European Commission v Council of the European Union.
Date: 2013-12-04
39. Thus, it first held, after recalling the central role which the FEU Treaty reserves for the Commission in determining whether aid is incompatible with the internal market, that the third subparagraph of Article 108(2) TFEU covers an exceptional and specific case, meaning that the power conferred upon the Council by that provision is clearly exceptional in character (see, to that effect, Case C‑110/02 Commission  v Council  [2004] ECR I‑6333, paragraphs 29 to 31) and, accordingly, that the third subparagraph of Article 108(2) TFEU must necessarily be interpreted strictly (see, by analogy, Case C‑510/08 Mattner  [2010] ECR I‑3553, paragraph 32, and Case C‑419/11 Česká spořitelna  [2013] ECR I‑0000, paragraph 26).
40. Second, with regard to the provisions in the third and fourth subparagraphs of Article 108(2) TFEU, whereby, on the one hand, an application to the Council by a Member State suspends the examination in progress at the Commission for a period of three months and, on the other, in the absence of a decision by the Council within that period, the Commission is to give a ruling, the Court has held that those provisions must be interpreted as meaning that, where that period has expired, the Council is no longer competent to adopt a decision under that third subparagraph in relation to the aid concerned (see, to that effect, Case C‑110/02 Commission  v Council , paragraph 32).
41. The Court has held, in that regard, that the enactment of a temporal limitation of that kind on the Council’s competence also shows that, if the Member State concerned has not made an application to the Council under the third subparagraph of Article 108(2) TFEU before the Commission declares the aid in question incompatible with the internal market and thereby closes the procedure referred to in the first subparagraph of Article 108(2) TFEU, the Council is no longer authorised to exercise the exceptional power conferred upon it by the third subparagraph of Article 108(2) TFEU in order to declare such aid compatible with the internal market (Case C‑110/02 Commission  v Council , paragraph 33, and Case C‑399/03 Commission v Council  [2006] ECR I‑5629, paragraph 24).
42. The Court has observed, in that context, that that interpretation makes it possible to avoid the taking of decisions the operative parts of which might prove contradictory and contributes accordingly to legal certainty by preserving the definitive nature of an administrative decision which is acquired on the expiry of reasonable time-limits for bringing an action or by the exhaustion of remedies (see, to that effect, Case C‑110/02 Commission  v Council , paragraphs 32 and 35, and Case C‑399/03 Commission  v Council , paragraph 25).
44. In that regard, the Court has consistently held that to hold that a Member State may grant to beneficiaries of such unlawful aid new aid in an amount equivalent to that of the unlawful aid, intended to neutralise the impact of the repayments which the beneficiaries are obliged to make pursuant to that decision, would clearly amount to thwarting the effectiveness of decisions taken by the Commission under Articles 107 TFEU and 108 TFEU (Case C‑110/02 Commission  v Council , paragraph 43, and Case C‑399/03 Commission  v Council , paragraph 27).
45. The Court has thus held that the Council, which may not counter a decision of the Commission finding aid incompatible with the internal market by itself declaring that aid compatible with that market, is also not permitted to thwart the effectiveness of such a decision by declaring compatible with the internal market, in accordance with the third subparagraph of Article 108(2) TFEU, an aid designed to compensate the beneficiaries of the unlawful aid declared incompatible with the internal market for the repayments they are required to make pursuant to that decision (see, to that effect, Case C‑110/02 Commission  v Council , paragraphs 44 and 45, and Case C‑399/03 Commission  v Council , paragraph 28).
50. In that regard, according to settled case-law, the Commission may, in the exercise of the powers conferred on it by Articles 107 TFEU and 108 TFEU, adopt guidelines to indicate how it intends, under those articles, to exercise its discretion in regard to new aid or in regard to existing systems of aid (Case C‑242/00 Germany  v Commission  [2002] ECR I‑5603, paragraph 27).
51. When they are based on Article 108(1) TFEU, those guidelines constitute one element of the regular and periodic cooperation under which the Commission, in conjunction with the Member States, must keep under constant review existing systems of aid and propose to them any appropriate measures required by the progressive development or by the functioning of the common market (see, to that effect, Case C‑311/94 IJssel-Vliet  [1996] ECR I‑5023, paragraphs 36 and 37, and Case C‑288/96 Germany v Commission  [2000] ECR I‑8237, paragraph 64). To the extent that those proposals for appropriate measures are accepted by a Member State, they are binding upon that State (see, to that effect, IJssel-Vliet , paragraphs 42 and 43, and Case C‑288/96 Germany  v Commission , paragraph 65), which must, as Article 19(1) of Regulation No 659/1999 states, implement them.
58. The fact that that scheme is simply an extension of the scheme which expired on 31 December 2009, assuming that be proved, is not decisive because the extension of an existing aid scheme creates a new aid which is distinct from the scheme which was extended (see, to that effect, Case C‑138/09 Todaro Nunziatina & C.  [2010] ECR I‑4561, paragraphs 46 and 47).
