings into public limited companies meant that the chargeable event for the notarial charges did not occur. Such a finding was, essentially, a statement of evidence.

66. The question for the Commission to examine was whether it was compatible with the logic of the Portuguese legal system for the transformation of public undertakings into public limited companies to occur by legislation, or whether the recourse to legislation for such operations constituted a derogation which, in view of the consequences which resulted therefrom (rendering a notarial deed unnecessary with the result that no charges were incurred in respect thereof), was intended to confer an advantage on public undertakings in relation to other undertakings.

67. The Court of First Instance finds, therefore, that the Commission – since it did not examine whether, despite its selective nature, the exemption from notarial charges did not constitute State aid on the ground that the recourse to a legislative instrument which entailed that exemption was not chosen with the aim of enabling public undertakings to escape those charges, but was merely part of the logic of the Portuguese legal system – failed to state grounds in law for its finding to the effect that the exemption from notarial charges did not constitute State aid.

68. As regards the second aspect of the ad hoc advantage – in other words, the exemption from the registration charges and the costs of publication relating to RTP’s transformation into a public limited company – the Court notes that the Commission stated in recital 129 of the contested decision that the same reasoning as that put forward in recital 128 of that decision is to apply. The Commission adds, essentially, that, in view of the fact that Law No 21/92 (which includes RTP’s statutes in an annex) was published in the Diário da República , it would have been superfluous to impose on RTP the publication requirements of the general law. The publication in the Diário da República produced the same effects as registration.

69. Even if those assertions, concerning the effects of publication in the Diário da República , are correct – which is, moreover, doubtful since the wording of the Portuguese law (cited in paragraph 55 above) suggests, on the contrary, that registration formalities continue to be necessary even though RTP’s transformation into a public limited company was brought about by a legislative act – nevertheless, the question remains, there again, whether it is consistent with the logic of the Portuguese legal system for RTP’s transformation into a public limited c ompany to occur not in the normal way laid down for private companies, in other words, by a notarial deed (with all the consequences that entails under the general law concerning registration requirements and publication), but by legislation.

70. As the Commission did not reply to that question in the contested decision, it is necessary to find that, as with the exemption from notarial charges, that institution has failed to prove to the requisite legal standard that, in respect of the exemption from registration and publication charges connected with RTP’s transformation into a public limited company, that exemption did not confer on RTP a specific advantage and that, accordingly, it did not constitute State aid.

71. Concerning, next, the permanent advantage granted to RTP, the applicant claims that RTP benefits from an unlimited exemption from payment to all authorities of any charges and fees in respect of any act of inscription, registration or annotation.

72. The Commission counters by stating, in its defence, that Article 11(2) of Law No 21/92 (see paragraph 56 above) merely confirms the applicability to RTP of a provision of general application, Article 1 of Decreto-Lei n o 404/90 of 21 December 1990 (Portuguese Decree-Law No 404/90) ( Diário da República I, Series I, No 293, of 21 December 1990; ‘Decree-Law No 404/90’) approving the system exempting from transfer tax (‘regime de isenção de sisa’) undertakings that carried out acts of cooperation or concentration (see, also, recital 130 of the contested decision).

73. Moreover, the Commission disputes that the exemption accorded by Article 11(2) of Law No 21/92 is ‘general’ in the sense of permanent in time. The Commission contends that, on several occasions, RTP paid notarial and registration charges related to changes in the company after its transformation into a public limited company (see, also, recital 126 of the contested decision).

74. The Court notes that the Commission’s argument consists, essentially, of the contention that Article 11(2) of Law No 21/92 is merely the application to a specific case of a general rule and that the requirement imposed by Article 87(1) EC that the aid should relate to a specific undertaking in order for it to be classified as State aid is thus not fulfilled in this case.

75. That argument of the Commission is not convincing, in the light of the wording of Decree-Law No 404/90, Articles 1 and 2 of which state:

‘Article 1

It is possible to grant to undertakings that, up to 31 December 1993, carry out acts of cooperation or concentration, an exemption from transfer tax on the transfer of fixed assets necessary for that concentration or that cooperation as well as emoluments and other statutory charges payable in the context of the performance of those acts.

Article 2

1. For the purpose of this Decree-Law, “act of concentration” shall mean:

(a) The merger of two or more individual undertakings and/or corporations into a new company limited by shares [public limited company or private limited company], including the total assets of the undertakings or companies.

(b) The incorporation by an undertaking, by a transfer in its favour, of all or part of the assets of another undertaking even if that other undertaking is not wound up.

2. For the purposes of this Decree-Law, “act of cooperation” shall mean:

(a) The creation of additional groups of undertakings in accordance with legislation in force for the provision of joint services, joint or cooperative purchase or sale, specialisation or rationalisation of production, market research, sales promotion, the acquisition and transfer of technical knowledge or practical arrangements, the development of new techniques and new products, the training of personnel and the perfecting of their skills, the carrying-out of specific work or services and all other joint objectives of a relevant nature.

(b) The creation of legal persons governed by private law which are non-profit making through the association of public undertakings, of companies with public capital or mostly public capital or of companies and other persons governed by private law, with the object, in their respective sectors, of maintaining a technical assistance service, organising an information system, promoting standards and the quality of products and good technology of manufacturing processes and researching the prospects for the development of the sector.’

76. That decree-law, which is indeed, on first analysis, a rule of general application, does not appear to cover the present case at all, namely the transformation of a company governed by public law into a public limited company. It concerns the case of a concentration or cooperation between two or more undertakings. At the hearing, in answer to a question from the Court, the applicant moreover explained, without being seriously challenged by the Commission, that that decree-law was in no way intended to apply to the present case.

77. It does not therefore appear that a private undertaking which limits itself to changing its corporate form to that of a public limited company can rely on that text in order to obtain exemption from the statutory fees and charges relating to that transformation. It follows that the contested decision, in recital 130, does not prove to the requisite legal standard that the exemption introduced by Article 11(2) of Law No 21/92 is merely the specific application to RTP of a general rule.

78. Once again, as in the case of the ad hoc advantage, the Court notes that the Commission has not proved to the requisite legal standard that the measure at issue did not confer a specific advantage on RTP and that, accordingly, it did not constitute State aid.

79. With regard to the Commission’s argument that the exemption is not permanent (see paragraph 73 above), it is probably well founded, but in no way alters the finding that the general nature of that exemption had not been proved to the requisite legal standard and, that being so, that it was thus not possible to conclude that that exemption did not constitute State aid.

80. In the defence, the Commission puts forward the argument that, even if the Court were to find that RTP should bear the notarial, registration and publication charges which apply to private undertakings, the costs arising will be paid by the State itself and that it will not be possible for that ‘aid’ to be found to be unlawful, since, as it is indispensable for the creation of the undertaking, it is directly linked to the fulfilment of the public service remit.

