Kingdom of Spain v Commission of the European Communities.
Date: 2002-09-19
46 As regards the Spanish Government's first argument that the overall amount of aid in question is small, and that it is divided among a large number of beneficiaries, each of whom received a negligible sum in national or Community terms, it is settled case-law of the Court that the relatively small amount of aid, or the relatively small size of the undertaking which receives it, does not as such exclude the possibility that intra-Community trade may be affected (see, inter alia, Case C-142/87 Belgium v Commission [1990] ECR I-959, paragraph 43 (`Tubemeuse'); Joined Cases C-278/92 to C-280/92 Spain v Commission [1994] ECR I-4103, paragraph 42; and Case C-310/99 Italy v Commission [2002] ECR I-0000, paragraph 86).  Other factors may be decisive when assessing the effect of aid on trade, such as whether the aid is cumulative and whether the undertakings that receive it are operating in a sector that is particularly exposed to competition.
62 It should first of all be observed that the obligation to provide a statement of reasons laid down in Article 253 EC is an essential procedural requirement, as distinct from the question whether the reasons given are correct, which goes to the substantive legality of the contested measure. Accordingly, the statement of reasons required by Article 253 EC must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review (see, inter alia, Case C-17/99 France v Commission [2001] ECR I-2481, paragraph 35 and Italy v Commission, cited above, paragraph 48).
63 Furthermore, that requirement must be appraised by reference to 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.  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 meets the requirements of Article 253 EC 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 France v Commission, cited above, paragraph 36, and Italy v Commission, cited above, paragraph 48).
68 Finally, whilst it is common ground that in the statement of reasons for its decision the Commission is bound to refer at least to the circumstances in which aid has been granted, where those circumstances show that the aid is such as to affect trade between Member States (Case 248/84 Germany v Commission [1987] ECR 4013, paragraph 18), it is not bound to demonstrate the real effect of aid already granted.  If it were, that requirement would ultimately favour Member States which grant aid in breach of the duty to notify, laid down in Article 88(3) EC, to the detriment of those which do notify aid at the planning stage (see, inter alia, to that effect, Case C-301/87 France v Commission (`Boussac') [1990] ECR I-307, paragraph 33).
79 In that connection it has stated that the use of the words `abnormally' and `serious' in Article 87(3)(a) shows that the exemption concerns only areas where the economic situation is extremely unfavourable in relation to the Community as a whole.  The exemption in Article 87(3)(c), on the other hand, is wider in scope inasmuch as it permits the development of certain areas in a Member State which are disadvantaged in relation to the national average without being restricted by the economic conditions laid down in Article 87(3)(a), provided such aid `does not adversely affect trading conditions to an extent contrary to the common interest' (see, inter alia, Germany v Commission, cited above, paragraph 19; Case C-169/95 Spain v Commission [1997] ECR I-135, paragraph 15; and Italy v Commission, cited above, paragraph 77).
80 Conversely, the fact that that condition is not mentioned in the exemption under Article 87(3)(a) implies greater latitude in granting aid to undertakings in regions which do not meet the criteria laid down in that exemption (see Spain v Commission, cited above, paragraph 16).
81 Nevertheless, the difference in wording between Article 87(3)(a) EC and Article 87(3)(c) EC cannot lead to the conclusion that the Commission should take no account of the Community interest when applying Article 87(3)(a), and that it must confine itself to verifying the specifically regional impact of the measures involved, without assessing their impact on the relevant market or markets in the Community as a whole.  In such cases the Commission is bound not only to verify that the measures are such as to contribute effectively to the economic development of the regions concerned, but also to evaluate the impact of the aid on trade between Member States, and in particular to assess the sectorial repercussions they may have at Community level.  As the Court has already held, Article 87(3) EC gives the Commission a discretion the exercise of which involves economic and social assessments which must be made in a Community context (see, inter alia, Case 730/79 Philip Morris v Commission [1980] ECR 2671, paragraph 24; Case 310/85 Deufil v Commission [1987] ECR 901, paragraph 18; and Spain v Commission, cited above, paragraph 18).
