Italian Republic v Commission of the European Communities.
Date: 2004-04-29
37. In those circumstances, it necessarily follows from the judgment in Alzetta and Others  v Commission  and from the dismissal of the appeal against it by the judgment delivered today in Italy  v Commission  that the present action has become devoid of purpose as regards the claim for the annulment of Articles 2 and 5 of the contested decision in so far as they concern aid to undertakings engaged in transport at a local, regional or national level.
42. With regard to existing aid, under the provisions of Article 93(1) and (2) of the Treaty and in accordance with the principle of legal certainty, if, in the course of its constant review of such aid, after giving notice to the parties concerned to submit their comments, the Commission finds that that aid is not compatible with the common market having regard to Article 92 of the Treaty, or that such aid is being misused, it is to decide that the State concerned must abolish or alter such aid within a period of time to be determined by the Commission. Such aid may therefore be lawfully put into effect as long as the Commission has not found it to be incompatible (see Case C‑47/91 Italy  v Commission  [1992] ECR I-4145, paragraphs 23 and 25, and Case C‑387/92 Banco Exterior de España [1994] ECR I‑877, paragraph 20).
44. In its assessment both of existing aid, pursuant to Article 93(1) and (2) of the Treaty, and of new aid which must be notified to it before being implemented, pursuant to Article 93(3) of the Treaty, the Commission is required, not to establish that such aid has a real effect on trade between Member States and that competition is actually being distorted, but only to examine whether that aid is liable to affect such trade and distort competition.
45. The same applies where new aid has been granted without having been notified to the Commission beforehand. If, on the other hand, the Commission were required in its decision to demonstrate the real effect of aid which has already been granted, that would ultimately favour those Member States which grant aid in breach of the duty to notify laid down in Article 93(3) of the Treaty, to the detriment of those which do notify aid at the planning stage (see Case C‑301/87 France  v Commission  [1990] ECR I‑307, ‘ Boussac Saint Frères ’, paragraphs 32 and 33).
52. In that regard, when financial aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra‑Community trade the latter must be regarded as affected by that aid (see Case 730/79 Philip Morris  v Commission  [1980] ECR 2671, paragraph 11, and Joined Cases C‑278/92 to C‑280/92 Spain  v Commission  [1994] ECR I‑4103, paragraph 40).
53. With regard to the Italian Government’s first argument, concerning the relatively small amount of aid or the relatively small size of the undertaking which receives it, it must be pointed out that such circumstances do not as such exclude the possibility that intra-Community trade might be affected (see Case C-142/87 Belgium  v Commission  [1990] ECR I-959, ‘ Tubemeuse ’, paragraph 43; Joined Cases C‑278/92 to C‑280/92 Spain  v Commission , cited above, paragraph 42, and Case C‑280/00 Altmark Trans and Regierungspräsidium Magdeburg  [2003] ECR I‑7747, paragraph 81).
54. Aid of a relatively small amount is liable to affect competition and trade between Member States where there is strong competition in the sector in which the undertakings which receive it operate (see Case 259/85 France  v Commission  [1987] ECR 4393, paragraph 24; Case C-303/88 Italy v Commission  [1991] ECR I‑1433, paragraph 27, and Case C‑351/98 Spain  v Commission  [2002] ECR I‑8031, paragraph 63).
57. Furthermore, it is clear that, where a sector has a large number of small companies, aid potentially available to all or a very large number of undertakings in that sector can, even if individual amounts are small, have an impact on competition and trade between Member States (see, to that effect, the judgment in Case C-351/98 Spain  v Commission , cited above, paragraph 64). In that regard, the figures communicated to the Commission by the Italian Government confirm that more than 80% of the recipients of the aid in dispute are small undertakings.
60. With regard to the Italian Government’s second argument, which claims, first, that the majority of the undertakings in receipt of that aid operate exclusively at a local level, it must be recalled that the condition for the application of Article 92(1) of the Treaty, namely that the aid must be capable of affecting trade between Member States, does not depend on the local or regional character of the transport services supplied or on the scale of the field of activity concerned (see Altmark Trans and Regierungspräsidium Magdeburg , cited above, paragraph 82).
67. With regard to the third argument, based on the alleged compensatory function of the aid in dispute in a situation of objective competitive disadvantage, it is sufficient to recall that, according to settled case-law, the fact that a Member State seeks to approximate, by unilateral measures, the conditions of competition in a particular sector of the economy to those prevailing in other Member States cannot deprive the measures in question of their character as aid (see Joined Cases 6/69 and 11/69 Commission  v France  [1969] ECR 523, paragraphs 20 and 21, and Case C‑6/97 Italy  v Commission  [1999] ECR I‑2981, paragraph 21).