60. The Council cannot however rely on the mere fact that the aid scheme is a new one in order to reassess a situation in respect of which the Commission has already made a final assessment, thereby contradicting that assessment. The Council does not therefore have power to decide that a new aid scheme must be regarded as compatible with the internal market where it is so indissolubly linked to an existing aid scheme that a Member State has undertaken to modify or abolish, in the framework of Article 108 (1) TFEU, that it appears largely artificial to claim to make a distinction between those two schemes for the purposes of applying Article 108(2) TFEU (see, by analogy, Case C‑110/02 Commission  v Council , paragraph 46).
66. Owing to the substantial change in circumstances referred to in paragraph 64 above, the assessment by the Commission of that aid scheme cannot therefore be considered as prejudicing the assessment which would have been carried out of an aid scheme, containing similar measures, but which would have fallen to be implemented in economic circumstances radically different from those which the Commission took into account in its assessment. It follows that the compatibility with the internal market of the new aid scheme which was the subject of an application addressed to the Council by the Republic of Lithuania under the third subparagraph of Article 108(2) TFEU must be evaluated following an individual assessment distinct from that of the scheme referred to in paragraph 15 above, which takes into consideration the relevant economic circumstances at the time when the aid is granted (see, to that effect, Case C‑261/89 Italy  v Commission  [1991] ECR I‑4437, paragraph 21, and Case C‑459/10 P Freistaat Sachsen and Land Sachsen-Anhalt  v Commission  [2011] ECR I‑109, paragraph 4 8).
72. Second, the power granted to the Council under the third subparagraph of Article 108(2) TFEU applies only within the limits indicated by that provision, namely where exceptional circumstances exist (see, to that effect, Case C‑122/94 Commission  v Council  [1996] ECR I‑881, paragraph 13).
74. Only those proposals for appropriate measures are submitted to the Member States for their approval, as point 197 of the agricultural guidelines makes clear, whereas the other stipulations of those guidelines are merely general policy rules to be followed by the Commission (see, to that effect, Case C‑382/99 Netherlands  v Commission  [2002] ECR I‑5163, paragraph 24 and the case-law cited), without binding the Member States. A fortiori they cannot bind the Council in so far as the third subparagraph of Article 108(2) TFEU gives it the power to derogate, in exceptional circumstances, from the provisions of Article 107 TFEU or from the regulations provided for in Article 109 TFEU.
80. As the Court has repeatedly held, an act is vitiated by misuse of powers only if it appears, on the basis of objective, relevant and consistent evidence, to have been taken with the exclusive or main purpose of achieving an end other than that stated or evading a procedure specifically prescribed by the Treaty for dealing with the circumstances of the case (see, to that effect, inter alia, Case C‑48/96 P Windpark Groothusen v Commission [1998] ECR I‑2873, paragraph 52, and Case C‑310/04 Spain  v Council  [2006] ECR I‑7285, paragraph 69).
88. Article 108(1) TFEU imposes on the Commission and the Member States a duty of regular and periodic cooperation under which the Commission, in conjunction with the Member States, must keep under constant review existing aid schemes and propose to them any appropriate measures required by the progressive development or by the functioning of the internal market (see, to that effect, Case C‑242/00 Germany  v Commission , paragraph 28 and the case-law cited).
97. According to the case-law of the Court, in the application of the third subparagraph of Article 108(2) TFEU the Council enjoys wide discretion, the exercise of which involves complex economic and social assessments which must be made in a European Union context. In that context, judicial review of the manner in which that discretion is exercised is confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with and to verifying the accuracy of the facts relied on and ascertaining that there has been no error of law, manifest error in the assessment of the facts or misuse of powers (see, to that effect, Case C‑122/94 Commission  v Council , paragraphs 18 and 19, and, by analogy, Case C‑333/07 Régie Networks  [2008] ECR I‑10807, paragraph 78).
100. Equally, to hold that low agricultural incomes, the restricted area of agricultural holdings or farmers’ lack of capital are structural problems in Lithuania does not make it possible to establish that the Council committed a manifest error of assessment by considering that the very significant reduction in agricultural incomes caused by the fall in prices and the high level of interest rates as a result of the crisis led to a significant deterioration in the situation of Lithuanian farmers, thereby jeopardising land reform and precluding, therefore, the resolution of those structural problems (see, by analogy, Case C‑122/94 Commission  v Council , paragraph 21).
110. With regard to compliance with the principle of proportionality, it follows from the considerations in paragraph 97 above that the lawfulness of a measure adopted under the third subparagraph of Article 108(2) TFEU can be affected only if the measure is manifestly inappropriate, having regard to the objective which the Council is seeking to pursue (see, by analogy, Case C‑343/09 Afton Chemical  [2010] ECR I‑7027, paragraph 46, and Case C‑59/11 Association Kokopelli  [2012] ECR I‑0000, paragraph 39).
117. In view of the extent of the discretion enjoyed by the Council in this case, the contested decision cannot be regarded as breaching the principle of proportionality only because it would have been possible for the Republic of Lithuania to pursue the objectives referred to in paragraph 111 above by means of another type of aid scheme. It is settled case-law that, when assessing whether a decision taken on the basis of discretionary power such as that enjoyed by the Council under the third subparagraph of Article 108(2) TFEU complies with the principle of proportionality, what must be ascertained by the Court is not whether the adopted decision was the only measure possible or the best measure possible, but only whether it was manifestly disproportionate (see, by analogy, Case C‑33/08 Agrana Zucker  [2009] ECR I‑5035, paragraph 33 and the case-law cited).