81. If the Commission’s contention is correct – that RTP was transformed into a public limited company because the Portuguese Government considered that to be necessary for the proper performance, by RTP, of its public service remit – then it is logical, inasmuch as a notarial deed and the classic formalities may be necessary for that transformation and that transformation was not in itself advantageous for RTP, for the costs relating thereto to be borne in full by the State.

82. Nevertheless, that contention by the Commission, which does not appear in the contested decision, is not accompanied by any evidence. It cannot be ruled out that the Portuguese Government transformed RTP into a public limited company for reasons other than those connected with the proper performance of the public service remit. The Commission itself states in the defence that that transformation was not necessary.

83. Accordingly, that argument of the Commission should be dismissed.

84. Having regard to all of the foregoing considerations, the Court of First Instance finds that the first part of this plea, concerning tax exemptions, is well founded in law and must, therefore, be upheld.

The second part, alleging the failure to classify the payment facilities for the licence as State aid

– Arguments of the parties

85. The applicant claims that, according to Article 13(1)(f) of Lei n o 58/90 regime da actividade de televisão of 7 September 1990 (Portuguese Law No 58/90 on the regime for television activities) ( Diário da República , Series I, No 207, of 7 September 1990; ‘Law No 58/90’), late payment of the network fee to Portugal Telecom by a private operator constitutes a ground for withdrawal of its licence. The seriousness of the penalty applicable contrasts with the leniency with which RTP was treated. That contradicts the Commission’s argument that there was no difference between the network fees which Portugal Telecom charged to RTP and those it charged to the private operators, to the extent that the decisive element was the reasonable time-limit for requiring payment. The acceptance by Portugal Telecom, whose majority shareholder from 1991 to 1997 was the Portuguese Republic, of late payments of the network fee by RTP thus constitutes State aid. The allegation that Portugal Telecom did not waive recovery of those debts or its claim for default interest is not in itself sufficient to call that assessment into question.

86. In the reply, the applicant claims that the Portuguese Republic was in control of Portugal Telecom until at least 1997 and that the agreements concluded between Portugal Telecom and RTP relate to March 1996 and December 1997. RTP was in a state of technical insolvency.

87. The Commission states that it examined that point, but the applicant notes that the contested decision does not answer the questions which it asked in the administrative procedure concerning the date on which the debt to Portugal Telecom was settled, if at all, the amounts of default interest actually settled and the amount of RTP’s debt to Portugal Telecom as at the date of the request.

88. The fact that the Autoridade Nacional de Comunicações (Portuguese National Communications Authority; ‘Anacom’), responsible for ensuring respect for the pricing rules for the television broadcasting network, decided in 2003 to reduce the level of the network fee paid by television operators to Portugal Telecom in 2002 was not relevant to the examination of the period from 1992 to 1998.

89. The Commission contests the applicant’s position that the Portuguese Republic was not unconnected with Portugal Telecom’s acceptance of late payments and thus with the grant, allegedly, of terms of payment which were not available to RTP’s competitors.

90. The Commission did not exclude a priori the involvement of public resources. However, having noted the absence of evidence of actual participation by the Portuguese authorities in the adoption of the agreements concerning the acceptance of payment deferrals, it was unable to find that such resources were implicated for the purposes of Article 87 EC.

91. In addition, Portugal Telecom’s behaviour before and after its privatisation in 1997 did not change. Portugal Telecom continued, after its privatisation, to conclude agreements with RTP accepting late payments of RTP’s network fee. The main reason for these agreements was a disagreement as to the level of the annual network fee, connected with the interdependence of the two undertakings. That fact was moreover underlined by Anacom’s decision of 2003 pursuant to which Portugal Telecom was obliged to reduce its tariffs considerably. That shows that Portugal Telecom’s behaviour towards RTP was that of a private creditor.

92. In the rejoinder, the Commission indicates that the only reason for its reference to Anacom’s decision of 2003 was the fact that that decision stated that the main reason for the agreements between RTP and Portugal Telecom appeared to be a dispute over the level of the annual network fee and that that constituted additional evidence that Portugal Telecom’s behaviour was that which a private creditor would have adopted in the same situation.

– Findings of the Court

93. For advantages to be capable of being classified as aid within the meaning of Article 87(1) EC, they must, first, be granted directly or indirectly through State resources and, second, be imputable to the State ( France v Commission , paragraph 43 above, paragraph 24 and the case-law cited; Case C‑355/00 Freskot [2003] ECR I‑5263, paragraph 81; Case C‑345/02 Pearle and Others [2004] ECR I‑7139, paragraph 35; Opinion of Advocate General Jacobs in Case C‑457/00 Belgium v Commission [2003] ECR I‑6931, I‑6934, points 67 and 69; Joined Cases T‑228/99 and T‑233/99 Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission [2003] ECR II‑435, paragraph 179; and Case T‑351/02 Deutsche Bahn v Commission [2006] ECR II‑1047, paragraph 101).

94. According to case-law, the imputability of a measure to the State cannot be inferred from the mere fact that the measure at issue was taken by a public undertaking ( France v Commission , paragraph 43 above, paragraphs 51 and 57).

95. Even if the State is in a position to control a public undertaking and to exercise a dominant influence over its operations, actual exercise of that control in a particular case cannot be automatically presumed. A public undertaking may act with more or less independence, according to the degree of autonomy left to it by the State. Therefore, the mere fact that a public undertaking is under State control is not sufficient for measures taken by that undertaking to be imputed to the State. It is also necessary to examine whether the public authorities must be regarded as having been involved, in one way or another, in the adoption of those measures ( France v Commission , paragraph 43 above, paragraph 52).

96. On that point, it cannot be demanded that it be demonstrated, on the basis of a precise inquiry, that in the particular case the public authorities specifically incited the public undertaking to take the aid measures in question. In the first place, having regard to the fact that relations between the State and public undertakings are close, there is a real risk that State aid may be granted through the intermediary of those undertakings in a non-transparent way and in breach of the rules on State aid laid down by the Treaty ( France v Commission , paragraph 43 above, paragraph 53).

97. Moreover, it will, as a general rule, be very difficult for a third party, precisely because of the privileged relations existing between the State and a public undertaking, to demonstrate in a particular case that aid measures taken by such an undertaking were in fact adopted on the instructions of the public authorities ( France v Commission , paragraph 43 above, paragraph 54).

98. For those reasons, the Court, in paragraph 55 of the judgment in France v Commission , paragraph 43 above, held that it must be accepted that the imputability to the State of an aid measure taken by a public undertaking may be inferred from a set of indicators arising from the circumstances of the case and the context in which that measure was taken. In that respect, the Court noted that it had already taken into consideration the fact that the body in question could not take the contested decision without taking account of the requirements of the public authorities (see, inter alia, Joined Cases 67/85, 68/85 and 70/85 Van der Kooy and Others v Commission [1988] ECR 219, paragraph 37) or the fact that, apart from factors of an organic nature which linked the public undertakings to the State, those undertakings, through the intermediary of which aid had been granted, had to take account of directives issued by an inter-ministerial committee (see Case C-303/88 Italy v Commission [1991] ECR I‑1433, paragraphs 11 and 12, and Case C-305/89 Italy v Commission [1991] ECR I‑1603, paragraphs 13 and 14).

