1999/597/ECSC: Commission Decision of 21 April 1999 in a procedure under Article 88 of the ECSC Treaty concerning state aid granted by Germany to Neue Maxhütte Stahlwerke GmbH (notified under document number C(1999) 1123) (Only the German text is authentic)
Date: 1999-04-21
Institutions: European Commission
Subjects: Germany, State aid, aid to industry, control of State aid, infringement procedure (EU), iron and steel industry

L 230/4

EN

Official Journal of the European Communities

31. 8. 1999

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 21 April 1999

in a procedure under Article 88 of the ECSC Treaty concerning state aid granted by Germany to
Neue Maxhütte Stahlwerke GmbH

(notified under document number C(1999) 1123)

(Only the German text is authentic)

(1999/597/ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Coal and
Steel Community, and in particular Articles 86 and 88,

Whereas:

I. PROCEDURE

(1)

(2)

On 16 December 1998 the Commission initiated the
procedure under Article 88 of the ECSC Treaty against
Germany. It concluded, on an evaluation of the informa-
tion presented to it, that Germany had infringed Article
86 of the ECSC Treaty by its failure to implement de-
cisions requiring it
to recover state aid of DEM 74
million that was incompatible with the common market
from the recipient enterprise, Neue Maxhütte Stahlwerke
GmbH (hereinafter referred to as ‘NMH’).

On 1 February 1999 the Commission notified Germany
of its position and gave it an opportunity to submit its
comments. It received Germany's comments on 5 March
1999.

II. FACTS

Maxhütte Stahlwerke GmbH, Sulzbach-Rosenberg and
Lech-Stahlwerke GmbH, Meitingen-Herbertshofen (1)
(NMH Decision I), determined that the notified meas-
ures, including a loan from the shareholders, the Land of
Bavaria, constitutes state aid that is incompatible with
the common market and must not be granted.

(4)

in the years 1993-95 Bavaria granted a
Nevertheless,
series of such loans without informing the Commission
in advance.

The Commission therefore adopted the following two
decisions:

(a) Decision 96/178/ECSC of 18 October 1995 on state
aid that Bavaria granted to the ECSC steel under-
taking Neue Maxhütte Stahlwerke GmbH, Sulzbach-
Rosenberg (2) (NMH Decision II), laying down that
the sum of DEM 49,9 million granted as loans by
Bavaria to NMH constitutes state aid that is incom-
patible with the common market and prohibited
under
the ECSC Treaty and
Commission Decision No 3855/91/ECSC of 27
November 1991 establishing Community rules for
aid to the steel

the provisions of

industry (3);

(b) Commission Decision 96/484/ECSC of 13 March
1996 on state aid that Bavaria granted to the ECSC
steel undertaking Neue Maxhütte Stahlwerke GmbH,
Sulzbach-Rosenberg (4)
laying
down that the sum of DEM 24,1 million granted as

(NMH Decision III),

(3)

The Commission, by Decision 95/422/ECSC of 4 April
1995 concerning state aid that
the Land of Bavaria
intends to grant to the ECSC steel undertakings Neue

(1) OJ L 253, 21.10.1995, p. 22.
(2) OJ L 53, 2.3.1996, p. 41.
(3) OJ L 362, 31.12.1991, p. 57.
(4) OJ L 198, 8.9.1996, p. 40.

31. 8. 1999

EN

Official Journal of the European Communities

L 230/5

(5)

(6)

(7)

(8)

(9)

loans by Bavaria to NMH constitutes state aid
incompatible with the common market and prohib-
ited under the provisions of the ECSC Treaty and
Commission Decision No 3855/91/ECSC.

In both cases, i.e. by Decisions NMH II and NMH III,
Germany was ordered to recover the aid from the re-
cipient company on the ground that it was incompatible
with the common market.

Germany challenged all three decisions before the Euro-
pean Court of Justice (Cases C-158/95, C-399/95 and
C-195/96). The Court ordered the proceedings to be
stayed pending a ruling by the Court of First Instance,
before which NMH challenged the decisions (Joined
Cases T-129/95, T-2/96 and T-97/96) (1).

By judgment of 21 January 1999, the Court of First
Instance dismissed NMH's applications and upheld the
Commission's decisions in their entirety.

In Case C-399/95, Germany sought a suspension of the
operation of Decision NMH II on the grounds that there
was doubt as to the lawfulness of the decision and there
was reason to fear that its immediate implementation
might cause significant harm. The President of the Court
of Justice dismissed the application by Order of 3 May
1996 (2) on the ground that Germany had failed to
adduce sufficient evidence justifying the suspension of
the Commission decision ordering the repayment of the
aid that Bavaria had granted to NMH.

On 6 December 1996 Germany informed the Commis-
sion that Bavaria had ordered NMH to repay the aid by
15 October 1996 and that proceedings to recover the
aid from NMH in accordance with the Commission de-
cisions in NMH II and NMH III were being prepared.
Germany indicated on 25 and 27 June 1997 that
Bavaria had begun recovery proceedings in February
1997, seeking an order for recovery of the debt from the
Regensburg Local Court. NMH challenged the decision,
whereupon the case was
remitted to the Amberg
Regional Court.

(10)

it

In the statement of reasons for the claim and the
application,
is indicated that Bavaria has claimed
DEM 14,8 million together with interest, i.e. only 20 %
the aid declared incompatible with the common
of
market in the NMH II and NMH III Decisions. According
to the statement of reasons for the claim and the
application and according to information provided by
Germany, Bavaria took this step unilaterally in order to
economise on the costs. Bavaria understands that, if its

(1) The legal basis is Article 47 of the Protocol on the Statute of the

Court of Justice of the European Coal and Steel Community.

(2) Order of

the European Court of

Justice of 3 May 1996, Case
C-399/95 R, Germany v Commission [1996] ECR I, p. 2444, point
76.

application is successful, NMH will repay the remaining
80 % on a voluntary basis.

(11) On 27 November 1997 Germany

informed the
Commission that NMH had lodged defences on 8 July
1997. In its defences, it denied that it had concluded any
agreement with Bavaria for the repayment of the balance
not
forming the subject matter of proceedings for
recovery. Accordingly, the repayment of the aid that is
incompatible with the common market is entirely at the
discretion of NMH.

(12)

In addition, NMH seeks to have the proceedings stayed
pending a decision by the European Court of Justice.

(13)

It was not until 14 July 1998 that Germany informed
the Commission that the Amberg Regional Court had
already ordered a stay of proceedings on 5 March 1998.

The terms of that order were not made known to the
Commission until 23 November 1998. The order was
made solely on the basis of Section 148 of the Code of
Civil Procedure, which states that a court may grant a
stay of proceedings if a similar procedure is pending
before another court whose judgment is relevant to the
proceedings in the former court.

(14) On 20 October 1998 the German authorities confirmed
by telephone that Bavaria had not taken any steps to
challenge the order. However, the Federal Government's
letter to the Commission of 23 November 1998 shows
that the order could, and still can, be challenged through
a simple appeal and is not subject to a time limit.

The aid has not yet been repaid. On 23 November 1998
the Federal Government informed the Commission that
NMH had initiated settlement and winding-up proced-
ures.

III. GROUNDS FOR THE INITIATION OF THE PRO-

CEDURE

(15) Under Article 86 of the ECSC Treaty, Member States
must take all appropriate measures to ensure fulfilment
of the obligations resulting from Commission decisions.
They are to refrain from any measures incompatible
with Articles 1 and 4. Under Article 4(c), subsidies or
aids granted by States are prohibited. If the Commission
considers that a State has failed to fulfil an obligation
under the Treaty,
it may institute proceedings under
Article 88 of the ECSC Treaty.

(16)

In instituting the proceedings,
the Commission con-
sidered that, on the basis of the facts set out below,
Germany had failed to fulfil its obligations under Article
86 of the ECSC Treaty.

L 230/6

EN

Official Journal of the European Communities

31. 8. 1999

(a) In order to save on the costs of the procedure,
Bavaria has unilaterally decided to apply to the court
for the repayment of only 20 % of the aid that is
incompatible with the common market. In doing so,
it relied on NMH to make a voluntary repayment of
the balance. For reasons of cost, it is common prac-
tice in Germany to assess the amount claimed at a
lower level than its true value but this is permissible
only if
lower
the parties expressly record their
assessment in a notarially authenticated agreement
in order to preclude difficulties of enforcement after
judgment has been delivered. Since in NMH's
defences it was denied that any agreement of that
nature had been concluded, Germany must have
been aware that, after the court had issued its judg-
ment,
it would not be able to rely on voluntary
payment of the remaining balance.

