Keywords

Summary



Keywords

1 Actions for annulment - Actionable measures - Measures producing legal effects - Decision initiating the inter partes procedure for reviewing the compatibility of aid with the common market

(EC Treaty, Arts 93(2) and 173)

2 State aid - Investigation by the Commission - Decision initiating the inter partes procedure for reviewing the compatibility of aid with the common market - Notice to the parties concerned - Purpose - Commission's obligations

(EC Treaty, Art. 93(2))

3 Acts of the institutions - Statement of reasons - Obligation - Scope - Decisions

(EC Treaty, Art. 190)

4 State aid - Recovery of illegal aid - Aid granted in breach of the procedure under Article 93 of the Treaty - Limitation period - Legitimate expectations - Legal certainty - Exceptional circumstances - None

(EC Treaty, Art. 93)

5 State aid - Definition - Financial aid granted by a Member State to an undertaking - Criterion for assessment - Whether reasonable conduct for a private investor pursuing a medium or long term policy - Not reasonable - Commission's discretion - Judicial review - Limits

(EC Treaty, Art. 92(1))

6 State aid - Prohibition - Derogations - Aid eligible for the derogation provided for by Article 92(3)(c) of the Treaty - Aid to an undertaking in difficulty - No restructuring programme designed to reduce or redirect activities - Regional aid - Reconciling objectives of free competition and Community solidarity - Commission's discretion

(EC Treaty, Art. 92(3)(a) and (c))

Summary

1 A Commission decision initiating the intra partes procedure under Article 93(2) of the Treaty for review of the compatibility of State aid with the common market has legal effects if it involves the designation of the aid as existing or new and a choice of the applicable rules of procedure. It thus constitutes an actionable measure within the meaning of Article 173 of the Treaty.

2 Under Article 93(2) of the Treaty, the Commission makes a decision on State aid only after giving notice to the parties concerned to submit their comments. Accordingly, the sole aim of the notice of initiation is to obtain from persons concerned all information required for the guidance of the Commission with regard to its future action.

The Commission cannot, therefore, be criticised for generally calling in question, in that notice of initiation, the disputed aid measures and for not specifying the exact amount of aid before the final decision, when, in the absence of prior notification of the aid and in the absence of any restructuring plan, the Commission could not, at the stage when the procedure was initiated, have a clear view of the aid measures under consideration, but none the less gave a sufficiently informative description of the aid in question and thus duly put those concerned on notice that they should submit their observations in good time.

3 The Community institutions' obligation under Article 190 of the Treaty to state the reasons on which a decision is based is intended to enable the Community judicature to exercise its power to review the legality of the decision and the person concerned to know the reasons for the measure adopted so that he can defend his rights and ascertain whether or not the decision is well founded.

4 In the absence of any limitation period established by the Community legislature as regards action by the Commission in respect of non-notified State aid, a beneficiary of aid cannot, in contesting a decision requiring the recovery of illegal aid, invoke the principle of legal certainty whereby limitation periods must in principle be fixed in advance.

Moreover, save in exceptional circumstances, a recipient cannot have a legitimate expectation that aid was properly granted unless it was granted in accordance with the provisions of Article 93 of the Treaty. Similarly, a Member State may not benefit in any way from its failure to comply with its obligation to notify under Article 93(3) of the Treaty.

5 In order to determine whether investment by the public authorities in the capital of an undertaking, in whatever form, constitutes State aid within the meaning of Article 92 of the Treaty, it is necessary to consider whether in similar circumstances a private investor might have provided injections of capital of such an amount.

In that regard, although the conduct of a private investor with which the intervention of a public investor pursuing economic policy aims must be compared need not be the conduct of an ordinary investor laying out capital with a view to realising a profit in the relatively short term, it must at least be the conduct of a private holding company or a private group of undertakings pursuing a structural policy - whether general or sectoral - and guided by prospects of profitability in the longer term.

Thus, a private shareholder may reasonably subscribe the capital necessary to secure the survival of an undertaking which is experiencing temporary difficulties but is capable of becoming profitable again, possibly after a reorganisation. Similarly, a parent company may also, for a limited period, bear the losses of one of its subsidiaries in order to enable the latter to close down its operations under the best possible conditions. However, when injections of capital by a public investor disregard any prospect of profitability, even in the long term, such provision of capital must be regarded as aid within the meaning of Article 92 of the Treaty.

Moreover, the Commission's consideration of the question whether a particular measure may be regarded as aid within the meaning of Article 92(1) of the Treaty where the State has allegedly not acted `as an ordinary economic agent' involves a complex economic appraisal. The Commission has a wide discretion when adopting a measure involving such appraisals and judicial review must accordingly be restricted to determining whether the Commission complied with the rules governing procedure and the statement of reasons, whether the facts on which the contested finding was based are accurate and whether there was any manifest error of assessment or misuse of powers. In particular, the Court is not entitled to substitute its own economic assessment for that of the author of the decision.

When exercising its wide discretionary powers the Commission is not obliged to mitigate the negative conclusion which it reaches by taking into account a few signs and prospects of an improvement which could be regarded as insignificant, or even artificially created, in comparison with the general financial and economic situation of the recipient undertaking.

In the absence of a restructuring plan intended to make an undertaking profitable, contributions made by a State to the capital of an undertaking whose overall economic and financial situation is precarious constitute aid within the meaning of Article 92(1) of the Treaty.

6 In order to be declared compatible with Article 92(3)(c) of the Treaty, aid to undertakings in difficulty must be linked with a restructuring programme designed to reduce or redirect their activities. Consequently, State aid granted to an undertaking which is used to offset losses and does not form part of a satisfactory restructuring programme is of such a nature as to preclude the application to it of the derogation from the prohibition on aid laid down in that provision.

Article 92(3)(a) and (c) of the Treaty introduces two derogations from free competition in favour of regional aid based on the aim of Community solidarity, a fundamental objective of the Treaty, as may be seen from the preamble. In exercising its discretion, the Commission has to ensure that the aims of free competition and Community solidarity are reconciled, whilst complying with the principle of proportionality. In this context, the Commission is under a duty to evaluate the sectoral effects of the planned regional aid, even where regions likely to fall within paragraph 3(a) are concerned, in order to avoid a situation in which, as a result of an aid measure, a sectoral problem is created at Community level which is more serious than the initial regional problem. Thus, the criterion of viability is relevant even in this analysis. Furthermore, the Court has stressed that the difference in wording between Article 92(3)(a) and Article 92(3)(c) cannot lead to the conclusion that the Commission should take no account of the Community interest when applying Article 92(3)(a), and that it must confine itself to verifying the regional specificity of the measures involved without assessing their impact on the relevant market or markets in the Community as a whole.

Accordingly, the Commission has not committed a manifest error in refusing to apply the derogation in question to an undertaking which, although established in an area eligible for regional aid under Article 92(3)(a) of the Treaty, is obviously not viable and is operating in a sector in which there is overcapacity. Where such an undertaking receiving illegal aid is only able to remain on the market because of that aid, such aid cannot be regarded as being to promote the economic development of the region.