Federal Republic of Germany v Commission of the European Communities.
Date: 2003-01-28
25.  It is true that, as the German Government observes, there is no provision made in either the EC or ECSC Treaties or in the Commission's Rules of Procedure for granting   "leave of absence"  .  None the less, regardless of the expression used in the decision of 1 July 1999, the fact is that in that decision the Commission, in the interest of ensuring the continuity of Community action, did no more than draw the appropriate conclusions from, first, Mr Bangemann's decision to accept an appointment in a private company and, second, his intention no longer to perform his duties in the Commission.
41.  As regards the subsidies which had already been paid when they were notified to the Commission and the legitimate expectation invoked by the German Government, it must be noted, first, that in view of the mandatory nature of the review of State aid by the Commission under Article 88 EC, undertakings to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure laid down in that article.  A diligent businessman should normally be able to determine whether that procedure has been followed (Case C-24/95   Alcan Deutschland   [1997] ECR I-1591, paragraph 25).
42.  A Member State the authorities of which have granted aid contrary to the procedural rules laid down in Article 88 EC 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 87 and 88 EC 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 EC Treaty ineffectual (Case C-5/89   Commission   v   Germany   [1990] ECR I-3437, paragraph 17, and Case C-169/95   Spain   v   Commission   [1997] ECR I-135, paragraph 48).
44.  Nevertheless, firstly, the facts of the case giving rise to the judgment in   RSV   v   Commission  , cited above, 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.
49.  Similarly, the Court has consistently held that the purpose of Article 88(3) EC, which is designed to prevent the putting into effect of aid contrary to the EC Treaty, requires that the prohibition laid down in that respect by the last sentence of that provision should be effective during the whole of the preliminary stage.  That is why, in order to take account of the interest of Member States in being informed of the position quickly in spheres where the necessity to intervene may be of an urgent nature, the Commission must act diligently.  If, after being informed by a Member State of a plan to grant aid, the Commission fails to initiate the contentious procedure within a reasonable period of time, the Member State may, after giving prior notice to the Commission, put the aid in question into effect, whereupon it will come under the system for already existing aid.  Guided by Articles 173 of the EC Treaty (now, after amendment, Article 230 EC) and 175 of the EC Treaty (now Article 232 EC), the Court has held that a reasonable period ought not to exceed two months (see, to that effect,   Lorenz  , cited above, paragraph 4, and Case C-99/98   Austria   v   Commission   [2001] ECR I-1101, paragraph 32).  Moreover, the Court has also held that that period of two months constitutes a mandatory time-limit (Austria   v   Commission  , cited above, paragraphs 72 to 74).
50.  It must be observed that the period available to the Commission in order to conduct the preliminary examination of planned aid and to decide whether it is necessary to initiate a contentious procedure has been set, both by the Community legislature in the Sixth Steel Aid Code and by the Court's case-law, at two months, in view of the Member State's interest in obtaining clarification quickly in spheres where there may be an urgent need to take action.  It follows that the preliminary examination of planned aid must, in principle, be regarded as an urgent matter, unless the Member State concerned expressly agrees to an extension of the time allowed (see, to that effect,   Austria   v   Commission  , paragraph 76).
58.  It must be borne in mind that while the reasoning required by the provisions referred to in the previous paragraph must show clearly and unequivocally the reasoning of the Community authority which adopted the contested measure so as to enable the persons concerned to ascertain the reasons for the measure and to enable the Court to exercise its power of review, it is not required to go into every relevant point of fact and law.  The question whether a statement of reasons satisfies those requirements must be assessed with reference not only to its wording but also to its context and the whole body of legal rules governing the matter in question (see, to that effect, Case C-122/94   Commission   v   Council   [1996] ECR I-881, paragraph 29; Case C-278/95 P   Siemens   v   Commission   [1997] ECR I-2507, paragraph 17, and Case C-367/95 P   Commission   v   Sytraval and Brink's France   [1998] ECR I-1719, paragraph 63).
59.  As regards more particularly a decision concerning State aid, the Court has held that although 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 reasons for its decision (Joined Cases 296/82 and 318/82   Netherlands and Leeuwarder Papierwarenfabriek   v   Commission   [1985] ECR 809, 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 Joined Cases C-15/98 and C-105/99   Italy and Sardegna Lines   v   Commission   [2000] ECR I-8855, paragraph 66).
93.  It must be noted at the outset that, unlike the provisions of the EC Treaty on State aid, which permanently empower the Commission to adopt decisions on its compatibility, the aid codes confer such power on the Commission only for a specified period (Joined Cases C-74/00 P and C-75/00 P   Falck and Acciaierie di Bolzano   v   Commission   [2002] ECR I-7869, paragraph 115).
