1 BY AN APPLICATION LODGED AT THE COURT REGISTRY ON 17 DECEMBER 1982 , SA INTERMILLS ( HEREINAFTER REFERRED TO AS ' ' THE APPLICANT ' ' ), WHOSE REGISTERED OFFICE IS AT ANDENNE , BROUGHT AN ACTION UNDER THE SECOND PARAGRAPH OF ARTICLE 173 OF THE EEC TREATY FOR A DECLARATION THAT COMMISSION DECISION 82/670/EEC OF 22 JULY 1982 ON AID GRANTED BY THE BELGIAN GOVERNMENT TO A PAPER-MANUFACTURING UNDERTAKING ( OFFICIAL JOURNAL 1982 , L 280 , P . 30 ) IS VOID .
2 THE APPLICATION WAS SUPPORTED BY THREE UNDERTAKINGS , SA INTERMILLS-INDUSTRIE ANDENNE , SA INTERMILLS-INDUSTRIE PONT-DE-WARCHE AND SA INTERMILLS-INDUSTRIE STEINBACH , WHICH WERE GRANTED LEAVE TO INTERVENE IN THE ACTION BY ORDER OF THE COURT OF 22 JUNE 1983 . THOSE UNDERTAKINGS ARE REFERRED TO HEREINAFTER AS ' ' THE INTERVENERS ' ' , THE EXPRESSION ' ' THE APPLICANTS ' ' BEING USED TO REFER TO THE APPLICANT TOGETHER WITH THE INTERVENERS .
3 IN SO FAR AS IT IS POSSIBLE TO ESTABLISH THE FACTS ON THE BASIS OF THE CONTESTED DECISION AND THE INFORMATION CONTAINED IN THE PAPERS PUT BEFORE THE COURT , A RESTRUCTURING PLAN FINANCED BY AID GRANTED BY THE BELGIAN STATE THROUGH THE WALLOON REGIONAL EXECUTIVE WAS ADOPTED . UNDER THAT PLAN THE APPLICANTS ABANDONED BULK PRODUCTION AND WENT OVER TO THE MANUFACTURE OF SPECIAL PAPERS WITH A HIGH ADDED VALUE . TWO FACTORIES WERE CLOSED , NAMELY THOSE AT SAINT-SERVAIS AND HUIZINGEN ( THE LATTER SITUATED IN FLANDERS AND OPERATED BY ANOTHER UNDERTAKING IN THE GROUP ); AT THE SAME TIME , PRODUCTION AT THE FACTORIES AT ANDENNE , PONT-DE-WARCHE AND STEINBACH WAS REORGANIZED AND ENTRUSTED TO MANUFACTURING UNDERTAKINGS , EACH ENDOWED WITH ITS OWN LEGAL PERSONALITY .
4 THE CONTENTS OF THE CONTESTED DECISION MAY BE SUMMARIZED AS FOLLOWS : IN THE COURSE OF 1980 THE COMMISSION LEARNED THAT A PAPER-MANUFACTURING UNDERTAKING HAD RECEIVED FROM THE BELGIAN AUTHORITIES ASSISTANCE IN THE FORM OF LOANS ( A LOW-INTEREST LOAN OF BFR 1 076 MILLION AND REPAYABLE ADVANCES OF BFR 510 MILLION ), LINKED TO MEASURES FOR THE RESTRUCTURING OF THE UNDERTAKING CONCERNED , AND ASSISTANCE IN THE FORM OF A HOLDING OF BFR 2 350 MILLION ACQUIRED BY THE WALLOON REGIONAL EXECUTIVE , THE MAIN EFFECT OF WHICH WAS TO RESCUE THE UNDERTAKING FROM A VERY DIFFICULT FINANCIAL SITUATION . IN A LETTER DATED 23 JULY 1980 THE COMMISSION DREW THE ATTENTION OF THE BELGIAN GOVERNMENT TO ITS OBLIGATIONS UNDER ARTICLE 93 ( 3 ) OF THE EEC TREATY , WHICH REQUIRES PRIOR NOTIFICATION OF PLANS TO GRANT AID . BY A LETTER DATED 6 FEBRUARY 1981 THE BELGIAN GOVERNMENT NOTIFIED THE COMMISSION OF THE AID IN QUESTION . IT IS CLEAR FROM THAT NOTIFICATION THAT THE DECISION TO GRANT THE AID HAD ALREADY BEEN ADOPTED ON 17 JULY 1980 BY THE WALLOON REGIONAL EXECUTIVE . HAVING DECIDED TO INITIATE THE PROCEDURE LAID DOWN IN ARTICLE 93 ( 2 ), THE COMMISSION INVITED THE BELGIAN GOVERNMENT TO SUBMIT ITS COMMENTS BY 10 APRIL 1981 . ONLY AFTER A REMINDER HAD BEEN SENT DID THE BELGIAN GOVERNMENT FINALLY SUBMIT ITS COMMENTS TO THE COMMISION ON 24 AUGUST 1981 . IN THE COURSE