99. In addition, other indicators might, in certain circumstances, be relevant in concluding that an aid measure taken by a public undertaking is imputable to the State, such as, in particular, its integration into the structures of the public administration, the nature of its activities and the exercise of the latter on the market in normal conditions of competition with private operators, the legal status of the undertaking (in the sense of it being subject to public law or ordinary company law), the intensity of the supervision exercised by the public authorities over the management of the undertaking, or any other indicator showing, in the particular case, an involvement by the public authorities in the adoption of a measure or the unlikelihood of their not being involved, having regard also to the compass of the measure, its content or the conditions which it contains ( France v Commission , paragraph 43 above, paragraph 56).

100. However, the mere fact that a public undertaking has been constituted in the form of a capital company under ordinary law cannot, having regard to the autonomy which that legal form is capable of conferring upon it, be regarded as sufficient to exclude the possibility of an aid measure taken by such a company being imputable to the State. The existence of a situation of control and the real possibilities of exercising a dominant influence which that situation involves in practice makes it impossible to exclude from the outset any imputability to the State of a measure taken by such a company, and hence the risk of an infringement of the Treaty rules on State aid, notwithstanding the relevance, as such, of the legal form of the public undertaking as one indicator, amongst others, enabling it to be determined in a given case whether or not the State is involved ( France v Commission , paragraph 43 above, paragraph 57 and the case-law cited).

101. In the present case, the Commission, after contending that, at least before the middle of 1997, the Portuguese Republic was in a position to control Portugal Telecom (recital 109 of the contested decision), concluded, however, that nothing indicated that the Portuguese public authorities were implicated in the adoption of the payment facilities for the fee (recital 116 of the contested decision).

102. The Commission contended, in that respect, that the regulation of tariffs and services proposed by Portugal Telecom made no distinction between private operators and the public broadcaster and that Portugal Telecom did not have to provide RTP with an obligatory universal service in terms of a network service (recital 111 of the contested decision).

103. It contended that Portugal Telecom, as a public limited company governed by company law, was not integrated into the structures of the public administrations (recital 113 of the contested decision).

104. It stated that, in response to a question on its part, the Portuguese authorities expressly stated that they had not intervened, directly or indirectly, in the grant of the payment facilities for the fee. In addition, no third party had come forward with any indications of such an intervention (recital 114 of the contested decision).

105. Lastly, the Commission, first, contended that Portugal Telecom’s behaviour did not change after the middle of 1997, since it continued to conclude agreements on payment facilities for the fee with RTP, and, second, stated that the main reason for those agreements was a dispute over the level of that fee. That was confirmed by Anacom’s decision of 2003 (recital 115 of the contested decision).

106. The Court notes that the applicant’s criticisms of the arguments and the evidence put forward by the Commission in the contested decision are limited.

107. Although the applicant’s argument that Portugal Telecom was controlled by the Portuguese Republic, as majority shareholder, constitutes an uncontested fact in the dispute, in view of the case-law outlined above, it is not sufficient for a finding that the measure at issue was imputable to the State.

108. The applicant claims that the law contained a breach of the principle of equal treatment of private and public operators, with regard to the penalty incurred for late payment of the network fee. Only private operators incurred the withdrawal of their licence for late payment.

109. The Court notes that, even though, as the applicant claims, Article 13(1)(f) of Law No 58/90 relates solely to private operators, that fact is not such as to constitute evidence that the Portuguese Republic was implicated in the grant to RTP of the payment facilities for the fee. The Commission contends in that regard and the applicant does not contest that Portugal Telecom was, in any event, under no obligation to provide RTP with a broadcasting service in the context of a universal service obligation. In other words, even though the law formally provided for withdrawal of the licence for late payment only in respect of private operators, Portugal Telecom was not prohibited from interrupting or suspending its services to RTP in the same situation.

110. The Court notes, lastly, that the applicant does not contest the Commission’s assessment that the payment facilities were mainly caused by a dispute between RTP and Portugal Telecom as to the level of the network fee. The applicant, at most, claims that the decision taken by Anacom in 2003 is without any relevance to this case. However, that objection, which does not, moreover, call into question the Commission’s assessment, is not relevant. Nothing precludes the Commission from relying on that 2003 decision as evidence – tenuous certainly, but none the less relevant – in support of its assessment that it was a tariff dispute between RTP and Portugal Telecom that was at the origin of the payment facilities for the fee.

111. The applicant’s argument that the alleged fact that Portugal Telecom did not waive recovery of those debts or its claim for default interest is insufficient, in itself, to prevent the measures being classified as State aid is clearly not related to the question whether the measure at issue is imputable to the State, but, at most, to the question whether State resources were involved. That question is not at issue inasmuch as, in recital 107 of the contested decision, the Commission decided, essentially, to find that State resources may have been involved.

112. Concerning, lastly, the applicant’s reference to the fact that RTP was in a state of technical insolvency, a reference which could be understood as suggesting that it is only because of the implication of the Portuguese Republic that Portugal Telecom accorded the payment facilities for the fee to RTP, it does not in itself, however, include any specific refutation of the Commission’s argument that payment facilities for the fee can be explained by a tariff dispute between RTP and Portugal Telecom.

113. Accordingly, the Court of First Instance finds that the applicant has not succeeded in calling into question the Commission’s assessment, contained in the contested decision, according to which there was no information to permit it to conclude that the payment facilities for the fee could be imputed to the Portuguese Republic.

114. It is thus necessary to reject that part of the plea.

The third part, alleging failure to classify the 1994 bond issue as State aid

– Arguments of the parties

115. The applicant disputes that the Commission’s finding that the information notice for the 1994 bond issue indicated that RTP guaranteed repayment of the loan with its own revenue entitled that institution to find that there was no State aid.

116. It is apparent from the contested decision that RTP’s financial position was very poor in 1994. It was solely because all its share capital was held by the State – and because it was thought that the State would not allow the undertaking to go into insolvency – that the 1994 bond issue was accepted by the market. That situation should have been properly taken into account in the assessment of the measure at issue.

117. In the reply, the applicant cites the report of the Tribunal de Contas, from which it appears that the level of RTP’s bank indebtedness is explained by the fact that RTP is a public undertaking, entrusted with providing public service television and benefiting from the regular financial support of the State, which was sufficient guarantee for RTP’s various creditors.

118. The Commission contends that the applicant’s position is incorrect. The Commission explained in the contested decision (recital 121) why it considered that the 1994 bond issue did not constitute State aid. No State guarantee was formally given, which is something which the applicant admits. RTP itself guaranteed the servicing of the debt. RTP was a public limited company at the time and thus did not have a status which would have resulted in an implicit State guarantee.

