1. By its application, the Commission of the European Communities asks the Court to declare that, by having failed to take the necessary measures within the prescribed period to comply with Articles 2 and 3 of: - Commission Decision 2003/28/EC of 20 December 2001 on a State aid scheme implemented by Spain in 1993 for certain newly established firms in Álava (Spain) (OJ 2003 L 17, p. 20); - Commission Decision 2003/86/EC of 20 December 2001 on a State aid scheme implemented by Spain in 1993 for certain newly established firms in Vizcaya (Spain) (OJ 2003 L 40, p. 11); - Commission Decision 2003/192/EC of 20 December 2001 on a State aid scheme implemented by Spain in 1993 for certain newly established firms in Guipúzcoa (Spain) (OJ 2003 L 77) (together, ‘the contested decisions’), or, in any case, by having failed to communicate those measures in accordance with Article 4 of those decisions, the Kingdom of Spain has failed to fulfil its obligations under those provisions. I - The background to the dispute
2. In 1993, the Basque provinces of Álava, Vizcaya and Guipúzcoa adopted tax measures aimed at encouraging business start-ups.
3. Article 14 of each of the provincial laws No 18/1993 of 5 July 1993 in the province of Álava, No 5/1993 of 24 June 1993 in the province of Vizcaya and No 11/1993 of 26 June 1993 in the province of Guipúzcoa, all three of which were entitled ‘Urgent tax measures in support of investment and to stimulate economic activity’ (Medidas Fiscales Urgentes de Apoyo a la Inversión e impulso de la Actividad Económica), granted a 10-year exemption from corporate tax to those undertakings created between the date of entry into force of the provincial law and 31 December 1994, on condition that, inter alia: - they were formed with a minimum paid-up capital of ESP 20 million; - they invested a minimum amount of ESP 80 million between the date of creation of the company and 31 December 1995, and - they created at least 10 jobs within six months of the start of their business.
4. By letter of 28 November 2000, the Commission initiated the formal investigation procedure provided for in Article 88(2) EC against the Kingdom of Spain, with regard to each of the three tax schemes (‘the disputed tax measures’).
5. By applications lodged on 9 February 2001, the Diputación Foral de Álava (Case T‑30/01), the Diputación Foral de Guipúzcoa (Case T‑31/01) and the Diputación Foral de Vizcaya (Case T‑32/01) brought three actions for annulment before the Court of First Instance of the European Communities, each against the decision to initiate the procedure involving them.
6. At the end of the formal investigation procedures, the Commission adopted the contested decisions.
7. Article 1 of each of those decisions held the tax scheme in question to be State aid and declared it incompatible with the common market.
8. Articles 2 to 4 of each of those decisions are worded as follows: ‘ Article 2 Spain shall abolish the aid scheme referred to in Article 1, if it is still in force. Article 3 1. Spain shall take all necessary measures to recover from the recipients the aid referred to in Article 1, which has been unlawfully made available to them. Spain shall cancel all payment of outstanding aid. 2. Recovery shall be effected without delay in accordance with the procedures of national law, provided these allow the immediate and effective [execution (Decision 2003/28)]/[implementation (Decisions 2005/86 and 2003/192)] of this Decision … Article 4 Spain shall inform the Commission, within two months of the date of notification of this Decision, of the measures taken to comply with it.’
9. The three decisions were notified to Spain by letters of 28 December 2001.
10. The period of two months referred to in Article 4 of each of the decisions expired without, according to the Commission, it having been informed of the adoption of implementing measures.
11. By applications lodged on 26 March 2002, the Diputación Foral d’Álava (Case T‑86/02), la Diputación Foral de Vizcaya (Case T‑87/02) and la Diputación Foral de Guipúzcoa (Case T‑88/02) brought three actions for annulment before the Court of First Instance, each of which was brought against the negative decision concerning it.
12. Cases T-30/01 to T-32/01 and T-86/02 to T-88/02 have been joined by the Court of First Instance and are currently pending before that Court.
13. Following various exchanges and reminders subsequent to 1 March 2002, since it took the view that the Kingdom of Spain had still not sent it information on the implementation of the contested decisions, the Commission decided to bring the present action for failure to fulfil obligations. II - Procedure before the Court
14. On 27 February 2007, the Court rejected a request of the Kingdom of Spain on the basis of Article 82a of the Rules of Procedure seeking to stay the proceedings until judgments were given in the six cases pending before the Court of First Instance. III - The action A - Arguments of the parties 1. Arguments of the Commission
15. The Commission relies on Articles 249 EC and 88(2) EC.
16. According to it, upon the expiry of the two-month period prescribed in Article 4 of each of the contested decisions, the Kingdom of Spain, contrary to Articles 2 and 3 of those decisions, had not abolished the State aid regimes in so far as they were in place, had not cancelled the outstanding aid and had not sought recovery of aid already made available.