OF THE PROCEDURE LAID DOWN BY ARTICLE 93 THREE MEMBER STATES INDICATED THAT THEY OBJECTED TO THE AID GRANTED BY THE BELGIAN AUTHORITIES ; THE COMMISSION ALSO RECORDED THE OPPOSITION OF TWO TRADE ASSOCIATIONS AND ONE UNDERTAKING , ALL OF WHICH DREW ATTENTION TO THE FACT THAT THE INDUSTRY IN QUESTION WAS SUFFERING FROM OVER-CAPACITY . THE COMMISSION FOUND THAT IN THIS CASE THE ASSISTANCE GRANTED BY THE BELGIAN AUTHORITIES WAS SUCH AS TO HAVE AN ADVERSE EFFECT ON TRADE BETWEEN MEMBER STATES AND TO DISTORT OR THREATEN TO DISTORT COMPETITION WITHIN THE MEANING OF ARTICLE 92 ( 1 ) OF THE TREATY . IT CONSIDERED THAT THE UNDERTAKING CONCERNED WAS IN A VERY DIFFICULT FINANCIAL SITUATION , WHICH APPEARED TO RULE OUT ANY RECOURSE TO THE UNSUBSIDIZED CAPITAL MARKET ; IN ITS OPINION , THE HOLDING OF BFR 2 350 MILLION WAS INTENDED TO RESOLVE THE UNDERTAKING ' S FINANCIAL PROBLEMS . ACCORDING TO THE COMMISSION , THE PROHIBITION ON STATE AIDS LAID DOWN IN ARTICLE 92 ( 1 ) EXTENDS TO INJECTIONS OF CAPITAL BOTH BY THE GOVERNMENT ITSELF AND BY REGIONAL OR LOCAL AUTHORITIES OR OTHER PUBLIC AGENCIES . THE COMMISSION ALSO CONSIDERED WHETHER AN EXEMPTION COULD BE GRANTED FOR THE AID IN QUESTION UNDER ARTICLE 92 ( 3 ) OF THE TREATY . HAVING RECALLED THAT THAT PROVISION PERMITS THE GRANT OF AID ' ' TO FACILITATE THE DEVELOPMENT OF CERTAIN ECONOMIC ACTIVITIES ' ' , IT STATED THAT THE AID GRANTED IN THE FORM OF LOW-INTEREST LOANS AND REPAYABLE ADVANCES COULD BE ACKNOWLEDGED TO BE COMPATIBLE WITH THE REQUIREMENTS OF THE TREATY ; THOSE LOANS WERE IN FACT LINKED TO AN INVESTMENT PROGRAMME WHICH WAS IN THE COMMUNITY INTEREST , IN SO FAR AS IT WAS INTENDED TO REDUCE BULK PRODUCTION AND CONVERT THE UNDERTAKING TO THE PRODUCTION OF SPECIAL PAPERS WITH A HIGH ADDED VALUE . ON THE OTHER HAND , THE COMMISSION CONSIDERED THAT THE AID GRANTED BY THE BELGIAN AUTHORITIES IN THE FORM OF A HOLDING IN THE UNDERTAKING ' S CAPITAL DID NOT QUALIFY FOR EXEMPTION UNDER ARTICLE 92 ( 3 ) BECAUSE THAT PART OF THE AID WAS NOT DIRECTLY LINKED TO THE RESTRUCTURING OF THE UNDERTAKING ; IT IN FACT CONSTITUTED ' ' RESCUE AID ' ' , INTENDED TO ALLOW THE UNDERTAKING TO MEET ITS FINANCIAL COMMITMENTS . IN THAT REGARD THE COMMISSION NOTED THAT ' ' AID OF THIS KIND , AIMED AT KEEPING PRODUCTION CAPACITY IN OPERATION , THREATENS TO DO SERIOUS DAMAGE TO THE CONDITIONS OF COMPETITION , AS THE FREE INTERPLAY OF MARKET FORCES WOULD NORMALLY CALL FOR THE CLOSURE OF THE UNDERTAKING , ALLOWING MORE COMPETITIVE FIRMS TO DEVELOP ' ' . ON THE BASIS OF THOSE CONSIDERATIONS , THE COMISSION DECIDED IN ARTICLE 1 THAT THE AID IN THE FORM OF A LOW-INTEREST LOAN AND REPAYABLE ADVANCES WAS COMPATIBLE WITH THE COMMON MARKET , WHEREAS THE AID IN THE FORM OF THE ACQUISITION OF A HOLDING WAS CONTRARY TO ARTICLE 92 OF THE TREATY . ARTICLE 2 OF THE DECISION PROVIDED THAT THE KINGDOM OF BELGIUM WAS TO INFORM THE COMMISSION WITHIN THREE MONTHS ' ' OF THE MEASURES IT HAS TAKEN TO ENSURE THAT THE AID . . . DOES NOT CONTINUE TO DISTORT COMPETITION IN THE FUTURE ' ' .
