CELEX: 62000CJ0457
Language: en
Date: 2003-07-03
Title: Judgment of the Court (Fifth Chamber) of 3 July 2003. # Kingdom of Belgium v Commission of the European Communities. # State aid - Aid to the Belgian group Verlipack - Hollow container glass sector. # Case C-457/00.

Case C-457/00 Kingdom of BelgiumvCommission of the European Communities
            «(State aid – Aid to the Belgian group Verlipack – Hollow container glass sector)»
            
               
                  Opinion of Advocate General Jacobs delivered on 19 September 2002 
                     
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                  Judgment of the Court (Fifth Chamber), 3 July 2003  
                     
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            Summary of the Judgment
         
         
                  1..
                  State aid – Examination by the Commission – Determination of the recipient of aid – Actual benefit – Whether possible to take account of the wording of allocation clauses in the case of a loan and thus to classify as the beneficiary
                     an entity other than the borrower – Whether necessary to classify in advance the State aid measure in respect of the borrower – Not necessary
                  (Art. 87(1) EC) 
         
                  2..
                  State aid – Commission decision declaring aid to be incompatible with the common market – Difficulties in implementation – Obligation on the Commission and the Member State to cooperate in seeking a solution consistent with the Treaty(Arts 10 EC and 88(2), first subpara., EC) 
         
                  3..
                  Acts of the institutions – Statement of reasons – Obligation – Scope – Commission decision finding aid incompatible with the common market  (Arts 87 EC and 253 EC) 
         
         1.
          In order to determine the recipient of State aid, it is necessary to identify the undertakings which have actually benefited
         from it. In the case of a loan, the Commission is not precluded from taking the wording of the allocation clauses into account
         in order to determine that recipient and such an analysis could lead to the conclusion that that recipient is a different
         entity from the borrower. Given that Article 87(1) EC prohibits aid granted by a Member State or through State resources in
         any form whatsoever, it is not necessary when reaching such a conclusion to first make a finding that the intervention constitutes
         State aid to the borrower. see paras 55-57
         
         2.
          A Member State which encounters unforeseen difficulties in implementing a decision finding that aid is incompatible with the
         common market and ordering its recovery may submit those problems for consideration by the Commission. In such a case the
         Commission and the Member State concerned must, in accordance with the duty of genuine cooperation between Member States and
         Community institutions stated in particular in Article 10 EC, work together in good faith with a view to overcoming the difficulties
         whilst fully observing the Treaty provisions, in particular the provisions on aid. see para. 99
         
         3.
          Whilst in certain cases the very circumstances in which State aid has been granted may show that it is liable to affect trade
         between Member States and to distort or threaten to distort competition, the Commission must at least set out those circumstances
         in the statement of the reasons for its decision finding that that aid is incompatible with the common market. see para. 103
      

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
            
            JUDGMENT OF THE COURT (Fifth Chamber)3 July 2003  (1)
         
         
            
         
               ((State aid – Aid to the Belgian group Verlipack – Hollow container glass sector))
               
            In Case C-457/00, 
            
            
             Kingdom of Belgium,  represented by A. Snoecx, acting as Agent, and by J.-M. De Backer, G. Vandersanden and L. Levi, avocats,
            
            
            applicant, 
            
            v
             Commission of the European Communities,  represented by G. Rozet, acting as Agent, with an address for service in Luxembourg,
            
            defendant, 
            
            APPLICATION for annulment of Commission Decision 2001/856/EC of 4 October 2000 concerning State aid to Verlipack, Belgium
            (OJ 2001 L 320, p. 28),
            
            
            THE COURT (Fifth Chamber),,
            
            composed of: C.W.A. Timmermans, President of the Fourth Chamber, acting as President of the Fifth Chamber, D.A.O. Edward, A. La Pergola, P. Jann and S. von Bahr (Rapporteur), Judges, 
            
            Advocate General: F.G. Jacobs, Registrar: H. von Holstein, Deputy Registrar, 
            
            
            having regard to the Report for the Hearing,
            
            after hearing oral argument from the parties at the hearing on 11 June 2002,after hearing the Opinion of the Advocate General at the sitting on 19 September 2002,
         gives the following
         
         
         Judgment
         1
            
         By application lodged at the Court Registry on 18 December 2000, the Kingdom of Belgium brought an action under the first
         paragraph of Article 230 EC for the annulment of Commission Decision 2001/856/EC of 4 October 2000 concerning State aid to
         Verlipack, Belgium (OJ 2001 L 320, p. 28;  
         the contested decision). 
         
            
               Legal background
            
         
         2
            
         Article 87(1) EC provides: 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.
         
         
         3
            
         Article 88 EC states: 
         
         1.
          The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States.
         It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the
         common market.
         
         
         2.
          If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State
         or through State resources is not compatible with the common market having regard to Article 87, or that such aid is being
         misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined
         by the Commission.
         If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested
         State may, in derogation from the provisions of Articles 226 and 227, refer the matter to the Court of Justice direct.On application by a Member State, the Council may, acting unanimously, decide that aid which that State is granting or intends
         to grant shall be considered to be compatible with the common market, in derogation from the provisions of Article 87 or from
         the regulations provided for in Article 89, if such a decision is justified by exceptional circumstances. If, as regards the
         aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph,
         the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure
         until the Council has made its attitude known.If, however, the Council has not made its attitude known within three months of the said application being made, the Commission
         shall give its decision on the case.
         