119. Consequently, the Commission contends that the 1994 bond issue was carried out under market conditions and that the State did not forgo revenue. Lastly, the fact that RTP was owned by the State in no way alters that finding in view of the neutrality of the Treaty as to whether the undertaking at issue is in public or private ownership.

120. The Commission maintains that the report of the Tribunal de Contas is inadmissible because it was not produced in the application, and notes that even the quotation from the report upon which the applicant relies shows that the Portuguese Republic did not provide any guarantee whatsoever.

– Findings of the Court

121. In recital 121 of the contested decision, the Commission stated that it had received no information to show that the 1994 bond issue was accompanied by a State guarantee. According to the prospectus for that bond issue, it was RTP itself which guaranteed repayment of the debt. RTP did not have a legal status which led to an implicit State guarantee.

122. It is not contested that RTP was a public limited company at the time of the 1994 bond issue. As a result, RTP’s owner, the Portuguese Republic, was not subject to an unlimited obligation to repay that company’s debts.

123. Neither is it contested that the prospectus for the 1994 bond issue provided for no guarantee on the part of the State.

124. The applicant claims, however, that the fact that the State had a 100% stake in RTP led to the existence of an implicit guarantee which alone explains how that company, despite its poor financial position, was successful in placing the 1994 bond issue on the market.

125. It is necessary, however, not to confuse the question whether the State granted, expressly or implicitly, a guarantee – the only question relevant to this case – with that of how the market reacted to the fact that the issuer of the bonds was not just another private operator, but RTP.

126. The fact that the market agreed to subscribe to the 1994 bond issue – in the applicant’s opinion, because it considered that the State would guarantee de facto its repayment – does not permit a finding that there is State aid, since it is not disputed that the State did not give its guarantee, either expressly or implicitly. Only objective findings leading to the conclusion that the State legally had to repay that issue in the event of default by RTP would permit a finding of the existence of a State guarantee.

127. It is not apparent from the court file or the applicant’s pleadings that the Portuguese Republic was under such an obligation.

128. Concerning the report of the Tribunal de Contas produced in the reply, that report, as noted in paragraphs 186 to 193 below, is not relevant to the assessment of the lawfulness of the contested decision.

129. Thus, the applicant having, in its pleadings, submitted no evidence such as to call into question the Commission’s assessment set out in recital 121 of the contested decision, it is necessary to dismiss the applicant’s head of claim concerning the 1994 bond issue.

Conclusion on the third plea in law

130. In view of all the foregoing considerations, it is necessary to uphold the present plea in part and to annul Article 2 of the contested decision inasmuch as it finds that the exemption from registration charges does not constitute State aid.

131. By contrast, the remainder of the present plea is dismissed, that is to say, in so far as it concerns the payment facilities for the fee and the 1994 bond issue.

132. It is necessary to examine, next, the second main contention, referred to in paragraph 33 above and, accordingly, the fourth plea in support of annulment.

The fourth plea in law, alleging that the Commission erred in law as to the conditions for the application of Article 86(2) EC

133. This plea is divided into two parts. In the first part, the applicant claims that the award of the public television service by the Portuguese Republic to RTP, without competitive tendering, precluded the grant of a derogation under Article 86(2) EC. In the second part, the applicant alleges an infringement of Article 86(2) EC, resulting from breach by the Commission, in the contested decision, of the criteria for the application of that provision as defined in the Communication on broadcasting.

The first part, alleging the award of the public television service to RTP without competitive tendering

– Arguments of the parties

134. The applicant, after stating that the public television service was not awarded to RTP on the basis of competitive tendering, complains that the Commission failed to question the lawfulness of that award. It claims that, if the Commission had carried out that examination, it would have been compelled to find that that award did not comply with the requirements of Community law and, accordingly, that the funding granted to RTP could not benefit from any exemption under Article 86(2) EC. It relies on the Commission’s interpretative communication on concessions under Community law (OJ 2000 C 121, p. 2; ‘Communication on concessions’) and on what it alleges was the Commission’s interpretation of the judgment in Case C‑324/98 Telaustria and Telefonadress [2000] ECR I‑10745 contained in its XXXIst Report on Competition Policy – 2001 (SEC(2002) 462 final). The applicant also relies on Case C‑107/98 Teckal [1999] ECR I‑8121.

135. In the reply, the applicant claims, essentially, that the fourth of the conditions set out in paragraphs 88 to 93 of Case C‑280/00 Altmark Trans and Regierungspräsidium Magdeburg [2003] ECR I‑7747 (‘the fourth Altmark condition’) required the Commission, in view of the failure to follow a competitive tendering procedure, to verify that the level of compensation awarded to RTP had been determined on the basis of a typical undertaking, well run and adequately provided with means. Such was manifestly not the case.

136. The Commission contends that the award of the public service television remit to RTP is a different question from that of whether the compensation awarded to that undertaking was compatible with the State aid rules and one which was never raised during the formal procedure.

137. Whatever the position, it does not follow from the provisions of Article 86(2) EC or from the case-law that Member States are required to follow specific procedures for choosing undertakings entrusted with the operation of services of general economic interest (‘SGEIs’).

138. In any event, in the case of broadcasting SGEIs, Community law does not require the open and competitive procedures normally required as a matter of course in contracts for concessions for public services.

139. The references made by the applicant to the regime applicable to concessions and to the case-law of the Court are not relevant.

140. With regard to the fourth Altmark condition, the applicant mistook its purpose. That condition concerns the question whether the measure is State aid and not whether it can benefit from the derogation provided for in Article 86(2) EC.

– Findings of the Court

141. First, with regard to the Commission’s preliminary remark – that the question of the conditions for the award of the television SGEI to RTP was raised for the first time before the Community judicature – it is necessary to point out that, although it is not admissible for a party interested in a State aid procedure to rely before the Community judicature on factual arguments which were unknown to the Commission and which it had not notified to the latter during the investigation procedure, nothing prevents, as in the present case, that party from raising against the final decision a legal plea not raised at the stage of the administrative procedure (see, to that effect, Case T‑110/97 Kneissl Dachstein v Commission [1999] ECR II‑2881, paragraph 102 and the case-law cited; Case T‑274/01 Valmont v Commission [2004] ECR II‑3145, paragraph 102; and Joined Cases T‑111/01 and T‑133/01 Saxonia Edelmetalle and ZEMAG v Commission [2005] ECR II‑1579, paragraph 68).

142. The Commission’s position, alleging that the applicant has raised a new argument, is thus not such as to permit that argument to be disregarded.

143. None the less, the Court of First Instance finds, like the Commission, that that argument has not succeeded in calling into question the lawfulness of the contested decision.