69. With regard to the third part of the first plea in law, which is based on the Commission’s obligation to state reasons, it is settled law that the statement of reasons required by Article 190 of the EC Treaty (now Article 253 EC) must be appropriate to the nature of the measure in question and must show clearly and unequivocally the reasoning of the institution which adopted the measure so as to inform the persons concerned of the justification for the measure adopted and to enable the Court to exercise its powers of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations (judgment in Joined Cases 296/82 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission  [1985] ECR 809, paragraph 19).
70. In that regard, it is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons for a measure meets the requirements of Article 190 of the Treaty must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (see, inter alia, judgments in Case C‑114/00 Spain  v Commission  [2002] ECR I‑7657, paragraphs 62 and 63, and Case C‑301/96 Germany  v Commission  [2003] ECR I‑0000, paragraph 87).
71. Nevertheless, with regard, more specifically, to a decision on State aids, the Court has held that, even if in certain cases the very circumstances in which the aid is granted are sufficient to show that the aid is capable of affecting trade between Member States and of distorting or threatening to distort competition, the Commission must at least set out those circumstances in the statement of reasons for its decision (judgments in Netherlands and Leeuwarder Papierwarenfabriek v Commission , cited above, paragraph 24; Joined Cases C‑329/93, C‑62/95 and C‑63/95 Germany and Others  v Commission  [1996] ECR I‑5151, paragraph 52, and Case C‑409/00 Spain  v Commission  [2003] ECR I‑1487, paragraph 74).
81. A Member State which seeks to be allowed to grant aid by way of derogation from the Treaty rules has a duty to collaborate with the Commission. In pursuance of that duty, it must in particular provide all the information to enable the Commission to verify that the conditions for the derogation sought are fulfilled (see Case C‑364/90 Italy  v Commission  [1993] ECR I‑2097, paragraph 20).
82. Economic assessments in connection with the application of Article 92(3) of the Treaty must be made in a Community context, which means that the Commission must examine the impact of aid on competition and intra‑Community trade. During that examination, the Commission must weigh the beneficial effects of the aid against its adverse effects on trading conditions and on the maintenance of undistorted competition (see Philip Morris  v Commission , cited above, paragraphs 24 and 26, and Joined Cases C‑278/92 to C‑280/92 Spain  v Commission , cited above, paragraph 51).
83. In the application of Article 92(3) of the Treaty, the Commission has a wide discretion the exercise of which involves economic and social assessments which must be made in a Community context (see, inter alia, Case 310/85 Deufil  v Commission [1987] ECR 901, paragraph 18). 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 that there has been no error of law, manifest error of assessment in regard to the facts or misuse of powers (see Case C‑351/98 Spain v Commission , cited above, paragraph 74, and Case C‑114/00 Spain  v Commission , cited above, paragraph 93).
103. It should first be recalled that abolishing unlawful aid by means of recovery is the logical consequence of a finding that it is unlawful. Consequently, the recovery of State aid unlawfully granted, for the purpose of restoring the previously existing situation, cannot in principle be regarded as disproportionate to the objectives of the Treaty in regard to State aids (see Tubemeuse , cited above, paragraph 66, and Case C‑169/95 Spain  v Commission  [1997] ECR I‑135, paragraph 47).
104. By repaying the aid, the recipient forfeits the advantage which it had enjoyed over its competitors on the market, and the situation prior to payment of the aid is restored (see Case C‑350/93 Commission  v Italy  [1995] ECR I‑699, paragraph 22). It also follows from that function of repayment of aid that, as a general rule, save in exceptional circumstances, the Commission will not exceed the bounds of its discretion, recognised by the case-law of the Court, if it asks the Member State to recover the sums granted by way of unlawful aid since it is only restoring the previous situation (see Case C‑75/97 Belgium  v Commission  [1999] ECR I‑3671, paragraph 66, and Case C‑310/99 Italy  v Commission  [2002] ECR I‑2289, paragraph 99).