         3.
          The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid.
         If it considers that any such plan is not compatible with the common market having regard to Article 87, it shall without
         delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into
         effect until this procedure has resulted in a final decision.
         
         
         
         4
            
         Article 295 EC provides: This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership.
         
         
         5
            
         Article 9, entitled  
         Revocation of a decision, of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88] of
         the EC Treaty (OJ 1999 L 83, p. 1) provides: The Commission may revoke a decision taken pursuant to Article 4(2) or (3), or Article 7(2), (3), (4), after having given
         the Member State concerned the opportunity to submit its comments, where the decision was based on incorrect information provided
         during the procedure which was a determining factor for the decision. ...
         
         
         6
            
         The Commission expressed its general position with regard to public authorities' holdings in company capital in the  
          Bulletin of the European Communities  (9/84, p. 93;  
         the guidelines). 
         
         
         7
            
         According to section 3.1 of the Commission's guidelines, the straightforward partial or total acquisition of a holding in
         the capital of an existing company without any injection of fresh capital does not constitute aid to the company. 
         
         
         8
            
         According to section 3.2 of those guidelines, State aid is not involved where fresh capital is contributed in circumstances
         that would be acceptable to a private investor operating under normal market economy conditions. 
         
         
         9
            
         On the other hand, according to section 3.3 of the guidelines, there is State aid where fresh capital is contributed in circumstances
         that would not be acceptable to a private investor operating under normal market economy conditions. 
         
         
         10
            
         Furthermore, section 3.4 of the guidelines states that some acquisitions may not fall within the categories indicated in sections
         3.2 and 3.3 of those guidelines. There are nevertheless cases in which there is a presumption of State aid. That is especially
         so where the authority's financial intervention takes the form of acquisition of a holding combined with other types of intervention
         which need to be notified under Article 88(3) EC. 
         
         
         11
            
         The Commission Communication to the Member States of 13 November 1993 on the application of Articles [87] and [88] of the
         [EC] Treaty and of Article 5 of Commission Directive 80/723/EEC to public undertakings in the manufacturing sector (OJ 1993
         C 307, p. 3;  
         the Communication of 13 November 1993) sets down, in paragraph 12, the  
         principle of using an investor operating under normal market conditions as a benchmark to determine ... whether aid is involved
         and if so to quantify it .... 
         
         
         12
            
         Paragraph 25 of the Communication of 13 November 1993 states that  
         no distinction can be drawn between aid granted in the form of  
          loans  and aid granted in the form of a subscription of capital of an undertaking ... An appropriate way of establishing whether
         such a measure is State aid is to apply the criterion ... of determining to what extent the undertaking would be able to obtain
         the sums in question on the private capital markets.
         
         
         13
            
         Paragraph 39 of the Communication of 13 November 1993 states that  
         [t]he potential loss extends to the full amount advanced (the capital) and any interest due but unpaid at the time of default. According to that paragraph, the risk attached to a loan is usually reflected in two distinct parameters, namely the interest
         rate charged and the security sought to cover the loan. According to paragraph 40 of that communication, where the perceived
         risk attached to the loan is high, then, all other things being equal, those two parameters can be expected to reflect that
         fact. The Commission adds that where that is not the case in practice, it will consider that the undertaking in question has
         had an advantage conferred on it, that is to say, that it has received an aid. 
         
         
         14
            
         Under paragraph 41 of the Communication of 13 November 1993  
         [t]he aid element amounts to the difference between the rate which the firm should pay (which itself is dependent on its financial
         position and the security which it can offer on foot of the loan) and that actually paid. In the same paragraph, the Commission states that  
         [i]n the extreme case, i.e., where an unsecured loan is given to a company which under normal circumstances would be unable
         to obtain finance (for example because its prospects of repaying the loan are poor) then the loan effectively equates [to]
         a grant payment and the Commission would evaluate it as such. According to paragraph 42 of that communication, the situation will be viewed from the point of view of the lender at the
         moment the loan is approved. 
         
         
         15
            
         The Commission Notice of 10 August 1996 on the method for setting the reference and discount rates (OJ 1996 C 232, p. 10;
          
         the Notice of 10 August 1996) states, in its third paragraph, that the reference rate allows the Commission to calculate in advance the aid element resulting
         from interest subsidy schemes relating to investment loans and is supposed to reflect the average level of interest rates
         in force for medium and long-term loans (five to ten years) backed by normal guarantees. Pursuant to the fourth paragraph
         of that notice, from 1 August 1996 the reference rate was to be calculated on the basis of the average yield on state bonds
         on the secondary market, harmonised by the European Monetary Institute, multiplied by a premium specific to each Member State.
         
         
         
         16
            
         The Notice of 10 August 1996 was replaced by the Commission Notice of 9 September 1997 on the method for setting the reference
         and discount rates (OJ 1997 C 273, p. 3) which provides that from 1 August 1997 the reference rates are to be determined on
         the basis of the five-year interbank swap rate, in the relevant currency, plus a premium of 75 basis points. 
         Factual background to the dispute
         
         17
            
         Prior to being declared insolvent in 1999, the Verlipack group (
         Verlipack) was the largest Belgian producer of hollow container glass, with a market share of 20% in Belgium and 2% in the European
         Union. It employed 735 people in its factories at Ghlin, Jumet and Mol (Belgium), each of which was owned by a separate company.
         
