French Republic v Commission of the European Communities.
Date: 1990-02-14
6 On 15 July 1987, the Commission adopted Decision 87/585, which forms the subject of the present action . That decision states that the financial contributions which were granted constituted aid which was incompatible with the common market under Article 92(1 ) of the Treaty, that such aid was unlawful because it was granted in breach of Article 93(3 ) of the Treaty, and that it could not be considered to be compatible with the common market under Article 92(3 ) of the Treaty . Under Article 2 of the decision, part of the aid had to be recovered and the French Government was required to inform the Commission of the measures adopted to that end . The Commission also pointed out, in the recitals in the preamble to its decision, that four other Member States, six federations and one individual firm had submitted comments under the procedure which resulted in the decision .
15 Furthermore, it is necessary to bear in mind the established case-law of the Court . In its judgment of 22 March 1977 in Case 78/76 Steinike und Weinlig v Germany (( 1977 )) ECR 595, the Court held that the prohibition contained in Article 92(1 ) of the Treaty is neither absolute nor unconditional, since paragraph ( 3 ) in particular of that article confers on the Commission a wide discretion to admit aid by way of derogation from the general prohibition in Article 92(1 ). The assessment in such cases of whether a State aid is or is not compatible with the common market raises problems which presuppose the examination and appraisal of economic facts and conditions which may be both complex and liable to change rapidly .
16 That was the reason for which the Treaty provided in Article 93 for a special procedure under which the Commission would monitor aid schemes and keep them under constant review . With regard to new aid which Member States might be intending to grant, a preliminary procedure was established; if this procedure was not followed, the aid could not be regarded as having been properly granted . By providing under Article 93 for the Commission to monitor and keep under constant review all aid schemes, the Treaty intended that any finding that aid might be incompatible with the common market should, subject to review by the Court, be the outcome of an appropriate procedure for the implementation of which the Commission was responsible .
17 The Court has also held ( see the judgment of 9 October 1984 in Joined Cases 91/83 and 127/83 Heineken Brouwerijen BV v Inspecteurs der Vennootschapsbelasting, Amsterdam and Utrecht (( 1984 )) ECR 3435 ) that the purpose of the first sentence of Article 93(3 ) of the Treaty is to provide the Commission with the opportunity to review, in sufficient time and in the general interest of the Communities, any plan to grant or alter aid . The final sentence of Article 93(3 ) of the Treaty constitutes the means of safeguarding the machinery for review laid down by that article, which, in turn, is essential for ensuring the proper functioning of the common market . The prohibition laid down in that article on putting any proposed measures into effect is designed to ensure that a system of aid cannot become operational before the Commission has had a reasonable period in which to study the proposed measures in detail and, if necessary, to initiate the procedure provided for in Article 93(2 ).
18 In order for it to be effective, the system analysed above presupposes that measures may be taken to counteract any infringement of the rules laid down in Article 93(3 ) of the Treaty and that such measures may, with a view to protecting the legitimate interests of the Member States, form the subject of an action . With regard to this system, there can be no dispute as to the need to introduce conservatory measures in cases where the effect of practices engaged in by certain Member States with regard to aid is to render nugatory the system established by Articles 92 and 93 of the Treaty .
19 Once it has established that aid has been granted or altered without notification, the Commission therefore has the power, after giving the Member State in question an opportunity to submit its comments on the matter, to issue an interim decision requiring it to suspend immediately the payment of such aid pending the outcome of the examination of the aid and to provide the Commission, within such period as it may specify, with all such documentation, information and data as are necessary in order that it may examine the compatibility of the aid with the common market .
20 The Commission has the same power in cases where it has been notified of aid but the Member State in question, instead of awaiting the outcome of the procedure provided for under Article 93(2 ) and ( 3 ) of the Treaty, has instead proceeded to put the aid into effect, contrary to the prohibition contained in Article 93(3 ).
21 Where a Member State has complied in full with the Commission' s order, the Commission is obliged to examine the compatibility of the aid with the common market, in accordance with the procedure laid down in Article 93(2 ) and ( 3 ) of the Treaty .
22 If the Member State, notwithstanding the Commission' s order, fails to provide the information requested, the Commission is empowered to terminate the procedure and make its decision, on the basis of the information available to it, on the question whether or not the aid is compatible with the common market . If appropriate, such a decision may call for the recovery of the amount of aid which has already been paid .
23 It has to be recognized that if the Member State fails to suspend payment of the aid, the Commission is entitled, while carrying out the examination on the substance of the matter, to bring the matter directly before the Court by applying for a declaration that such payment amounts to an infringement of the Treaty . Such a referral is justified in respect of urgency because there has been a decision embodying an order, taken after the Member State in question has been given an opportunity to submit its comments and thus at the conclusion of a preliminary procedure in which it has been enabled to put its case, as in the case of the means of redress provided under the second subparagraph of Article 93(2 ) of the Treaty . This means of redress is in fact no more than a variant of the action for a declaration of failure to fulfil Treaty obligations, specifically adapted to the special problems which State aid poses for competition within the common market .
24 With regard to the present case, it is not disputed that the Commission did examine whether or not the aid was compatible with the common market, even though it did so as a matter of secondary importance . That examination is therefore capable of forming the subject of the present proceedings .
B - Infringement of the procedural rules
30 The Court recognized in those judgments that this principle requires the Member State in question to be placed in a position in which it may effectively make known its views on the observations submitted by interested third parties under Article 93(2 ) of the Treaty and on which the Commission proposes to base its decision . The Court held that in so far as the Member State had not been afforded the opportunity to comment on such observations, the Commission could not incorporate them in its decision against that State .
31 However, in order for such an infringement of the right to be heard to result in annulment, it is necessary to establish that, had it not been for such an irregularity, the outcome of the procedure might have been different . In that regard, it should be noted that the observations in question, which were lodged with the Court at its request, do not contain any information in addition to that which the Commission already possessed and of which the French Government was aware . Under those circumstances, the fact that the French Government did not have an opportunity to comment on those observations was not likely to influence the outcome of the administrative procedure . This complaint must therefore also be rejected .
C - The statement of the reasons on which the decision is based
32 The French Government claims that the statement of the reasons on which the contested decision is based is inadequate inasmuch as it contains no assessment of the real effect of the aid already granted on competition and on trade between Member States, and inasmuch as it appears to be contradictory in view of the closure of production sites . The French Government also criticizes the reasoning of the decision by claiming that it is based on an incorrect assessment of the market share held by CBSF and of the patterns of trade between the Member States . The latter complaint also relates, in substance, to the question whether the financial contributions were compatible with the common market and will for that reason be considered together with the submission based on infringement of Article 92 .
33 The first complaint must be rejected . If the Commission were required in its decision to demonstrate the real effect of aid which had 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 . It was therefore not necessary that the reasoning on which the contested decision was based should contain an up-to-date assessment of the effect of aid granted without being notified at the planning stage .
39 For the purpose of deciding whether such measures constitute State aid, it is appropriate to apply the criterion, suggested by the Commission in its decision and in any case not disputed by the French Government, which is based on the opportunities open to the undertaking of acquiring the amounts in question on the capital market .
41 The same is true of the loans at reduced rates of interest and the reduction in social security charges, because they also enabled CBSF to avoid having to bear costs which would normally have had to be met out of the undertaking' s own financial resources, and thereby prevented market forces from having their normal effect .
49 The arguments put forward by the applicant cannot be accepted . It should be borne in mind that the Commission enjoys a wide discretion under Article 92(3 ) of the Treaty and that the exercise of that discretion involves assessments of an economic and social nature which must be made within a Community context .