144. As stated in point 29 of the Communication on broadcasting, the grant of the derogation from the prohibition on State aid laid down in Article 86(2) EC requires, according to the case-law (see, to that effect, Case C‑179/90 Merci Convenzionali Porto di Genova [1991] ECR I‑5889, paragraph 26; Case T‑106/95 FFSA and Others v Commission [1997] ECR II‑229, paragraphs 173 and 178; and Joined Cases T‑204/97 and T‑270/97 EPAC v Commission [2000] ECR II‑2267, paragraphs 125 and 126), the fulfilment of three conditions: first, the service in question must be an SGEI and clearly defined as such by the Member State; second, the undertaking in question must have been explicitly entrusted by the Member State with the provision of that SGEI; thirdly, the application of the competition rules of the Treaty – in this case, the ban on State aid – must obstruct the performance of the particular tasks assigned to the undertaking and the exemption from such rules must not affect the development of trade to an extent that would be contrary to the interests of the Community.

145. Among its conditions for application, Article 86(2) EC does not include a requirement to the effect that the Member State must have followed a competitive tendering procedure for the award of the SGEI. Moreover, in Case T‑17/02 Olsen v Commission [2005] ECR II‑2031, paragraph 239, the Court expressly stated that it is not apparent either from the wording of Article 86(2) EC or from the case-law on that provision that an SGEI may be entrusted to an operator only as a result of a tendering procedure.

146. In view of the foregoing considerations, the applicant’s head of claim alleging that the Commission should, in the context of its examination under Article 86(2) EC, have verified whether the television SGEI had been awarded to RTP after competitive tendering must be rejected.

147. It follows equally from this conclusion – to the effect that, in the context of its examination under Article 86(2) EC, the Commission was not required to examine whether the award to RTP of the television SGEI occurred in the context of a competitive tendering – that, even if the television SGEI, for other reasons, such as those relied on by the applicant and recalled in the last two sentences of paragraph 134 above, should have been the subject of such a competitive tendering, its absence in this case would, at most, have justified the Commission in bringing an action for failure to fulfil obligations against the Portuguese Republic pursuant to Article 226 EC, a procedure which, if that case had arisen, might have resulted in that Member State bringing that award to an end and organising a tendering procedure. However, that absence of competitive tendering cannot, by contrast, have the result that State funding of the SGEI holder’s public service obligations must, even though the requirements concerning the definition of the SGEI, the remit and proportionality are fulfilled, be considered to be State aid incompatible with the common market.

148. In any event, the Court of First Instance finds, contrary to what the applicant claims on the grounds recalled in the last two sentences of paragraph 134 above, that the Portuguese Republic was in no way required to organise a competitive tendering prior to the award of the television SGEI to RTP.

149. In that regard, the applicant refers, first, to the Communication on concessions (paragraph 134 above). Although the public service contracts concluded between the Portuguese Republic and RTP are headed ‘concession’, it does not appear that RTP is a concession holder within the meaning of that communication and, moreover, the applicant puts forward no evidence to that effect (see, in particular, the sixth subpoint of point 2.2 and the third subpoint of point 2.4 of the Communication on concessions). In other words, RTP was remunerated for its operation (as a television service broadcasting to subscribers) and therefore bore the operating risk.

150. It appears, on the contrary, that RTP is a public television operator broadcasting programmes to and for the benefit of the entire population, whose costs for that service to the public are borne by the State.

151. In addition, even though RTP was a concession holder within the meaning of the Communication on concessions, it should be borne in mind that, although that communication states that ‘relationships between public authorities and public enterprises entrusted with the operation of services of general economic interest are, in principle, covered by this communication’ (eighth subpoint of point 2.4), it states expressly that, ‘in the audiovisual sector, account should be taken of the [Amsterdam Protocol]’ (footnote 29, eighth subpoint of point 2.4). In so doing, the Communication on concessions acknowledges the specific nature of broadcasting and exempts that sector from the general rule.

152. Lastly, it is necessary to note that, according to the Communication on concessions, those concessions are ‘subject to the rules and principles of the Treaty, in so far as … their object is the provision of economic activities’ (first subpoint of point 2.4). Further on, the Communication on concessions states that it ‘does not concern ... acts concerning non-economic activities such as obligatory schooling or social security’ (second indent of the fifth subpoint of point 2.4).

153. Although the public service of broadcasting is considered to be an SGEI and not a service of general non-economic interest, it must none the less be pointed out that that classification as an SGEI is explained more by the de facto impact of public service broadcasting on the otherwise competitive and commercial broadcasting sector, than by an alleged commercial dimension to broadcasting. As is clear from the Amsterdam Protocol, public service broadcasting ‘is directly related to the democratic, social and cultural needs of each society’. To the same effect, the resolution of the Council and of the Member States of 25 January 1999 concerning broadcasting (OJ 1999 C 30, p. 1) states that that public service, ‘in view of its cultural, social and democratic functions which it discharges for the common good, has a vital significance for ensuring democracy, pluralism, social cohesion, cultural and linguistic diversity, [and] must be able to continue to provide a wide range of programming … [for] society as a whole’ (recital B and point 7 of the resolution).

154. That specific status for public service broadcasting is, moreover, the basis for the freedom accorded by the Amsterdam Protocol to Member States in the award of broadcasting SGEIs. It explains and justifies the fact that a Member State cannot be required to have recourse to competitive tendering for the award of such an SGEI, at least where it decides to ensure that public service itself through a public company, as in this case.

155. Next, it is for the same reasons that the references also made by the applicant to the XXXIst Report on Competition Policy – 2001 , to the interpretation which the Commission gave therein to the judgment in Telaustria and Telefonadress , paragraph 134 above, and to the judgment in Teckal , paragraph 134 above, appear just as lacking in relevance. By those references, which concern totally different broadcasting activities, the applicant disregards, once again, the specific features of that sector and the particular objectives pursued by Member States when they define and organise broadcasting.

156. It follows from all the foregoing considerations that, for the purposes of granting the derogation laid down in Article 86(2) EC, not only did the Commission not have to examine whether the television SGEI was granted after competitive tendering (paragraph 146 above), but that, in any event, the Portuguese Republic was not obliged to have recourse to competitive tendering.

157. Concerning the applicant’s head of claim regarding the fourth Altmark condition (paragraph 135 above), it should be pointed out that, pursuant to Article 113 of its Rules of Procedure, the Court of First Instance may of its own motion decide that an absolute bar exists to proceeding with an action. On that basis, it is necessary to declare inadmissible, according to Article 48(2) of those rules, the pleas in law set out for the first time at the reply stage which are not based on matters of law or of fact which come to light in the course of the procedure (Case T‑40/01 Scan Office Design v Commission [2002] ECR II‑5043, paragraph 96, and Joined Cases T‑134/03 and T‑135/03 Common Market Fertilizers v Commission [2005] ECR II‑3923, paragraph 51). However, a submission or argument which may be regarded as amplifying a plea made previously in the application must be considered to be admissible (Case C‑412/05 P Alcon v OHIM [2007] ECR I‑3569, paragraphs 38 to 40, and Case T‑107/04 Aluminium Silicon Mill Products v Council [2007] ECR II‑669, paragraph 60 and the case-law cited).

158. The Court notes that that head of claim was raised only at the reply stage (paragraphs 14 to 22), and was not based on matters of law or of fact which came to light in the course of the procedure before the Court. In that regard, the fact that the Commission referred, on its own initiative, to the fourth Altmark condition in its defence (in particular, in paragraph 37), for the purpose of refuting the applicant’s argument alleging that competitive tendering was required for the award of the SGEI at issue, does not constitute a matter of law or of fact which comes to light within the meaning of the case-law referred to in the preceding paragraph which would allow the applicant to put forward this head of claim effectively at the reply stage.

159. Moreover, the Court points out that, inasmuch as it refers to the Commission’s obligation to verify whether the level of compensation needed was determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with means, would have incurred in meeting its public service obligations, that head of claim does not constitute the amplification of any plea raised at the application stage. In the application, the applicant confined itself to attacking, without, moreover, making any reference to the fourth Altmark condition, the lack of competitive tendering upon the award of the television SGEI to RTP (see paragraphs 175 to 183 of the application) and did not in any way raise the – completely different – head of claim currently at issue, according to which, in the absence of competitive tendering, the Commission, before according a derogation pursuant to Article 86(2) EC, should have verified, in the applicant’s view, in accordance with the fourth Altmark condition, that the level of compensation awarded to RTP had been determined on the basis of a typical undertaking, well run and adequately provided with means .

160. Accordingly the applicant’s head of claim concerning the fourth Altmark condition is inadmissible.

161. It follows from all the foregoing considerations that it is necessary to reject the first part of this plea.

The second part, alleging infringement of the criteria for the application of Article 86(2) EC

– Arguments of the parties

162. The applicant claims that the Commission failed to comply with the criteria for the application of Article 86(2) EC, as stated in the Communication on broadcasting and according to which, first, the State must define the public service remit entrusted to the undertaking in question, second, the service must actually be supplied, third, the actual supply of the service which is the subject of the contract must be subject to independent monitoring and, fourth, the financial compensation granted by the State must comply with the principles of transparency and proportionality.

163. Concerning the first of those criteria, where it chooses, as in this case, to award the public service to an undertaking which pursues, simultaneously, commercial activities in competition with other operators, the State cannot opt for a ‘wide’ definition of the public service. Such a definition does not allow a clear distinction to be drawn between competitive activity and public service activity and renders it impossible both to monitor the actual supply of the public service and to apportion the costs incurred by the undertaking between its commercial activities and its public service activities. The Portuguese State failed to define clearly, in a transparent and accountable way, the public service remit entrusted to RTP and the resources allocated for the funding thereof.

164. Those criticisms are not abstract. They are specifically based on the ineffectiveness of the monitoring mechanisms. Among the monitoring mechanisms referred to in recitals 56 to 59 of the contested decision, the only ones carried out by authorities independent of the Portuguese Republic and of RTP are those carried out by a consultative council of representatives of public opinion, and by external auditors.

165. Not only did the Commission make no reference in the contested decision to the performance of independent monitoring, but it did not even seek to satisfy itself whether, in practice, such monitoring took place. None the less, the Commission is not only obliged to take account of the mechanisms which are, in theory, provided for, but also to verify that they were actually applied.

166. Despite having all the necessary powers of investigation for that purpose, the Commission took no initiative or action in respect of the applicant’s repeated requests to the Portuguese authorities for the contractual external audit reports or a statement that no such reports existed. First, the information obtained by the applicant by its own efforts revealed that RTP had not been independently audited between 1992 and 1997. Second, the evidence available concerning the contractual external audit carried out in 1998 revealed serious deficiencies.

167. Moreover, neither did the Commission comply with the criterion regarding the actual supply of the public service. The contested decision was not substantiated by any documentary evidence of RTP’s actual compliance with the public service remit entrusted to it. Furthermore, no independent audit had been carried out from 1992 to 1997 and the contractual external audit report for 1998 revealed numerous shortcomings in the supply of the public service by RTP.

168. Accordingly, as the criteria for the application of Article 86(2) EC, as defined by the Commission itself, have not been complied with, the contested decision must be annulled.

169. The applicant adds that, where mechanisms to monitor fulfilment of public service obligations do not function, the Communication on broadcasting precludes the finding that the public service has actually been supplied. Moreover, where monitoring is in operation and the competent authorities consider that the public service has not been supplied or that certain costs are not attributable to that service, the Commission cannot dismiss that monitoring and state, as it did in the contested decision and in the defence, that, in short, everything was attributable to the public service and that all the costs submitted by the undertaking resulted from the public service remit.

170. It is necessary to go back to the report of the Tribunal de Contas, adopted more than a year before the contested decision, which was clearly known to the Portuguese Republic and RTP and which should also have been known to the Commission. In view of both the length of its investigation of RTP and the duty of the Member States to cooperate in good faith with the Community institutions, the Commission could not have been unaware that the Tribunal de Contas was conducting an in-depth investigation, nor could it have been unaware of the existence of that report.

171. That report confirms the contractual external audit report for 1998 and the wording of the application describing how the Commission erred in law when assessing the costs which RTP incurred in providing the public service. It also confirms the applicant’s allegations that the Commission erred in law concerning the assessment of the conditions for the application of Article 86(2) EC, particularly with regard to the ineffectiveness of the monitoring mechanisms. It confirms, also, that RTP did not supply the service which was expected. Thus, having regard to the criteria in the Communication on broadcasting, ‘the Commission would not [have been] able to carry out its tasks under Article 86(2) [EC] and, therefore, [would not have been able to] grant any exemption under that provision’ (point 43 of the Communication).

172. According to the applicant, it was not possible for the Commission not to have known of the report of the Tribunal de Contas, from which it was clearly apparent that the conditions for the application of Article 86(2) EC had not been fulfilled. The Commission cannot monitor the way in which RTP ensures the public service on the basis of the annual reports drawn up by an auditor of the undertaking or the undertaking’s accounting records. Moreover, the role of an auditor is not to verify whether a specific undertaking provides or does not provide public services and still less to verify whether certain sums correspond or not to those services. The contested decision is thus manifestly unlawful and must be annulled.

173. The Commission contends that, contrary to the applicant’s assertions, the Communication on broadcasting imposes no obligation of independent verification that the public service of broadcasting is actually provided. In point 29, that communication lays down three criteria to be fulfilled for a measure to benefit from the derogation provided for in Article 86(2) EC. Those criteria, which consist of the definition of an SGEI, the public service remit and proportionality, are those which were applied in the contested decision.

174. It is incorrect that a ‘wide’ definition of public service does not allow a clear distinction to be drawn between competitive activity and public service activity, nor does such a definition render it impossible either to verify that public services are actually provided or to apportion the costs incurred by the undertaking between its commercial activities and its public service activities.

175. The role of the Commission in the broadcasting sector is limited to verifying any manifest errors in the definition of public service, which must be in harmony with the objective of responding to the democratic, social and cultural needs of a given society. The Commission did not find such errors.

176. Accordingly, it is a question of whether the funding of the public service remit is proportional or not to the net cost of the public service. The Commission’s finding is that the total financing received by RTP in the course of the period under consideration did not exceed the net costs of the public service.