17. The Commission claims that, despite many reminders, even on the date on which the present action was brought, the decisions had not been implemented.
18. It claims that the only defence available to a Member State in opposing an application by the Commission under Article 88(2) EC for a declaration that it has failed to fulfil its Treaty obligations is to plead that it was absolutely impossible for it properly to implement the decision ordering recovery. This condition is not fulfilled in the present case.
19. In any case, the Kingdom of Spain is not able to plead illegality of the contested decisions, since it has not brought an action for annulment against them. 2. Arguments of the Spanish Government
20. The Spanish Government puts forward, as its principal argument, a plea based on the illegality of the contested decisions. Alternatively, it disputes whether a failure to fulfil obligations can be attributed to it in the present case. a) Illegality of the contested decisions
21. Under reference to Case C-99/02 Commission v Italy [2004] ECR I-3353, paragraph 16 and the case law cited, analysed a contrario, the Spanish Government considers that it is entitled to plead the illegality of the negative decisions of the Commission, although it has not brought actions for annulment. Those decisions are not definitive, in so far as they are the subject of pending actions for annulment, brought before the Court of First Instance by the relevant provincial authorities.
22. The plea put forward is sub-divided into six parts, respectively alleging a misuse of power, an application of guidelines which were not in force at the date of the adoption of the disputed tax measures, an infringement of Article 14(1) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88] of the EC Treaty (OJ 1999 L 83, p. 1), an infringement of the right to a fair hearing with respect to the preliminary investigation procedure, an infringement of the right to a fair hearing with respect to the formal investigation procedure and a breach of the duty to provide adequate reasons. b) Absence of a failure to fulfil obligations
23. The Spanish government denies that it failed to fulfil the obligations to abolish the aid schemes in so far as they were still in force, the obligations to cancel outstanding aid and those to recover the aid already made available. i) Obligations to abolish aid schemes in so far as they were still in force and to cancel outstanding aid
24. The Spanish Government notes that the disputed tax measures involved exemptions from corporation tax for a period of 10 years starting from, and including, the tax year in which the new company was formed.
25. Those measures, although not formally repealed, were in force for a limited period, since, being applicable to companies created between the entry into force of provincial laws Nos 18/1993, 5/1993 and 11/1993, in 1993, and 31 December 1994, they could only give rise to exemptions until the tax declaration submitted, at the latest, in July 2005.
26. In those circumstances, the tax schemes at issue have ceased to have effect. ii) Obligations to recover aid already made available
27. The Spanish Government considers that the Commission was wrong to object that, in order to recover the aid already made available, it intended to make use of the procedure under national law for declaring voidable measures to have a detrimental effect. According to the Commission, that procedure had the effect of complicating the recovery of the aid to a very high degree.
28. However, the procedure chosen was, in fact, the procedure for review of void measures, which was the appropriate procedure for the proper implementation of the contested decisions.
29. Consequently, since the Commission erred in objecting that the Kingdom of Spain had chosen a recovery procedure which did not enable the contested decisions to be implemented in any way, it cannot be said that that Member State failed to fulfil its obligations. B - Findings of the Court 1. The plea based on the unlawfulness of the contested decisions
30. The system of remedies set up by the EC Treaty distinguishes between the remedies provided for in Articles 226 EC and 227 EC, which permit a declaration that a Member State has failed to fulfil its obligations, and those contained in Articles 230 EC and 232 EC, which permit judicial review of the lawfulness of measures adopted by the Community institutions, or the failure to adopt such measures. Those remedies have different objectives and are subject to different rules. In the absence of a provision of the Treaty expressly permitting it to do so, a Member State cannot, therefore, properly plead the unlawfulness of a decision addressed to it as a defence in an action for a declaration that it has failed to fulfil its obligations arising out of its failure to implement that decision (see, inter alia, Case C-261/99 Commission v France [2001] ECR I-2537, paragraph 18, and Case C-404/00 Commission v Spain [2003] ECR I-6695, paragraph 40).
31. The position could be different only if the measure in question contained such particularly serious and manifest defects that it could be deemed non-existent ( Commission v France , paragraph 19, and Commission v Spain , paragraph 41).
32. That also applies in an action for failure to fulfil obligations based on the second subparagraph of Article 88(2) EC ( Commission v France , paragraph 20, and Commission v Spain , paragraph 42).
33. In this regard, it must be stated that the Kingdom of Spain has not claimed in its pleadings that the contested decisions contained a defect of a kind which might lead to those decisions being deemed non-existent.
34. In any case, the Spanish Government cannot, by referring to the judgment in Commission v Italy, validly rely on the actions for annulment brought by the relevant provinces, pending before the Court of First Instance.