         
         
         18
            
         In 1985, the Belgian public authorities acquired a holding in Verlipack, bringing their stake in the group to 49% of the capital.
         The remainder of the capital was held by a private undertaking, the Beaulieu group. As a result of capital increases by the
         Beaulieu group, the public shareholding was gradually reduced. In 1996, the Walloon Region transferred its shareholdings in
         Verlipack Ghlin and Verlipack Jumet to the Beaulieu group. 
         
         
         19
            
         At that time Verlipack was experiencing financial difficulties. In September 1996 it entered into a technical assistance agreement
         with one of the most important European producers of hollow container glass ─ the German group Heye-Glas (
         Heye). In April 1997 that agreement was extended to include management and financial assistance. The Beaulieu and Heye groups
         set up a holding company, Verlipack I, controlled by Heye. A second holding company, Verlipack II, was set up by the shareholders
         of Verlipack I and the Walloon Region, which contributed capital of BEF 350 million. 
         
         
         20
            
         On 16 September 1998, following an examination of the measures concerned under Article 87 EC and Article 88 EC, the Commission
         decided not to raise objections to that capital contribution (
         the decision of 16 September 1998). That decision found that those measures were compatible with the Commission's guidelines on public authorities' holdings
         in company capital. It stated, in particular, that the contribution made by the Walloon Region was consistent with the actions
         of a provider of risk capital operating under normal market economy conditions. Moreover, the simultaneous acquisition of
         a majority, paid-up shareholding of BEF 500 million in Verlipack I by a private investor, Heye, indicated that there were
         prospects of future profitability and viability for Verlipack. 
         
         
         21
            
         According to the press and several complainants, the Verlipack production sites suffered fresh losses in the course of 1998.
         In addition, according to one of the complainants, Heye's private contribution to the capital of Verlipack I in April 1997
         had in reality originated from funds provided by the Walloon Region in the form of two loans of BEF 250 million. 
         
         
         22
            
         The Kingdom of Belgium subsequently supplied details regarding development at Verlipack and the allegations relating to the
         grant of the two loans to Heye. In particular, it explained that Heye's capital contribution of BEF 500 million to Verlipack
         I originated from two loans from the Société régionale d'investissement de Wallonie (
         SRIW). 
         
         
         23
            
         The first loan, granted on 27 March 1997, was for BEF 250 million with a duration of five years at a fixed rate of 5.1% plus
         a 1% risk premium. It was to be used as necessary to finance the recapitalisation of the Ghlin and Jumet plants and investment
         in the three Verlipack operating plants, including the Mol plant in Flanders. A conditional loan write-off clause stipulated
         that if, by the date on which payment of a tranche of the loan became due, Verlipack II and the three operating companies
         were declared insolvent, the amounts owed by Heye as from that due date inclusive need no longer be repaid to SRIW, which
         undertook in the circumstances to write off the corresponding loan, provided that Heye had until then regularly honoured the
         due dates of both the principal and the interest. That clause did not however apply if the insolvency was due to a deliberate
         policy decision by the majority shareholder Heye resulting in the relocation of production to another country. 
         
         
         24
            
         SRIW's second loan to Heye, granted on 28 March 1997, was for a duration of ten years at the six-month BIBOR rate (the base
         reference rate on the Belgian banking market) in force on the first working day of each half-year for which it was due, plus
         1.5%. However, the borrower could, at any time from the sixth year onwards, decide to opt for a fixed interest rate of 7%
         per annum, which would remain fixed for the outstanding duration of the loan. The financial allocation clause in the loan
         agreement provided that the full amount of the loan was, like the amount under the first loan, to be used as necessary to
         finance the recapitalisation of the Ghlin and Jumet plants and investment in the three Verlipack operating plants. An immediate
         collectability clause in the loan agreement enabled SRIW to demand the immediate repayment of its loan in certain circumstances,
         in particular in the event of a failure to satisfy the allocation clause. 
         
         
         25
            
         By letter of 1 July 1999, the Commission informed the Kingdom of Belgium of its decision to initiate the procedure under Article
         88(2) EC in respect of the interventions by the Walloon Region. After initiating that procedure, the Commission received observations
         from three complainants, from Heye and from the Kingdom of Belgium. 
         
         
         26
            
         In January 1999, that is to say, well before that letter had been sent, the companies belonging to the Verlipack group were
         declared insolvent. In May 1999, Verlipack II was put into liquidation. 
         The contested decision
         
         27
            
         In paragraph 98 of the grounds of the contested decision the Commission found that the capital injected into Verlipack by
         the Walloon Region in April 1997 and the two loans granted by SRIW in March 1997 to Heye to finance Heye's capital contribution
         to Verlipack (
         the loans at issue) stemmed from public resources. 
         
         
         28
            
         The Commission stated, in paragraph 99 of the grounds of the contested decision, that under the guidelines there is a presumption
         that there is State aid where the acquisition of a holding is combined with other types of intervention which need to be notified
         pursuant to Article 88(3) EC. The Commission considered that it could be assumed that the grant of the loans at issue to finance
         Heye's capital contribution to Verlipack constituted aid and, together with the capital injected by the Walloon Region into
         Verlipack, those loans should have been notified. 
         
         
         29
            
         In paragraphs 101 to 114 of the grounds of the contested decision, the Commission examined the compatibility of the interventions
         in question with the private investor principle. 
         