177. It appears that RTP drew up separate accounts for public service activities and commercial activities, and the latter were carried on by legally separate undertakings. RTP’s accounting thus showed the costs and income of the public service remit, as well as RTP’s holdings in commercial undertakings, treated for accounting purposes as financial investments. RTP’s financial accounts were always subject to annual audit by an auditor. In addition, under the Portuguese internal system of funding, RTP obtained only partial reimbursement of its public service costs. Moreover, in that context, RTP operated a second level of cost accounting within the public service activities properly so called – something which was always reflected in the reports on the public service – which showed in a transparent way which costs were reimbursable by public service activity.

178. Admittedly, the Portuguese authorities chose initially to apply, through the public service contract, a compensation mechanism which did not cover all public service costs. The fact remains that Community law permits full compensation of those costs. Thus, the applicant cannot object to other measures taken subsequently by the Portuguese authorities in order to cover that portion of costs which had not yet been the subject of compensation.

179. In addition, the idea that it was legitimate to accept a ‘wide’ definition of the public service remit in RTP’s case, since RTP had established that the funding of that remit was proportional to its net costs, is also confirmed by the fact that there was no distortion of the market in respect of commercial activities resulting from public service activities.

180. The argument alleging that monitoring mechanisms were ineffective is not valid. The Commission’s role is not to assess whether RTP or the Portuguese Republic correctly applied all the internal Portuguese rules, but only to verify whether RTP’s State funding was compatible with the Treaty. In order to do this, the Commission was required to analyse and assess the objective and credible data relating to the cost of RTP’s public service and commercial activities.

181. What should be noted is that, as detailed in recital 177 et seq. of the contested decision, all the data analysed and confirmed by the Commission were subject to appropriate monitoring mechanisms in Portugal.

182. Even if it were to be found subsequently that any monitoring system described did not operate as it should have or that the data supplied to the Commission were inaccurate, that does not mean that the contested decision was defective in any way. The Commission adopted that decision on the basis of the evidence at its disposal at the date of its adoption which it had no reason to doubt.

183. Concerning, lastly, the contention that the contested decision was not substantiated by any documentary evidence to show that RTP had actually fulfilled its public service remit, that argument is incorrect. It is not for the Commission to assess specifically whether the public service contracts were precisely performed or whether the quality standards which are defined therein were complied with. Its role is confined to verifying whether the activities carried out by RTP as a public service may or may not be considered to be an SGEI within the meaning of the Treaty.

184. All the activities carried out by RTP as an SGEI are legitimate and are not vitiated by any manifest error. In addition, the investigation permitted the finding that the funding awarded to RTP was actually allocated to the fulfilment of RTP’s public service remit.

185. The Commission contends that the production of the report of the Tribunal de Contas in the reply occurred late and without a convincing justification for that lateness. That institution expressly denies that it was aware of the existence of that report prior to the contested decision. In any event, that report does not call into question the assessment contained in the contested decision.

– Findings of the Court

186. It is necessary, at the outset, to resolve the question whether the report of the Tribunal de Contas, produced as an annex to the reply, is admissible and relevant to the present action, in order to assess the lawfulness of the contested decision.

187. It is necessary to consider, first, the relevance of that report.

188. According to settled case-law, in an action for annulment brought under Article 230 EC, the legality of a Community measure must be assessed on the basis of the information existing at the time when the measure was adopted. In particular, the complex assessments made by the Commission must be examined solely on the basis of the information available to it at the time when the assessments were made (Joined Cases 15/76 and 16/76 France v Commission [1979] ECR 321, paragraph 7; Case C‑197/99 P Belgium v Commission [2003] ECR I-8461, paragraph 86; Joined Cases T‑371/94 and T‑394/94 British Airways and Others v Commission [1998] ECR II‑2405, paragraph 81; and Joined Cases T‑126/96 and T‑127/96 BFM and EFIM v Commission [1998] ECR II‑3437, paragraph 88).

189. The applicant claims that, in view of the length of the Commission’s investigation of RTP and the duty of the Member States to cooperate in good faith with the Community institutions, the Commission must have known that the Tribunal de Contas was conducting a detailed investigation of RTP and could not have been unaware of the existence of that report.

190. Clearly, however, apart from the general assertions referred to above, the applicant, on whom the burden of proof rests, has not adduced any specific evidence that the Commission had actual knowledge even of the existence of the report, when it adopted the contested decision. The applicant maintains, however, that it was unaware of the existence of that report when that decision was adopted.

191. The Commission formally denies that it had any knowledge of the existence of that report at the time of the contested decision and contends that it was, accordingly, impossible for it even to request that it be disclosed to it.

192. In that regard, the Court of First Instance finds that it has not been established that the Commission had knowledge of the existence of the report of the Tribunal de Contas at the time of the contested decision.

193. Consequently, regardless even of whether that report, despite being produced only at the reply stage, must be considered to be admissible pursuant to Article 48(2) of the Rules of Procedure, it must be held to be lacking in any relevance and cannot be taken into consideration for the purpose of assessing the lawfulness of the contested decision.

194. Having disposed of that preliminary question, it is necessary to deal with the applicant’s argument that, where, as in this case, it chooses to award the broadcasting SGEI to an operator which at the same time pursues commercial activities, a Member State cannot opt for a ‘wide’ definition of public service.

195. It is necessary, first, to note that, as stated in the case-law (see, to that effect, FFSA and Others v Commission , paragraph 144 above, paragraph 99) and as set out by the Commission in point 22 of its communication COM(2000) 580 final of 20 September 2000 on services of general interest in Europe, Member States have a wide discretion to define what they regard as SGEIs. Hence, the definition of such services by a Member State can be questioned by the Commission only in the event of manifest error (Opinion of Advocate General Léger in Case C‑309/99 Wouters and Others [2002] ECR I‑1577, I‑1583, point 162, and the judgment in Olsen v Commission , paragraph 145 above, paragraph 216).

196. The importance of SGEIs for the European Union and the need to guarantee the proper functioning of those services has, moreover, been underlined by the insertion of Article 16 EC in the EC Treaty by the Treaty of Amsterdam (see, in that regard, the Opinion of Advocate General Alber in Case C‑340/99 TNT Traco [2001] ECR I‑4109, I‑4112, point 94, Opinions of Advocate General Jacobs in Case C‑475/99 Ambulanz Glöckner [2001] ECR I‑8089, I‑8094, point 175, and Case C‑126/01 GEMO [2003] ECR I‑13769, I‑13772, point 124, and Opinion of Advocate General Poiares Maduro in Case C‑205/03 P FENIN v Commission [2006] ECR I‑6295, I‑6297, footnote 35, point 26; see also the order of the President of the Court in Case T‑53/01 R Poste Italiane v Commission [2001] ECR II‑1479, paragraph 132).

197. More specifically concerning broadcasting SGEIs, the Court in Case 155/73 Sacchi [1974] ECR 409 – concerning, inter alia, whether the exclusive right granted by a Member State to an undertaking to make all kinds of television transmissions, even for advertising purposes, constitutes a breach of the rules of competition – recognised, essentially, that Member States could legitimately define a broadcasting SGEI to include the broadcast of full-spectrum programming. In that judgment, the Court held that ‘nothing in the Treaty prevents Member States, for considerations of public interest of a non-economic nature, from removing radio and television transmissions … from the field of competition by conferring on one or more establishments an exclusive right to conduct them’ ( Sacchi , paragraph 14; see, also, the Opinion of Advocate General Reischl in that judgment, p. 433, p. 445, second to fifth unnumbered points, and Opinion of Advocate General Léger in Wouters and Others , paragraph 195 above, point 163).

198. In addition, when Member States stated in the Amsterdam Protocol that ‘the system of public broadcasting in the Member States is directly related to the democratic, social and cultural needs of each society and to the need to preserve media pluralism’, they were making a direct reference to public service broadcasting systems introduced by them and entrusted with broadcasting full-spectrum television programmes for the benefit of the entire population of those States.

199. Lastly, it is necessary to bear in mind the terms in which the Council and the Member States, in their resolution of 25 January 1999 concerning public service broadcasting (paragraph 153 above), reaffirmed the importance of broadcasting SGEIs.

200. In that resolution, Member States, ‘considering the fact that public service broadcasting, in view of its cultural, social and democratic functions which it discharges for the common good, has a vital significance for ensuring democracy, pluralism, social cohesion, cultural and linguistic diversity; … stressing that the increased diversification of the programmes on offer in the new media environment reinforces the importance of the comprehensive mission of public service broadcasters; [and] recalling the affirmation of competence of the Member States concerning remit and funding set out in the [Amsterdam Protocol]’ noted and reaffirmed that that protocol confirms ‘[their] will ... to stress the role of public service broadcasting’ and that ‘public service broadcasting must be able to continue to provide a wide range of programming in accordance with its remit as defined by the Member States in order to address society as a whole’ and that ‘in this context it is legitimate for public service broadcasting to seek to reach wide audiences’.

201. It follows from the foregoing considerations that Community law in no way precludes a Member State from defining broadcasting SGEIs widely to include the broadcasting of full-spectrum programming.

202. That possibility cannot be called into question by the fact that the public service broadcaster carries on, in addition, commercial activities, in particular the sale of advertising space.

203. Calling such activities into question would be tantamount to making the very definition of the broadcasting SGEI dependent on its method of financing. An SGEI is defined, ex hypothesi, in relation to the general interest which it is designed to satisfy and not in relation to the means which will ensure its provision. As the Commission points out in point 36 of the Communication on broadcasting, ‘the question of the definition of the public service remit must not be confused with the question of the financing mechanism chosen to provide these services’.

204. It follows from all of the foregoing considerations that the power of the Member States to define broadcasting SGEIs in such a way as to include broadcasting a wide range of programmes, whilst authorising the operator in charge of that SGEI to carry on commercial activities, such as the sale of advertising space, cannot be disputed.

205. The Court points out, moreover, that, beyond the criticism expressed by the applicant of a wide definition of public service in the case of a broadcaster carrying on, in addition, commercial activities, the applicant’s heads of claim concern, above all, RTP’s fulfilment of that remit and monitoring by the Commission in that regard.

206. According to the applicant, the Commission did not, in fact, seek to satisfy itself that the fulfilment by RTP of its remit had been subject to independent monitoring. The Commission is not only obliged to take account of the monitoring mechanisms which are, in theory, provided for. It must also verify their actual application. The applicant criticises the Commission for failing to act on its request for the disclosure by the Portuguese authorities of the contractual external audit reports or for a statement that no such reports exist. It further criticises the Commission for the lack of evidence, in the contested decision, of actual compliance by RTP with the public service remit with which it was entrusted.

207. The relevant recitals of the contested decision are recitals 56 to 59 and 177 to 181.

208. In order to rule on whether the applicant’s heads of claim are well founded, it is necessary to examine the question of the monitoring of the public service broadcaster’s compliance with its public service remit.

209. That examination necessitates a two-part analysis. In the first part, it is necessary to examine the monitoring of RTP’s compliance with the qualitative criteria – or quality standards – which were generally applicable to all its public service broadcasting activity. In the second part, it is necessary to examine the monitoring of the actual provision by RTP of the public services expected of it and the correspondence between those services and the costs declared.

210. Although the first part of the analysis relates to an assessment, tinged with subjectivity, of the qualitative level of public service television, the second part concerns the objective question of the administrative and accounting fairness of RTP’s accounts in relation to the cost items of which they are comprised and the costs which they exhibit. The Commission can meaningfully verify whether State financing is proportional to public service costs only if it is reasonably convinced that the financial and accounting data sent to it concerning the public service operator and its activity are reliable.

211. First, concerning the question of the monitoring of RTP’s compliance with the qualitative criteria, it must be found that, in view of its economic impact, on a wide definition, public service broadcasting can have its State funding declared to be compliant with the provisions of the Treaty on State aid only inasmuch as the qualitative requirements set out in the public service remit are complied with. Those qualitative requirements are the justification for the existence of broadcasting SGEIs in the national audiovisual sector and there is, thus, no reason for a widely defined broadcasting SGEI which sacrifices compliance with those qualitative requirements in order to adopt the conduct of a commercial operator, by broadcasting programming specifically designed to generate optimal audiences for advertisers, to continue to be financed by the State on the same conditions as if those qualitative requirements were complied with.

212. However, only the Member State is able to assess the public service broadcaster’s compliance with the quality standards defined in the public service remit. As the Commission points out in its communication COM(1999) 657 final to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions of 14 December 1999 on the principles and guidelines for the Community’s audiovisual policy in the digital age, ‘content issues are essentially national in nature, being directly and closely connected to the cultural, social and democratic needs of a particular society’ and ‘in line with the principle of subsidiarity, therefore, content regulation is primarily the responsibility of Member States’. It is thus not for the Commission to assess compliance with quality standards; that institution must be able to rely on appropriate monitoring by the Member States (recital 41 of the Communication on broadcasting).

213. As the Commission, thus, does not have the power specifically to verify compliance with quality standards, it can and generally must confine itself to finding that there is a mechanism for the monitoring by an independent body of compliance by the broadcaster with its public service remit.

214. It is only where the information sent to the Commission during the investigation contains serious evidence to the effect that, despite its existence, a monitoring mechanism was not used that the Commission can be required to examine whether it was actually used, whilst ensuring that it does not go beyond that examination and, in particular, that it does not replace the Member State in the specific assessment of compliance with the qualitative criteria.

215. In the present case, it is not contested that the Commission noted the existence of a mechanism for monitoring RTP’s compliance with its public service obligations. Thus, the contested decision states that ‘the public service contracts provide for the setting-up of a Public Opinion Council consisting of representatives from the different sections of