35. The fact that, in that and other judgments, the Court took the view that, in the circumstances of the case before it, an action for annulment had not been brought within the prescribed period or that an action of that kind was dismissed, does not of itself mean that, in the converse case, the unlawfulness of a Community measure may be pleaded as a defence in an action for failure to fulfil obligations on the ground alone that an action for annulment brought against that measure is pending.
36. It must be borne in mind that the contested decisions are presumed to be lawful and that, despite the existence of the action for annulment, they remain binding in all respects on the Kingdom of Spain ( Commission v France , paragraph 26).
37. It follows that, in an action for failure to fulfil obligations brought under the second subparagraph of Article 88(2) EC, and except for the case of the non-existence of the act, a Member State is not entitled to raise the defence of the unlawfulness of a negative decision of the Commission when a direct action against that decision is pending before the Community Courts (see, regarding cases in which actions for annulment were pending, Case C-404/97 Commission v Portugal [2000] ECR I‑4897 and Case C-207/05 Commission v Italy [2006] ECR I‑70).
38. It follows from the above that the plea examined must be rejected as inadmissible. 2. The existence of the failure to fulfil obligations a) The pleas relating to the obligations to abolish aid schemes in so far as they were still in force and to cancel outstanding aid
39. Article 2 of each of the contested decisions requires the Kingdom of Spain to abolish the relevant aid schemes in so far as they are still in force. The second sentence of Article 3(1) of each of those decisions requires the cancellation of outstanding aid.
40. As the Spanish Government points out, the aid schemes were applicable only to companies formed by 31 December 1994 at the latest.
41. However, they would be producing their effects over the course of 10 tax years, that is to say, for a period of several years after the contested decisions.
42. In order to give effect to Article 2 and the second sentence of Article 3(1) of each of the contested decisions, the Kingdom of Spain was obliged to repeal the aid schemes and cancel the tax exemptions not already in place.
43. The Spanish Government does not deny that the tax schemes have not been repealed and that the tax exemptions not already in place at the date of the contested decisions have not been cancelled.
44. It follows that the Commission’s pleas relating to Article 2 and the second sentence of Article 3(1) of each of the contested decisions are well founded. b) The pleas relating to the obligation to recover aid already made available
45. Where negative decisions are taken in cases of unlawful aid, the recovery of that aid, ordered by the Commission, is to take place in the conditions provided for in Article 14(3) of Regulation No 659/1999, which states: ‘…recovery shall be effected without delay and in accordance with the procedures under the national law of the Member State concerned, provided that they allow the immediate and effective execution of the Commission’s decision. To this effect and in the event of a procedure before national courts, the Member States concerned shall take all necessary steps which are available in their respective legal systems, including provisional measures, without prejudice to Community law.’
46. According to settled case-law, the only defence available to a Member State in opposing an application by the Commission under Article 88(2) EC for a declaration that it has failed to fulfil its Treaty obligations is to plead that it was absolutely impossible for it properly to implement the decision (see, inter alia, Commission v France , paragraph 23, Commission v Spain , paragraph 45, and Case C-415/03 Commission v Greece [2005] ECR I-3875, paragraph 35).
47. In the present case, the obligation to recover is laid down in the first sentence of Article 3(1) and in Article 3(2) of each of the contested decisions.
48. The Kingdom of Spain does not plead that it was absolutely impossible for it to implement those provisions.
49. It limits itself to contending that the procedure chosen for the recovery of the aid already made available is an appropriate procedure to implement the decisions properly.
50. However, it has produced no supporting evidence, in particular, of the identity of the beneficiaries of that aid, of the amounts of aid granted and of the procedures that are in fact under way for the purposes of the recovery of that aid.
51. Therefore, it has not proved the actual putting into place, within the period prescribed in Article 4 of each of the contested decisions, of measures allowing for, the immediate and effective implementation, within the meaning of Article 14(3) of Regulation No 659/1999, of the contested decisions as regards that aid already made available.
52. Accordingly, the Commission’s pleas relating to the first sentence of Article 3(1) and of Article 3(2) of each of the contested decisions are well founded.
53. It follows from the above that the action is well founded to the extent that the Commission claims that the Kingdom of Spain has not adopted all the necessary measures to abolish the relevant aid schemes, to cancel outstanding aid, and to recover aid already made available.
54. The Court does not need to examine the form of order sought against the Kingdom of Spain for failing to notify the Commission of the measures implementing the decision, since the Kingdom of Spain did not in fact implement the decision within the prescribed period (see Case C-348/93 Commission v Italy [1995] ECR I-673, paragraph 31, and Case C‑207/05 Commission v Italy , paragraph 53).
55. It must therefore be held that in failing to take the necessary measures within the prescribed period to comply with the provisions of Articles 2 and 3 of each of the contested decisions, the Kingdom of Spain has failed to fulfil its obligations under those provisions. IV - Costs
56. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Kingdom of Spain has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission.