Italian Republic v Commission of the European Communities.
Date: 2002-03-07
45 First, it must be observed that the Commission, for the purposes of applying Article 87(3) EC, enjoys a wide discretion, the exercise of which involves assessments of an economic and social nature which must be made within a Community context (see, inter alia, Case C-303/88 Italy v Commission [1991] ECR I-1433, paragraph 34, and Case C-156/98 Germany v Commission [2000] ECR I-6857, paragraph 67).
46 Second, where the Commission enjoys substantial freedom of assessment, as it does when applying Article 87 EC, the Court, in reviewing whether that freedom was lawfully exercised, cannot substitute its own assessment for that of the competent authority but must restrict itself to examining whether that authority's assessment is vitiated by a manifest error or misuse of powers (see, in particular, Case C-169/95 Spain v Commission [1997] ECR I-135, paragraph 34, and Case C-288/96 Germany v Commission [2000] ECR I-8237, paragraph 26).
47 Third, concerning misuse of powers, it should be borne in mind that the Court has consistently held (see, inter alia, Case C-84/94 United Kingdom v Council [1996] ECR I-5755, paragraph 69, and Case C-48/96 P Windpark Groothusen v Commission [1998] ECR I-2873, paragraph 52) that there is a misuse of powers where a Community institution adopts a measure 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.
48 Fourth, concerning the question whether the Commission failed to comply with its obligation to state reasons, it must be made clear that that obligation 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. 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. 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, in particular, Case C-17/99 France v Commission [2001] ECR I-2481, paragraphs 35 and 36).
The general plea: failure to take account of the value of TWECs as an instrument of intervention in the labour market
51 According to settled case-law, the concept of aid encompasses advantages granted by public authorities which, in various forms, mitigate the charges which are normally included in the budget of an undertaking. A partial reduction of social security contributions devolving upon undertakings of a particular industrial sector constitutes aid within the meaning of Article 87(1) EC if that measure is intended partially to exempt those undertakings from the financial charges arising from the normal application of the general social security system, without there being any justification for that exemption on the basis of the nature or general scheme of that system (see, in particular, Case C-251/97 France v Commission [1999] ECR I-6639, paragraphs 35 to 37).
52 The conditions with which aid must comply in order to be compatible with the common market are spelled out in the exceptions laid down in Article 87(2) and (3) EC. In that connection, it should be borne in mind that the Commission may adopt a policy as to how it will exercise its discretion in the form of measures such as guidelines, in so far as those measures contain rules indicating the approach which the institution is to take and do not depart from the rules of the Treaty (see, in particular, Case C-288/96 Germany v Commission [2000] ECR I-8237, paragraph 62; see also, to that effect, Case C-313/90 CIRFS and Others v Commission [1993] ECR I-1125, paragraphs 34 and 36, and France v Commission, cited above, paragraph 45). It follows that, although those rules, setting out the approach which the Commission proposes to follow, certainly help to ensure that it acts in a manner which is transparent, foreseeable and consistent with legal certainty, they cannot bind the Court. However, they may form a useful point of reference (see, to that effect, Case C-387/97 Commission v Greece [2000] ECR I-5047, paragraphs 87 and 89).
61 Consequently, the first specific plea must be rejected.
The second and third specific pleas: infringement of Community law and misuse of powers in relation to the determination of that part of the aid regarded as lawful and inadequate statement of reasons in relation to the determination of that part of the aid regarded as lawful and the part thereof regarded as unlawful
63 By its second specific plea, the Italian Government claims that the contested decision (i) is based on assertions presented as self-evident and, as a result, infringes Community law, (ii) constitutes a misuse of powers and (iii) fails adequately to state reasons when it defines that part of the aid found to be lawful, stating at point 91 that solely as regards the aid to encourage the use of training and work experience contracts for workers with particular difficulties in entering or re-entering the labour market, i.e. young people under 25, young graduates up to the age of 29 and the long-term unemployed (out of work for more than a year) or the aid intended to create new jobs, total aid does not exceed the amount needed to promote the creation of new jobs ....
77 In that regard, it must be borne in mind that, according to the case-law of the Court, the use of the terms abnormally and serious in the exception laid down in Article 87(3)(a) EC shows that it concerns only areas where the economic situation is extremely unfavourable in relation to the Community as a whole (Case 248/84 Germany v Commission [1987] ECR 4013, paragraph 19).