94.  Accordingly, where aid which a Member State wishes to authorise under a code is not notified during the period laid down by the code for such notification, the Commission can no longer give a decision on the compatibility of that aid under that code (Case 214/83   Germany   v   Commission   [1985] ECR 3053, paragraphs 40 to 47, and Case C-210/98 P   Salzgitter   v   Commission   [2000] ECR I-5843, paragraphs 49 to 55).
116.  After the reunification of Germany that provision was not repealed either by the Treaty on European Union or by the Treaty of Amsterdam (Case C-156/98   Germany   v   Commission   [2000] ECR I-6857, paragraph 47).
117.  It ought, however, to be noted that since it constitutes a derogation from the general principle, laid down in Article 87(1) EC, that State aid is incompatible with the common market, Article 87(2)(c) EC must be construed narrowly (Germany   v   Commission  , cited above, paragraph 49).
118.  Furthermore, as the Court has held in previous decisions, in interpreting a provision of Community law it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it forms part (Case 292/82   Merck   [1983] ECR 3781, paragraph 12; Case 337/82   St Nikolaus Brennerei und Likörfabrik   [1984] ECR 1051, paragraph 10, and   Germany   v   Commission  , paragraph 50).
119.  In addition, although, following the reunification of Germany, Article 87(2)(c) EC falls to be applied to the new   Länder  , such application is conceivable only on the same conditions as those applicable in the old   Länder   during the period preceding the date of that reunification (Germany   v   Commission  , paragraph 51).
120.  In this case, the phrase   "division of Germany"   refers historically to the establishment of the dividing line between the two occupied zones in 1948. Therefore, the   "economic disadvantages caused by that division"   can only mean the economic disadvantages caused in certain areas of Germany by the isolation which the establishment of that physical frontier entailed, such as the breaking of communication links or the loss of markets as a result of the breaking off of commercial relations between the two parts of German territory (Germany   v   Commission  , paragraph 52).
121.  By contrast, the conception advanced by the German Government, according to which Article 87(2)(c) EC permits full compensation for the undeniable economic backwardness suffered by the new Länder,  disregards both the nature of that provision as a derogation and its context and aims (Germany   v   Commission  , paragraph 53).
122.  The economic disadvantages suffered by the new Länder as a whole have not been directly caused by the geographical division of Germany within the meaning of Article 87(2)(c) EC (Germany   v   Commission  , paragraph 54).
123.  It follows that the differences in development between the original and the new Länder are explained by causes other than the geographical rift caused by the division of Germany and in particular by the different politico-economic systems set up in each part of Germany (Germany   v   Commission  , paragraph 54).
133.  In order to establish whether the privatisation of GS for a negative selling price of DEM 340 million involves elements of State aid, it is necessary to assess whether, in similar circumstances, a private investor of a dimension comparable to that of the bodies managing the public sector could have been prevailed upon to make capital contributions of the same size in connection with the sale of that undertaking or whether it would instead have chosen to wind it up (Case C-482/99   France   v   Commission   [2002] ECR I-4397, paragraph 70).
134.  In that respect, as the Court's case-law makes clear, a distinction must be drawn between the obligations which the State must assume as owner of the share capital of a company and its obligations as a public authority (Spain   v   Commission  , paragraph 22).
138.  So far as concerns, first, the guarantees of loans granted to GS, it must be stated that they were given in favour of an undertaking in difficulty which supplied no adequate consideration. A private investor would not as a rule have given GS loans of that sort.  As the Commission has noted in paragraph 45 of the grounds of the contested decision, State guarantees given to firms in difficulty must be regarded as aid equal to the amount of the loan guaranteed.  It follows that the obligations in connection with that loan imposed on the undertaking arise from the grant of aid and may not, therefore, be included in the calculation of the normal cost of winding up.
140.  Finally, so far as the shareholder loans are concerned, having regard to GS's difficulties and the conditions attaching to the loans, they constitute aid in their entirety, as is stated in paragraph 44 of the grounds of the contested decision.  The fact that those loans do not have to be repaid therefore entails the loss of a claim as the result of the grant of aid, that is to say, arising from a measure taken by the Member State as a public authority, which could not have been taken by a private investor and could not, accordingly, be taken into account in calculating the cost of the winding up.  Even assuming that, in the event of insolvency, the shareholder loans were to be considered, in accordance with German law, to be equity which could not be claimed back from the assets to satisfy creditors and were included in the costs of winding up, those costs would rise to only DEM 292 million, distinctly less than the DEM 340 million which privatisation cost.