         
         30
            
         In paragraph 102 the Commission stated that any aid granted by a Member State that does not correspond to the actions of a
         private investor favours the recipient firm and may affect trade between Member States and distort or threaten to distort
         competition within the meaning of Article 87(1) EC. In paragraph 103 it held that, under the guidelines, that is the case
         where the injection of capital into companies whose capital is divided between private and public shareholders makes the public
         holding reach a level significantly higher than its original level and where the relative disengagement of private shareholders
         is largely due to the company's poor profit outlook. 
         
         
         31
            
         The Commission noted, in paragraph 106, the relative disengagement on the part of Heye at the time of its acquisitions in
         Verlipack II in April 1997. In view of the allocation clauses, the aim of which was to finance the recapitalisation of Verlipack
         through the funds lent to Heye, the Commission considered, in paragraph 111, that those funds merely passed through Heye and
         Verlipack II to Verlipack. Consequently, Verlipack had to be regarded as the recipient of the loans from which it alone benefited.
         
         
         
         32
            
         In the light of those considerations, the Commission found, in paragraph 112, that a lender of funds would not on the one
         hand have acquired a shareholding of BEF 350 million and, on the other, lent risk capital of BEF 500 million, covering 50%
         of the risk in the event of Verlipack's profit outlook proving unfavourable. It concluded, in paragraph 114, that the Kingdom
         of Belgium did not act like a private investor operating under normal market economy conditions. 
         
         
         33
            
         As regards the first loan at issue, for the sum of BEF 250 million, the Commission found, in paragraph 115 of the grounds
         of the contested decision, that the loan agreement contained a loan write-off clause in the event of Verlipack being declared
         insolvent. In its view, no lender of funds would have agreed to write off BEF 250 million to refinance the recapitalisation
         of a group such as Verlipack, whose difficulties were visible in its operating results. Consequently, in paragraph 116 of
         those grounds, the Commission concluded that that loan, granted to Heye to finance its capital injection into Verlipack, constituted
         aid to that group within the meaning of Article 87(1) EC. 
         
         
         34
            
         As regards the second loan at issue, also for BEF 250 million, the Commission noted that that loan was granted in March 1997
         at 4.92% for the period from 28 March to 31 September 1997 and at 5.30% for the period from 1 October 1997 to 30 September
         1998. However, in its view, the comparison between the market conditions and those attached to the loans in question had to
         be carried out by reference to the dates on which the loans were granted, namely 27 and 28 March 1997. The reference rate
         applicable in Belgium at that time was 7.21%. The Commission concluded that on the basis of a ten-year duration and a three-year
         grace period, and to the extent that the interest subsidy was variable, the loan contained an element of aid of 2.85% gross,
         equal to BEF 7.125 million. In addition, it observed that the loan agreement did not require Heye to provide SRIW with any
         collateral to cover the amount borrowed. Thus, whilst bearing in mind the letter from Heye's bankers confirming its solvency,
         the Commission expressed its doubts as to whether a private financial institution would have taken such a risk without any
         security. 
         
         
         35
            
         After finding that the aid did not fall within the scope of the derogations set out in Article 87(2) and (3) EC, the Commission
         held, first, in paragraph 141 of the grounds of the contested decision, that the capital of BEF 350 million injected into
         Verlipack by the Walloon Region together with the two loans at issue had to be regarded as aid under Article 87(1) EC because
         the capital was not contributed by the Walloon Region on terms that would have been acceptable to a private investor operating
         under normal market economy conditions. 
         
         
         36
            
         The Commission then took the view, in paragraph 142 of those grounds, that the grant of the first loan at issue, whose real
         recipient was Verlipack, constituted aid within the meaning of Article 87(1) EC because the acceptance of a loan write-off
         clause in the event of Verlipack's winding up could not be regarded as the normal behaviour of a private investor. 
         
         
         37
            
         Finally, in paragraph 143 of the grounds of the contested decision, the Commission considered that the grant of the second
         loan at issue, for an identical amount, whose real recipient was also Verlipack, included an aid element of BEF 7.125 million.
         As no collateral was pledged, that behaviour of SRIW did not conform to the private investor principle either. 
         
         
         38
            
         In those circumstances, the Commission adopted the contested decision, Articles 1 to 5(1) of which are worded as follows:
          Article 1 The Commission decision of 16 September 1998 not to raise objections in respect of the capital contributed to Verlipack is
         hereby revoked under Article 9 of Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application
         of Article [88] of the EC Treaty. Article 2 The State aid totalling EUR 8 676 273 (BEF 350 million) granted by Belgium to Verlipack is incompatible with the common market. Article 3 The State aid totalling EUR 6 197 338 (BEF 250 million) granted by Belgium to Verlipack is incompatible with the common market. Article 4 The State aid totalling EUR 6 197 338 (BEF 250 million) granted by Belgium to Verlipack contains an element of State aid amounting
         to [EUR] 176 624 (BEF 7.125 million) that is incompatible with the common market. Article 5 
         
         1.
          Belgium shall take the necessary steps to recover from the recipient the aid referred to in Articles 2 to 4, which was granted
         to it unlawfully.
         
         Forms of order sought
         
         39
            
         The Kingdom of Belgium claims that the Court should annul the contested decision and order the Commission to pay the costs.
         
         
         
         40
            
         In support of its action it submits that the Commission infringed Articles 87 EC and 295 EC by finding that the relevant interventions
         by the Walloon Region constituted State aid. In particular, the Kingdom of Belgium argues that the Commission was wrong to
         find that SRIW had not acted as a private investor when granting the loans at issue and that the Commission incorrectly identified
         Verlipack as the recipient of the amounts referred to in Articles 2 to 4 of the operative part of the contested decision.
         It also alleges that the Commission failed to comply with its obligation to state reasons on a number of counts. 
         