105. In this case, since the Italian Republic merely claims that repayment of the aid in dispute would place a very heavy burden on the recipient undertakings, liable to cause many of them to disappear from the market and so giving rise to a serious employment and social crisis, it is sufficient to point out, in accordance with the case‑law of the Court, that apprehension of internal difficulties cannot justify a failure by a Member State to comply with its obligations under Community law (see, inter alia, Case C‑404/97 Commission  v Portugal  [2000] ECR I‑4897, paragraph 52, Case C‑310/99 Italy  v Commission , paragraph 105, and Case C‑404/00 Commission  v Spain  [2003] ECR I‑6695, paragraph 55).
106. Consequently, there is no evidence that the Italian Republic was faced with exceptional circumstances making repayment impossible and, accordingly, the first part of the fourth plea in law cannot be upheld.
Breach of the principle of the protection of legitimate expectations
– Arguments of the parties
110. As to the principle of legitimate expectations, it must be pointed out that, by a communication published in the Official Journal of the European Communities  (OJ 1983 C 318, p. 3), the Commission informed potential recipients of State aid of the risk attaching to any aid granted to them illegally, in that they might have to refund the aid (Case C-5/89 Commission  v Germany  [1990] ECR I-3437, paragraph 15, and Case C‑310/99 Italy  v Commission , cited above, paragraph 102).
111. It is true that a recipient of unlawfully granted aid is not precluded from relying on exceptional circumstances on the basis of which it had legitimately assumed the aid to be lawful and thus declining to refund that aid. If such a case is brought before a national court, it is for that court to assess the material circumstances, if necessary after obtaining a preliminary ruling on interpretation from the Court of Justice (see Case C‑5/89 Commission  v Germany , cited above, paragraph 16, and Case C‑310/99 Italy  v Commission , cited above, paragraph 103).
112. However, a Member State whose authorities have granted aid contrary to the procedural rules laid down in Article 93 of the Treaty may not plead the legitimate expectations of recipients in order to justify a failure to comply with the obligation to take the steps necessary to implement a Commission decision instructing it to recover the aid. If it could do so, Articles 92 and 93 of the Treaty would be deprived of all practical force, since national authorities would thus be able to rely on their own unlawful conduct in order to render decisions taken by the Commission under those provisions of the Treaty ineffectual (see Case C-5/89 Commission  v Germany , paragraph 17, and Case C‑310/99 Italy  v Commission , paragraph 104).
116. In that regard, it is important to recall that the fundamental requirement of legal certainty has the effect of preventing the Commission from indefinitely delaying the exercise of its powers (see Case 52/69 Geigy v Commission  [1972] ECR 787, paragraphs 20 and 21, and Joined Cases C‑74/00 P and C‑75/00 P Falck and Acciaierie di Bolzano  v Commission [2002] ECR I‑7869, paragraph 140).
117. Admittedly, a delay by the Commission in deciding that aid is unlawful and that it must be abolished and recovered by a Member State may, in certain circumstances, establish a legitimate expectation on the recipients’ part so as to prevent the Commission from requiring that Member State to order the refund of that aid (see Case 223/85 RSV  v Commission [1987] ECR 4617, paragraph 17). Nevertheless, the facts of the case giving rise to that judgment were exceptional and bear no resemblance to those in the present case. The measure at issue in that judgment concerned a sector which had for some years been receiving State aid approved by the Commission and its object was to meet the additional costs of an operation which had already received authorised aid (see Case C‑334/99 Germany  v Commission  [2003] ECR I‑1139, paragraph 44).
125. In that regard, it must be pointed out that, according to settled case-law, the operative part of an act is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption (see Case C‑355/95 P TWD  v Commission  [1997] ECR I‑2549, paragraph 21, and Case C‑404/97 Commission  v Portugal , cited above, paragraph 41).
129. As regards the fourth part of the fourth plea in law, relating to the alleged failure to state reasons for the contested decision, it is sufficient to point out that the Court has held that, in the matter of State aid, where, contrary to the provisions of Article 93(3) of the Treaty, the proposed aid has already been granted, the Commission, which has the power to require the national authorities to order its repayment, is not obliged to provide specific reasons in order to justify the exercise of that power (see Joined Cases C‑278/92 to C-280/92 Spain  v Commission , paragraph 78, and Case C‑75/97 Belgium v Commission , paragraph 82). Nevertheless, it is established that, in sections VI to VIII of the reasons for the contested decision, the Commission made clear the reasons which led it to decide to require the repayment of the aid in dispute. It must therefore be held that that decision is not vitiated in that regard by any failure to state reasons and, accordingly, the fourth part of the fourth plea cannot be upheld.