(b) Neither Germany nor Bavaria has sought an interloc-
utory order for repayment of the aid, for example to
claim initial payments or the provision of guarantees
or security, or an attachment order, etc., in order to
ensure that the Commission's decisions are imple-
mented as quickly as possible.

(c) Bavaria has failed to appeal against the order of the
Amberg Regional Court of 5 March 1998 staying
the proceedings although it was not in accordance
with the case-law of the European Court of Justice
on the implementation of decisions that aid must be
repaid and on the staying of the enforcement of
decisions of Community authorities. Germany has
taken no action against Bavaria to secure the revoca-
tion of the stay of proceedings.

IV. GERMANY'S COMMENTS AND THE COMMISSION'S

ASSESSMENT

IVa. Failure to claim recovery of, or obtain security

for, the full amount of aid

(17) Germany considers that it has complied with Article 86

of the ECSC Treaty at all stages of the procedure.

(a) The restriction of the claim for repayment forms
established practice in such cases in Germany in
order to keep the court and lawyers' fees, which are
based on the value of the subject matter at issue,
within bounds. The statement of reasons on which
the judgment is based would have covered all loans
at issue. A notarially authenticated agreement would
simply have led to additional costs. Since there was
no danger of the claims being time-barred and they
could be extended at any time, Bavaria had done
what was necessary to secure a flexible procedure in
the future.

(b) Moreover, the Commission was aware as early as
March 1997 that the claim for repayment was being

restricted and could have then made known its
views.

(c) Lastly, Bavaria put

forward a claim for the full

amount in NMH's winding-up.

it did not object

The Commission considers that these arguments cannot
be accepted. As was pointed out at the beginning of the
proceedings,
to the practice of
restricting the value of the subject matter at issue but
wished that, in accordance with usual practice in such
cases, a (notarial) agreement should be concluded in
order to avoid difficulties with enforcement of the judg-
ment. In the absence of that agreement, the balance of
80 % of the claim would not be covered by any judg-
ment of the court so that there would be no legal basis
for enforcement. NMH would in that case enjoy a discre-
tion to decide whether it paid over the balance under the
judgment or not. It is irrelevant that Bavaria could at any
time have sought payment of the balance of the 80 %
since it has not done so.

In fact, the Commission did not formally react regarding
this particular fact before the initiation of the procedure.
However, that does not prevent it from deciding that
there has been an actual breach of Article 86 of the
ECSC Treaty.
It is pointed out again that, when the
statement of reasons on which the claim was based and
the application were transmitted on 25 July 1997,
Germany confirmed without reservation the views of the
Bavarian authorities that NMH would repay the aid in
full. It was only as a result of repeated requests that the
Commission on 27 November 1997 received NMH's
defences of 8 July 1997 and discovered that the neces-
sary measures had not been taken. Since the defences,
moreover, sought to stay the proceedings, it wished to
be kept informed of further developments so that it
could ensure compliance with Article 86 of the ECSC
Treaty. However, it was not until 14 July 1998 that it
was apprised of the order staying the proceedings. A
copy of the order reached it only on 23 November
1998. In those circumstances Germany cannot rely on
the principle of legitimate expectations.

The submission of the claim on 19 January 1999 in
NMH's winding-up does not preclude a finding that
there has been an infringement of the Treaty since the
claim was not lodged until after the beginning of the
present proceedings.

The Commission therefore considers that Germany has
infringed Article 86 of the ECSC Treaty by its failure to
recover all of the aid that was unlawful and incompat-
ible with the common market or to embody the reduc-
tion of the claim in a notarially authenticated agreement,
thereby ensuring that, on the delivery of the court's
judgment on the partial amount of
the
Commission's decision would be immediately and fully
enforced.

the claim,

(18)

(19)

(20)

(21)

31. 8. 1999

EN

Official Journal of the European Communities

L 230/7

1. Failure to take interim measures to recover the aid

(attachment) are permissible only if

(22) Germany argues that, under the relevant rules (Sections
916 and 917 of the Code of Civil Procedure), interim
measures
the
enforcement of a judgment would be thwarted or signi-
ficantly hampered, in particular if assets are liable to be
removed. However, those rules are of only limited rel-
evance; since all of NMH's assets were at that stage of
the procedure subject to a charge, attachment would not
have been possible.