         
         41
            
         The Commission contends that the Court should reject the action as unfounded and order the Kingdom of Belgium to pay the costs.
         
         First plea: infringement of Articles 87 EC and 295 ECFirst part of the first plea: the presumption that the loans at issue constituted State aid
         
         
         42
            
         The Kingdom of Belgium claims that, by presuming, in paragraph 99 of the grounds of the contested decision, that the two loans
         at issue constituted State aid because the Walloon Region had made a capital contribution to Verlipack II, the Commission
         misapplied the concept of State aid and prejudged the substance of the case, in breach of Articles 87 EC and 295 EC. 
         
         
         43
            
         In that regard, it must be noted that in paragraph 99 of the grounds of the contested decision, the Commission recalled the
         content of section 3.4 of the guidelines, which it found to be applicable to the interventions in question, as it was fully
         entitled to do. 
         
         
         44
            
         The relevant paragraph in the grounds of the contested decision forms the introduction to the part of that decision which
         deals with the assessment of the aid. In that part of the decision, the Commission examined the terms on which the two loans
         at issue were granted and, after a detailed analysis, concluded that those terms were incompatible with the private investor
         principle. There is thus no evidence to support a finding that the Commission prejudged the substance of the case in breach
         of Articles 87 EC and 295 EC. 
         
         
         45
            
         In those circumstances, the first part of the first plea must be rejected as unfounded. 
         Second part of the first plea: incorrect application of the private investor test
         
         
         46
            
         The Kingdom of Belgium submits that the Commission incorrectly applied the private investor test. In its view, SRIW carried
         out a detailed examination of the file on Heye's financing of Verlipack on the basis of the business plan and the documents
         provided by Verlipack. At the date on which the two loans at issue were granted, there were numerous factors establishing
         the credibility of those documents, and these had been explained in detail to the Commission. 
         
         
         47
            
         In that regard, it must be observed that in order to determine whether the Commission correctly applied the private investor
         test it is necessary to ascertain whether a private investor, in possession of the same information on Verlipack's financial
         situation as that available to the Walloon authorities, would have granted the two loans at issue on the same terms as those
         agreed to by the Walloon authorities. 
         
         
         48
            
         As regards Verlipack's economic situation, it is clear from,  
          inter alia , an internal note for SRIW's board of management of 7 January 1997 that the grant of the two loans at issue, which were intended
         to finance the restructuring of Verlipack, bore very substantial risks. According to that note, despite significant investments,
         the Beaulieu group had not managed to achieve better product quality, normal productivity or financial results which would
         allow for some hope for the future of Verlipack. The note stated that the takeover of Verlipack by Heye was the only and last
         chance to prevent insolvency. 
         
         
         49
            
         It is in the light of those circumstances that the Walloon authorities agreed to grant the first loan at issue, containing
         a loan write-off clause in the event of insolvency, and the second loan at issue, without requiring any security from Heye.
         
         
         
         50
            
         In those circumstances, the Kingdom of Belgium has not established that the Commission incorrectly applied the private investor
         test by taking the view that the Walloon authorities granted the two loans at issue in circumstances that would not have been
         acceptable to a private investor operating under normal market economy conditions. 
         
         
         51
            
         The second part of the first plea must therefore be rejected. 
         Third part of the first plea: incorrect identification of Verlipack as the recipient of the two loans at issue
         
         
         52
            
         The Kingdom of Belgium submits that the finding, in paragraph 109 of the grounds of the contested decision, that Verlipack
         was the actual recipient of the public funds made available to Heye is based on a manifestly incorrect assessment of the facts.
         In the alternative, it claims that that finding is based on a misunderstanding of the concept of a recipient. 
         
         
         53
            
         According to the Kingdom of Belgium, an allocation clause is not in itself questionable, since such clauses appear in most
         loan agreements. Heye is in fact the true borrower of the funds lent by SRIW and must moreover make early repayment of the
         funds notwithstanding the loan write-off clause in the first loan at issue. Consequently, before ascertaining the recipient
         of aid, it is first necessary to confirm the existence of aid and, in order to do that, to evaluate the intervention with
         regard to the characteristics of the transaction. 
         
         
         54
            
         The Kingdom of Belgium also argues that the identification of Verlipack as the recipient of the loans at issue makes compliance
         with the contested decision impossible. 
         
         
         55
            
         In that regard, in order to determine the recipient of State aid, it is necessary to identify the undertakings which have
         actually benefited from it. 
         
         
         56
            
         While the use of clauses allocating the amounts loaned is completely legitimate, the Commission is not precluded from taking
         their wording into account in order to determine the recipient of the aid. 
         
         
         57
            
         It is possible that such an analysis could lead to the conclusion that the recipient of the State aid is a different entity
         from the borrower. Given that Article 87(1) EC prohibits aid granted by a Member State or through State resources in any form
         whatsoever, it is not necessary when reaching such a conclusion to first make a finding that the intervention constitutes
         State aid to the borrower. 
         
         
         58
            
         In the present case, the Commission essentially held, in paragraphs 109 to 111 of the grounds of the contested decision, that,
         given the allocation clauses, Heye was obliged to pass the funds loaned to it by SRIW on to Verlipack, to permit the restructuring
         of that group. 
         
         
         59
            
         The Kingdom of Belgium does not deny that those funds were in actual fact allocated to Verlipack. 
         
         
         60
            
         It must therefore be held that the Commission was entitled to reach the conclusion that it was Verlipack which actually benefited
         from the public funds in question. 
         
         
         61
            
         Finally, it must be observed that the problems of recovering the aid which derive from the fact that Verlipack is considered
         to be the recipient of the interventions in question cannot affect the validity of that conclusion. 
         
         
         62
            
         In those circumstances, the third part of the first plea must be rejected. 
         Fourth part of the first plea: contradiction between the contested decision and the decision of 16 September 1998
         
         
         63
            
         The Kingdom of Belgium submits that the Commission could not, without contradicting itself, consider, in its decision of 16
         September 1998, that in April 1997 it was reasonable to assume that Verlipack was profitable and also take the view, in paragraph
         115 of the grounds of the contested decision, that that group's operating results were such that, in March 1997, no lender
         of funds would have agreed to the first loan at issue. The economic circumstances were no different at that time, that is
         to say, the group had reasonable prospects of viability. The Commission thus made a manifest error of assessment of the facts
         and an error of reasoning, misapplied the concept of State aid and also infringed the principle of legal certainty. 
         
         
         64
            
         In any event, the Commission misapplied the concept of State aid by considering that the whole of the first loan constituted
         State aid. Given that Heye's financial situation was sound, the element of aid included in the loan could only have consisted
         of the difference between the interest rate calculated on the basis of the reference rate and the rate which would have been
         obtained on the market given the arrangements for repayment. Moreover, the loan write-off clause presented less of a risk
         than the Commission supposed, inasmuch as that clause could not prevent repayment of the loan sum as a result of SRIW's early
         termination of its agreement with Heye. 
         
         
         65
            
         In that regard, it should be observed, first, that the decision of 16 September 1998 was revoked pursuant to Article 9 of
         Regulation No 659/1999, since it was based on incorrect information provided during the procedure. Therefore the fact that
         that decision and the contested decision contain different assessments with regard to Verlipack's economic situation, as a
         result of the information subsequently provided, does not constitute a contradiction between the grounds for the decisions.
         
         
         
         66
            
         Second, it should be noted that, under the loan write-off clause set out in the first loan at issue, Heye was relieved of
         the obligation to repay the sums it owed to SRIW in the event of Verlipack's insolvency. The risk attached to that loan therefore
         depended not so much on the financial situation of Heye, but on the financial situation of Verlipack. As is clear from the
         contested decision, which the applicant does not contest in this respect, Verlipack's financial situation was very poor and
         SRIW was aware of that at the date on which the loan in question was granted. 
         
         
         67
            
         In those circumstances, the Commission was entitled to consider that the grant of the first loan at issue bore a significant
         risk for SRIW and that no lender of funds would have been prepared to assume such a risk. 
         
         
         68
            
         The fourth part of the first plea must therefore be rejected. 
         Fifth part of the first plea: application of an incorrect reference rate
         
         
         69
            
         The Kingdom of Belgium challenges the Commission's use of the reference rate applicable in the first half of 1997, namely
         7.21%, in respect of the loan of 28 March 1997. The Commission applied that reference rate without examining the conditions
         in which the two loans at issue were granted in the light of the documents and the arguments submitted by the Belgian authorities
         in the course of the procedure under Article 88 EC and, in particular, without expressing a view on the letters from various
         banks relating to that matter or on a study carried out by KPMG concerning the method of establishing the reference rates
         in the context of aid schemes to undertakings within the European Union. Hence, the Commission failed to comply with the obligation
         to state reasons. By automatically applying the reference rate, the Commission also declined to exercise the discretion conferred
         on it by Article 87 EC and misapplied the private investor test. 
         
         
         70
            
         According to the study by KPMG, the reference rate, which was particularly high, did not at that time reflect the rates applied
         on the market. The Kingdom of Belgium adds that, following that study, the Commission decided to modify its method of calculating
         the reference rate from 1 August 1997. In addition, it states that the Belgian authorities had forwarded two letters to the
         Commission, one from the Artesia Bank and the other from Crédit à l'Industrie, establishing that the interest rates were in
         line with market rates and with the reference rate set by the Commission from 1 August 1997. It points out that the Belgian
         authorities had provided the Commission with a letter from Dresdner Bank stating that it was granting credit facilities of
         between DEM 10 million and 99 million without requiring a guarantee. The Commission's argument based on the lack of collateral
         provided to SRIW cannot therefore be accepted. 
         
         
         71
            
         In that regard, it should be pointed out that the reference rate is used to calculate the portion of aid included in interest
         subsidy schemes for investment loans. In the contested decision the Commission applied the reference rate calculated on the
         basis of the criteria laid down in the Notice of 10 August 1996, which was applicable to the loan granted on 28 March 1997.
         
         
         
         72
            
         For reasons of legal certainty and equal treatment, the Commission considers as a general rule that it is legitimate to apply
         the reference rate in force during a given period to all the loans granted during that period. 
         
         
         73
            
         Moreover, it is clear from paragraph 117 of the grounds of the contested decision that the Commission applied the reference
         rate in the light of the specific features of the loan agreement, namely the fact that it was granted for a ten-year term
         with a three-year grace period and a variable interest subsidy and that Heye was not required to provide any guarantee. 
         