84 As the Spanish Government has provided no evidence that the aid in question was by its nature likely to make an effective and lasting contribution to the economic development of Extremadura, the Commission did not exceed the limits of its discretion in finding, on that basis, that the aid in question was incompatible with the common market.  It must in particular be pointed out that, in a case where the Court was asked to rule on an aid scheme in the wine sector in Italy, it held that the Commission had shown that the aid in question, which was granted without any specific conditions and solely according to the quantities used, had to be regarded as operating aid to the undertakings concerned and that, as such, it affected trading conditions to an extent contrary to the common interest (Case C-86/89 Italy v Commission [1990] ECR I-3891, paragraph 18).
87 Aid granted to Extremadura processing undertakings before that date was found incompatible with the common market on the sole ground that it constituted a restriction on the free movement of goods between Member States because it was limited to Extremadura processors who entered into approved contracts with agricultural and livestock holdings in Extremadura for the supply of raw materials for processing.  In those circumstances there is no need to consider the possible applicability to that aid of the Communication on regional aid.
89 It is settled case-law that, once the Community has, pursuant to Article 34 EC, legislated for the establishment of a common organisation of the market in a given sector, Member States are under an obligation to refrain from taking any measure which might undermine or create exceptions to it (see, inter alia, to that effect, Case 83/78 Pigs Marketing Board [1978] ECR 2347, paragraph 56, and Case 177/78 McCarren [1979] ECR 2161, paragraph 14).
90 As stated at paragraph 48 above, the Council has adopted, for most of the products referred to in Annex I to the Treaty, regulations on the common organisation of the market.  Since those regulations establish an integrated regulatory framework that already contains measures of financial support for the sectors concerned, a Member State may not unilaterally award aid to those sectors, even if the aid is intended to facilitate the purchase of certain specific products for industrial processing and even though the quantity is subject to a ceiling.  According to settled case-law, it is for the Community to seek solutions to the problems which might arise in the context of the common agricultural policy once, as in this case, it has established common organisations of the market in a number of sectors (see, inter alia, to that effect, Case 90/86 Zoni [1988] ECR 4285, paragraph 26, and Italy v Commission, cited above, paragraph 19).
93 As regards the other requirements in the Communication on short-term loans, namely, first, that the aid must be confined to that which is strictly necessary to offset the disadvantages suffered by the agricultural sector and, secondly, that the amount of subsidised loans to any beneficiary must not exceed the cash flow shortfall entailed by financing production before produce is sold, the Spanish Government argues that that is precisely the position here since, in its view, Decree 35/1993 lays down minimum interest which the beneficiary must pay and limits the amount of the subsidy.  The interest-rate rebate relates exclusively to financing the purchase of agricultural products under approved contracts.
103 The aid scheme in question therefore establishes a financial incentive to buy raw materials from agricultural and livestock holdings in Extremadura.  In those circumstances, it must be regarded as a measure having equivalent effect to a quantitative restriction on imports, which is prohibited by the Treaty (see, to that effect, Case 249/81 Commission v Ireland [1982] ECR 4005, paragraphs 20 to 30).
104 In the light of all of the foregoing considerations, it must be held that the Commission did not exceed the limits of its discretion in finding that the aid scheme in question could not benefit from any of the exemptions provided for in Article 87(2) or (3) EC.  It is settled case-law that State aid, certain conditions of which contravene other provisions of the Treaty, cannot be declared by the Commission to be compatible with the common market (see, inter alia, Case C-21/88 Du Pont de Nemours Italiana [1990] ECR I-889, paragraph 20; Case C-156/98 Germany v Commission [2000] ECR I-6857, paragraph 78; and Case C-204/97 Portugal v Commission [2001] ECR I-3175, paragraph 41).
107 In that connection it must be borne in mind first of all that abolishing unlawful aid by means of recovery is the logical consequence of a finding that it is incompatible with the common market.  A Member State may not claim that such a measure is disproportionate to the objectives of the Treaty in regard to State aids nor rely on the legitimate expectations of the undertaking that receive the aid 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 set at naught, since national authorities would thus be able to rely on their own unlawful conduct in order to deprive of their effectiveness decisions taken by the Commission under provisions of the Treaty (see, inter alia, the judgment in Spain v Commission, cited above, paragraphs 47 and 48).
108 Secondly it is also clear from the case-law of the Court that the legality of a decision adopted by the Commission in the area of State aid is to be assessed in the light of the information available to the Commission when the decision was adopted (see, inter alia, Case 234/84 Belgium v Commission [1986] ECR 2263, paragraph 16).