(23)

The Commission considers that Germany has shown
that procedural law, to be applied without distinction to
law,
claims based on domestic
precludes attachment in this case. It is therefore of the
view that the failure to seek interim measures for repay-
ment of the aid does not infringe Article 86 of the ECSC
Treaty.

and Community

2. Failure to appeal against the order to stay the proceedings

(24) Germany does not challenge the Commission's view that
failure to lodge an appeal
infringes Article 86 of the
ECSC Treaty. It must therefore be found that an infringe-
ment has been committed.

(25) Appended to Germany's reply is an intervention by
Bavaria, which disputes the Commission's view. Bavaria
considers that the order of the Amberg Regional Court
staying the proceedings is lawful. Under Section 148 of
the Code of Civil Procedure, the Regional Court was not
only empowered in this case to stay the proceedings; it
was under a duty to do so. Only the European Court of
Justice has jurisdiction to determine the lawfulness of
the decision on the aid so that the Regional Court, if it
delivered any judgment in this case, would have risked
doing so in contrast to a ruling of the European Court of
Justice. Moreover, since an appeal could at any time be
lodged against the order to stay the proceedings, there
was no risk of the right to challenge it being time-
barred.

(26)

(27)

(28)

to stay the proceedings

Justice, which require that

The order
should not be
appraised on the criteria in the Zuckerfabrik case, which
relate solely to the suspension of administrative de-
cisions, but only on the criteria for recovery fixed by the
European Court of
the
application of national procedural law must not make
recovery impossible or extremely difficult. That is not
the case here. Section 148 of the Code of Civil Pro-
cedure is in accordance with Community law and there
is no reason to consider that Community law has been
disregarded, in accordance with the approach adopted in
Factortame I.

The Commission considers, on the grounds set out
below, that an appeal should have been lodged against
the order to stay the proceedings.

The Amberg Regional Court based its order to stay the
proceedings solely on Section 148 of the Code of Civil
Procedure, which lays down that a court has a discretion
to stay the proceedings if it considers that the decision
in a case before it depends on the outcome of a case
pending before another court.

(29) However, Section 148 of the Code of Civil Procedure
does not make it compulsory to stay the proceedings, so
that Community law can in fact be applied without
disregarding national law. Bavaria's arguments are not
relevant to the present facts and would mean that the
implementation of ECSC decisions would automatically
be suspended whenever an application was made to the
Court. Such an interpretation is contrary to Community
law.

(30)

Likewise, Section 148 of the Code of Civil Procedure
cannot be interpreted to mean that a stay of proceedings
the
is compulsory under Community law.
requirements of Community law are as set out below:

In fact,

(a) first, the national courts are required to give fullest
effect to Community law having direct effect. Any
provision of national
law that might prevent
Community law from having full force and effect
must be set aside (1). In addition, the national courts
must order the repayment of unlawful aid unless, by
reason of exceptional circumstances, repayment is
inappropriate (2).

of

In addition,

domestic measures

(b) Moreover, the requirement that recovery must take
place in accordance with the procedural provisions
of national law (3) cannot justify a stay of proceed-
ings if an appeal is possible under national law and
required under Community law.
the
power of national courts to suspend the imple-
mentation
on
Community law is acceptable only subject to certain
restrictions and conditions (4) that are not applicable
in this case. One of these conditions is that due
account must be taken of the Community interest
and that the national court must respect judgments
or orders (in proceedings for interim relief) of the
European Court of Justice (5). That was not so in the
present case since the Order of the President of the
European Court of
Justice of 3 May 1996 was
entirely disregarded.

based

(31)

There were thus sufficient grounds to lodge an appeal.
Accordingly, the Commission considers that the failure
of Bavaria to lodge an appeal against the order of the
Amberg Regional Court of 5 March 1998 granting a
stay of the proceedings for recovery of aid from NMH is
contrary to Article 86 of the ECSC Treaty.

(1) Judgment of

the European Court of

Justice in Case C-213/89

Factortame I [1990] ECR I, p. 2433.

(2) Judgment of the European Court of Justice in Case C-39/94 SFEI

and others [1996] ECR I, p. 3547.

(3) Judgment of the European Court of Justice in Case C-24/95 Alcan

Deutschland [1997] ECR I, p. 1591.

(4) Judgment of

the European Court of

in Joined Cases
C-143/88 and C-92/89 Zuckerfabrik Süderdithmarschen v Haupt-
zollamt Itzehoe and Zuckerfabrik Soest v Hauptzollamt Paderborn
[1991] ECR I, p. 415.