         
         74
            
         In the light of those specific features, the applicant has not established that the Commission erred in law by considering
         that, even though the rate of interest due on the loan at issue was completely normal, that loan included an element of State
         aid. 
         
         
         75
            
         It must therefore be held that the application of the reference rate in force at the date on which the loan of 28 March 1997
         was granted seems completely justified. None of the bank letters relied on by the Kingdom of Belgium can cast any doubt on
         that conclusion. 
         
         
         76
            
         In those circumstances, the fifth part of the first plea must be rejected. 
         Sixth part of the first plea: lack of any individual assessment of the interventions in question
         
         
         77
            
         The Kingdom of Belgium submits that the Commission treated the interventions as a single whole although their respective legal
         natures differed substantially and they ought to have been assessed separately. In its view, when examining the Walloon Region's
         capital contribution the Commission considered the two loans at issue as if they had been reclassified as direct capital contributions
         to Verlipack. The Commission thereby misapplied the concept of State aid. 
         
         
         78
            
         In that regard, it should be observed that all the interventions in question, namely the two loans at issue and the capital
         contribution, were carried out more or less simultaneously by two institutions which were closely linked to each other and
         which were pursuing the same objective, namely to permit the restructuring of Verlipack, which was in serious financial difficulty.
         
         
         
         79
            
         As is clear from section 3.4 of the guidelines, there is a presumption of State aid where the authority's financial intervention
         takes the form of acquisition of a holding combined with other types of intervention which need to be notified under Article
         88(3) EC. 
         
         
         80
            
         In those circumstances, the Commission was entitled to take account of the existence of the two loans at issue in its examination
         of the compatibility of the capital contribution with Article 87 EC. 
         
         
         81
            
         It follows that the sixth part of the first plea must be rejected. 
         Seventh part of the first plea: clear misassessment of the nature of the interventions from public funds
         
         
         82
            
         The Kingdom of Belgium submits that, by finding that Heye did not contribute risk capital but instead funds from public resources,
         the Commission redefined the legal and economic nature of the interventions in question for no good reason. 
         
         
         83
            
         In that regard, it suffices to observe that the Commission correctly found, in paragraphs 101 and 106 of the grounds of the
         contested decision, that the funds for the two loans at issue did not stem from a private lender but from a public body, SRIW
         in the present case, which cannot be equated to a private investor. That finding does not constitute an unjustified redefinition
         of the interventions in question. 
         
         
         84
            
         In those circumstances, the seventh part of the first plea must be rejected. 
         Eighth part of the first plea: clear misassessment of the actual participation of private partners
         
         
         85
            
         The Kingdom of Belgium submits, first of all, that it is not possible to consider, as the Commission did in paragraph 106
         of the grounds of the contested decision, that by having recourse to financing from SRIW, Heye disengaged itself at the time
         of its acquisitions in Verlipack, since those loans had to be repaid under normal market conditions. Moreover, Heye was under
         an obligation to realise a significant investment programme and, consequently, it had to make substantial increases to its
         capital. 
         
         
         86
            
         Second, the Kingdom of Belgium argues that it is legal and economically incorrect to consider, as does the Commission in paragraphs
         108 to 110 of the grounds of the contested decision, that Heye intervened only as an intermediary and that it did not contribute
         risk capital to Verlipack. It was therefore not possible for the Commission to take the view, without making an error of assessment,
         that private partners of the Walloon Region had already disengaged themselves in March 1997. 
         
         
         87
            
         Third, the Commission's position is contradictory. Although apparently regarding the two loans at issue as capital contributions
         by the Walloon Region, the Commission treats them as loans in its examination of the terms on which they were granted in order
         to ascertain whether there was any element of State aid. The Commission ought therefore to concede that while Heye could potentially
         be regarded as having received aid, contained in those loans, the capital contribution of BEF 515 250 000 was a distinct and
         independent transaction carried out by a private company as an investment liable to yield profits in due course. 
         
         
         88
            
         Fourth, the Commission's position is also contradictory inasmuch as it found that a private investor would not have made a
         capital contribution of BEF 350 000 000 or lent risk capital of BEF 500 000 000, whereas, in respect of the latter sum, it
         found that only the amount of BEF 257 125 000 (BEF 250 000 000 + BEF 7 125 000) was in fact State aid. 
         
         
         89
            
         As regards the first argument, the Court finds it clear from paragraph 106 of the grounds of the contested decision that the
         Commission found a relative disengagement on the part of Heye on the ground that Heye had covered only 50% of the risk of
         its investment in Verlipack. Even having regard to the circumstances referred to by the Kingdom of Belgium, that finding cannot
         constitute a manifest error of assessment. 
         
         
         90
            
         As regards the second and third arguments, reference should be made to paragraphs 55 to 62 and 80 to 81 of this judgment,
         which set out, respectively, the reasons why the Commission was entitled to take the loans at issue into account for the purpose
         of determining the compatibility of the capital contribution with Article 87 EC and the grounds on which it was entitled to
         conclude that the recipient of the State aid was not Heye but Verlipack. 
         
         
         91
            
         As regards the fourth argument, the Court sees no contradiction in the contested decision between the Commission's observation
         that no private investor would have lent capital equivalent to the sum of the two loans at issue and its finding that not
         all of that sum was State aid. 
         
         
         92
            
         The eighth part of the first plea, and thus the plea in its entirety, must therefore be dismissed. 
         The second plea: failure to comply with the obligation to state reasons
         
         93
            
         The Kingdom of Belgium submits that the contested decision does not comply with the obligation to state reasons laid down
         in Article 253 EC in four respects. 
         