84 In that regard, it is clear from the case-law of the Court that when aid granted by the State strengthens the position of an undertaking vis-à-vis other undertakings competing in intra-Community trade the latter must be regarded as affected by that aid. For that purpose, it is not necessary for the recipient undertaking itself to export its products. Where a Member State grants aid to an undertaking, domestic production may for that reason be maintained or increased with the result that undertakings established in other Member States have less chance of exporting their products to the market in that Member State (Joined Cases C-278/92, C-279/92 and C-280/92 Spain v Commission [1994] ECR I-4103, paragraph 40).
86 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 might be affected (Spain v Commission, cited above, paragraph 42).
88 So far as the obligation to state reasons is concerned, the Commission explained in general terms at point 65 of the contested decision that the aid distorted competition and that in so far as that effect extended to intra-Community trade, the latter was affected by the aid. At point 66, the Commission illustrated that proposition, taking as an example production industries. At point 97, dealing with the conversion of TWECs into open-ended contracts, the Commission referred to that analysis and explained why it was even more relevant to the measures prescribed for such conversion.
89 The Commission was not required to go into any more detail in that regard. In the case of an aid programme, the Commission may confine itself to examining the characteristics of the programme in question in order to determine, in the grounds of its decision, whether, by reason of the terms of the programme, it gives an appreciable advantage to recipients in relation to their competitors and is likely to benefit in particular undertakings engaged in trade between Member States (see, inter alia, Germany v Commission, cited above, paragraph 18).
90 In the present case, the Italian laws on TWECs amount to an aid programme. The contested decision contains the requisite analysis of the programme and its effects.
91 There was no need for the contested decision to include an analysis of the aid granted in individual cases on the basis of the scheme. It is only at the stage of recovery of the aid that it is necessary to look at the individual situation of each undertaking concerned.
98 In that regard, it must be borne in mind that the abolition, by means of recovery, of State aid which has been unlawfully granted is the logical consequence of a finding that it is unlawful (Case C-142/87 Belgium v Commission (Tubemeuse) [1990] ECR I-959, paragraph 66) and that the aim of obliging the State concerned to abolish aid found by the Commission to be incompatible with the common market is to restore the previous situation (Case C-350/93 Commission v Italy [1995] ECR I-699, paragraph 21, and Case C-75/97 Belgium v Commission [1999] ECR I-3671, paragraph 64).
99 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 (Commission v Italy, cited above, paragraph 22). It also follows from that function of repayment of aid that, as a general rule, the Commission will not, save in exceptional circumstances, 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 (Belgium v Commission, cited above, paragraph 66).
102 As to the principle of legitimate expectations, it must be borne in mind 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 unlawfully, in that they might have to refund the aid (Case C-5/89 Commission v Germany [1990] ECR I-3437, paragraph 15).
103 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 (Commission v Germany, cited above, paragraph 16).
104 However, a Member State whose authorities 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 Treaty ineffectual (Commission v Germany, cited above, paragraph 17).
105 As to the argument that repayment would be complicated and hard to verify and the argument concerning the wide reach of the aid scheme across the fabric of national production industry, it is sufficient to point out, in accordance with the case-law of the Court, that apprehension of even insuperable internal difficulties cannot justify a failure by a Member State to fulfil its obligations under Community law (see, in particular, Case C-404/97 Commission v Portugal [2000] ECR I-4897, paragraph 52). In this case, since the Italian Government has made no attempt to recover the aid in question, implementation of the decision to effect recovery cannot be shown to be impossible (Case C-6/97 Italy v Commission [1999] ECR I-2981, paragraph 34).
106 So far as the obligation to state reasons is concerned, it is clear from the case-law of the Court that, in the matter of State aid, where, contrary to the provisions of Article 88(3) EC, 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 Spain v Commission, cited above, paragraph 78, and Belgium v Commission, cited above, paragraph 82). However, at paragaphs 120 and 121 of the contested decision, the Commission explained why it was requiring repayment. Therefore it must be found that the contested decision is not vitiated in that regard by an inadequate statement of reasons.