Justice

(5) Judgment of

Justice in Case C-465/93
Atlanta Fruchthandelsgesellschaft and others [1995] ECR I, p. 3761.

the European Court of

L 230/8

EN

Official Journal of the European Communities

31. 8. 1999

(32) Germany considers, however,

that

the Commission's
position, namely that the German authorities failed to
take the necessary steps with regard to the Land of
Bavaria to ensure that an appeal was lodged, establishes
that the Commission is not familiar with the constitu-
tional relations between the Federal Government and the
Government of
the Land of Bavaria. The complaint
regarding this relationship is therefore incomprehensible.

(33)

(34)

The Commission considers that this objection is irrelev-
ant to the measures taken by Germany. Even in the
administrative procedure prior
to the institution of
Article 88 proceedings, the Commission expressly raised
questions concerning those measures and received no
answer.
It therefore assumed that no measures were
taken. Germany is responsible throughout its national
territory for the application of Community law and
cannot evade that responsibility by invoking domestic
circumstances. Germany's manifest failure to take the
necessary steps against the order to stay the proceedings
therefore infringes Article 86 of the ECSC Treaty.

V. TIME LIMITS FOR THE FULFILMENT OF OBLIGA-

TIONS

The second sentence of the first paragraph of Article 88
of the ECSC Treaty lays down that the Commission
must set
for the
the State in question a time limit
fulfilment of its obligation. On 31 December 1998 the
Commission was informed that NMH had been declared
unable to meet
in the event of
its obligations and,
the proceedings would automatically be
winding-up,
interrupted under Section 240 of
the Code of Civil
Procedure. In the circumstances an appeal would be of
no effect. Moreover, Germany informed the Commission
that on 18 January 1999 Bavaria had lodged a claim in
the list of creditors' claims against NMH for the entire
amount of the aid that was unlawful and contrary to the
common market.

(35) Germany therefore requests that the Article 88 proceed-

ings should be stayed without a decision.

(36)

The Commission considers that,
in the circumstances
that have developed after the institution of proceedings
on 16 December 1998, it has no more reason to set
Germany a time limit for the fulfilment of its obligations
which, as has been established in this decision, that State
has infringed.

submission of

(37) However, the Commission does not consider that NMH's
infringement of
winding-up proceedings undo the
Community law. The
claim in
winding-up does not stand in the way of a Commission
decision on an infringement of Article 86 of the ECSC
Treaty adopted before the initiation of the winding-up.
Even if the winding-up were to be considered a legal
remedy, it was adopted after the Commission's position
was made known. In accordance with the case-law of
the European Court of Justice, the proceedings must be

a

continued since the basis has been created for a liability
that Germany may bear towards other Member States,
the Community or individuals as a result of the breach
of its obligations.

VI. CONCLUSIONS

(38)

The Commission determines that the following infringe-
ments of Article 86 of the EC Treaty have taken place:

(a) Germany (the Land of Bavaria) has failed to claim the
recovery of unlawful aid that is incompatible with
the common market to its full amount or to have
the reduction in the claim incorporated in a nota-
rially authenticated agreement so as to ensure that
the
the Commission's decision after delivery of
Court's judgment on part of the claim can be imple-
mented immediately and for the full amount;

(b) Germany or Bavaria has failed to lodge an appeal
against the order of 5 March 1998 of the Amberg
Regional Court staying the civil proceedings for
recovery of the aid from NMH,

HAS ADOPTED THIS DECISION:

Article 1

Germany has failed to fulfil
its obligations under Decisions
96/178/ECSC and 96/484/ECSC and Article 86 of the ECSC
Treaty by failing to lodge a claim with the court for the
recovery in full of the payments of aid incompatible with the
Treaty and amounting to DEM 74 million,
together with
interest, that was granted to Neue Maxhütte Stahlwerke GmbH
or to have incorporated in a notarially authenticated agreement
the reduction of the claim, thereby ensuring that the decisions
could be immediately and fully implemented after the delivery
of judgment by the court.

Article 2

Germany has failed in its obligations under Decisions 96/178/
ECSC and 96/484/ECSC and Article 86 of the ECSC Treaty by
the failure, either on its part or on the part of the Bavarian
authorities, to lodge an appeal against the order of the Amberg
Regional Court of 5 March 1998 staying the proceedings
before that court.

This Decision is addressed to the Federal Republic of Germany.

Article 3

Done at Brussels, 21 April 1999.

For the Commission

Karel VAN MIERT

Member of the Commission