         
         94
            
         First, in the operative part of the contested decision, the Commission identified Verlipack, without any additional clarification,
         as being the recipient of the two loans at issue. That decision therefore does not make it possible to identify the company
         from which the Commission has ordered that the State aid in question be recovered. 
         
         
         95
            
         Second, the Kingdom of Belgium submits that Article 4 of the contested decision contains a flagrant contradiction inasmuch
         as it states that the  
         State aid totalling EUR 6 197 338 (BEF 250 million) granted by Belgium to Verlipack contains an element of State aid amounting
         to EUR 176 624 (BEF 7.125 million) that is incompatible with the common market. 
         
         
         96
            
         Third, the contested decision is an exact replica of the position expressed by the Commission when it initiated the formal
         examination procedure, and it thus follows that the Commission does not seem to have taken into account the documents, explanations
         or arguments submitted by the Belgian authorities in the course of that procedure. 
         
         
         97
            
         Fourth, in the contested decision the Commission did not carry out an examination of the impact of the measures in question
         on competition and trade between Member States in respect of each of the interventions complained of. That decision merely
         refers in theoretical and general terms, in paragraphs 102 and 103 of its grounds, to the criteria set out in the guidelines.
         The Kingdom of Belgium claims that the contested decision does not even contain a description of the relevant market. That
         examination was all the more necessary since, in 1998, the Commission had decided not to raise objections to the Walloon Region's
         contribution of capital to Verlipack II. 
         
         
         98
            
         As regards the first allegation, it should be noted that it is apparent from the contested decision that the illegal aid must
         be recovered from Verlipack, composed of the holding companies Verlipack I and II and their subsidiaries. 
         
         
         99
            
         In any event, if the Kingdom of Belgium had had serious doubts in that regard it could, like any Member State which encounters
         unforeseen difficulties in implementing an order for recovery, have submitted those problems for consideration by the Commission.
         In such a case the Commission and the Member State concerned must, in accordance with the duty of genuine cooperation stated
         in particular in Article 10 EC, work together in good faith with a view to overcoming the difficulties whilst fully observing
         the Treaty provisions, in particular the provisions on aid (Case C-303/88  
          Italy  v  
          Commission  [1991] ECR I-1433, paragraph 58). 
         
         
         100
            
         As regards the second allegation, it relates, as the Commission acknowledges, to a drafting error. That error is not however
         liable to lead to confusion on the part of the reader of the contested decision. It is clear from the grounds of that decision,
         and in particular from paragraph 143 thereof, that it was the loan of BEF 250 million granted to Heye by SRIW which contained
         an aid element of BEF 7.125 million. 
         
         
         101
            
         As regards the third allegation, suffice it to state that, as the Advocate General observed in paragraph 117 of his Opinion,
         many elements in the grounds of the contested decision, concerning the assessment of the interventions in question, are intended
         to respond to the arguments submitted to the Commission by the Belgian authorities and the other parties in the course of
         the administrative procedure. 
         
         
         102
            
         As regards the fourth and final allegation, it is common ground that it was not raised by the Kingdom of Belgium until the
         reply stage. However, the lack or inadequacy of a statement of reasons such as to impede judicial review by the Community
         judicature constitutes a matter of public interest which may, and even must, be raised by that judicature of its own motion
         (Case C-166/95 P  
          Commission  v  
          Daffix  [1997] ECR I-983, paragraph 24). It is therefore also appropriate to examine that last allegation. 
         
         
         103
            
         In that respect, whilst in certain cases the very circumstances in which the aid has been granted may show that it is liable
         to affect trade between Member States and to distort or threaten to distort competition, the Commission must at least set
         out those circumstances in the statement of the reasons for its decision (Joined Cases C-329/93, C-62/95 and C-63/95  
          Germany and Others  v  
          Commission  [1996] ECR I-5151, paragraph 52). 
         
         
         104
            
         As the Advocate General pointed out in paragraph 123 of his Opinion, the Commission mentioned, in paragraph 130 of the grounds
         of the contested decision, the circumstances which actually shaped the market in question, the role played by Verlipack in
         that market and the reasons why the aid granted was liable to affect trade between the Member States and to distort competition
         on that market. 
         
         
         105
            
         It follows that the second plea, alleging a failure to comply with the obligation to state reasons laid down by Article 253
         EC, must be dismissed. 
         
         
         106
            
         In those circumstances, the action must be dismissed in its entirety. 
         
         Costs
         107
            
         Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
         applied for in the successful party's pleadings. Since the Commission has applied for costs and the Kingdom of Belgium has
         been unsuccessful, the latter must be ordered to pay the costs. 
         
         On those grounds, 
         
         
         
            
            THE COURT (Fifth Chamber)
         
         
         hereby: 
         
            
            1.
             Dismisses the appeal; 
            
            
            2.
             Orders the Kingdom of Belgium to pay the costs. 
            
            
                  Timmermans
               
               
                  Edward 
               
               
                  La Pergola 
               
            
                  Jann
               
               
                  von Bahr 
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
            
            
            
            
            
            
            
         
         
         Delivered in open court in Luxembourg on 3 July 2003. 
         
         
         
         
                  R. Grass 
               
               
                  M. Wathelet  
               
            
         
         
         
                  Registrar
               
               
                  President of the Fifth Chamber
               
            
      
      
          1 –
            
             Language of the case: French.