5 THE COMMISSION DOES NOT DISPUTE THE ADMISSIBILITY OF THE APPLICATION . ALTHOUGH THE CONTESTED DECISION IS ADDRESSED TO THE KINGDOM OF BELGIUM , THE COMISSION ACKNOWLEDGES THAT THE APPLICANT IS DIRECTLY AND INDIVIDUALLY CONCERNED , IN ITS CAPACITY AS THE RECIPIENT OF THE AID IN QUESTION , WITHIN THE MEANING OF THE SECOND PARAGRAPH OF ARTICLE 173 .
6 IN ADDITION TO VARIOUS SUBMISSIONS RELATING TO THE PROCEDURE ADOPTED , THE APPLICANT CHALLENGES THE DECISION ON THE GROUNDS THAT IT CONTAINED AN INACCURATE ASSESSMENT OF THE FACTS IN RELATION TO THE CRITERIA SET OUT IN ARTICLE 92 ( 1 ) AND ( 3 ) AND WAS BASED ON A CONTRADICTORY AND INADEQUATE STATEMENT OF REASONS .
7 THE THREE INTERVENERS PUT FORWARD SUBSTANTIALLY THE SAME SUBMISSIONS , CLAIMING IN ADDITION THAT THE COMMISSION FAILED TO RECOGNIZE THE FACT THAT , PRECISELY AS A RESULT OF THE RESTRUCTURING FINANCED BY THE AIDS IN QUESTION , THEY EACH ACQUIRED A LEGAL PERSONALITY SEPARATE FROM INTERMILLS SA , THE COMPANY REFERRED TO BY THE CONTESTED DECISION . THAT FACT WAS IGNORED BY THE COMMISSION .
8 SINCE THAT QUESTION MUST BE DECIDED PRIOR TO THE ASSESSMENT OF THE VARIOUS SUBMISSIONS PUT FORWARD BY THE PARTIES , IT IS NECESSARY FIRST TO EXAMINE THE STATUS OF THE APPLICANTS IN RELATION TO THE CONTESTED DECISION . THE STRUCTURE OF THE INTERMILLS GROUP
9 THE APPLICANTS CLAIM THAT THE COMMISSION , IN FINDING THAT THE AID IN QUESTION - IN THE FORM OF LOANS , REPAYABLE ADVANCES AND CAPITAL HOLDINGS - BENEFITED THE APPLICANT ALONE , GAVE AN INACCURATE DESCRIPTION OF THE COMPANIES CONCERNED . IN JUNE 1980 , BEFORE THE CONTESTED DECISION WAS ADOPTED , THREE NEW AND INDEPENDENT MANUFACTURING COMPANIES WERE SET UP UNDER THE RESTRUCTURING PLAN FINANCED BY THE AID . THE WALLOON REGIONAL EXECUTIVE ACQUIRED A HOLDING IN THOSE COMPANIES OF BFR 850 MILLION , COMPARED WITH THE FIGURE OF BFR 2 350 MILLION WHICH IS QUOTED IN THE DECISION . SINCE THE NEW UNDERTAKINGS WERE CREATED , THE APPLICANT HAS NO LONGER CARRIED ON ANY INDUSTRIAL ACTIVITY OF ITS OWN . IT WAS THEREFORE WRONG TO DESCRIBE THE INJECTION OF CAPITAL AS HAVING BEEN INTENDED IN ITS ENTIRETY TO MEET THE COMMITMENTS OF THE FORMER SA INTERMILLS , IN ORDER TO ENABLE IT TO ESCAPE FROM A PRECARIOUS FINANCIAL SITUATION .
10 IN ADDITION , THE INTERVENERS CLAIM THAT THERE WAS A BREACH OF THE PRINCIPLE LAID DOWN IN ARTICLE 222 OF THE EEC TREATY ON THE RULES IN MEMBER STATES GOVERNING THE SYSTEM OF PROPERTY OWNERSHIP , IN SO FAR AS THE COMMISSION , BY IGNORING THE CREATION OF THE NEW MANUFACTURING COMPANIES , IN REALITY PURPORTED TO PROHIBIT THE WALLOON REGIONAL EXECUTIVE FROM PARTICIPATING IN THE CAPITAL OF UNDERTAKINGS CREATED IN ITS TERRITORY .
11 IT IS CLEAR FROM THE INFORMATION SUPPLIED BY THE APPLICANTS THEMSELVES THAT FOLLOWING THE RESTRUCTURING BOTH SA INTERMILLS AND THE THREE MANUFACTURING COMPANIES ARE CONTROLLED BY THE WALLOON REGIONAL EXECUTIVE AND THAT , FOLLOWING THE TRANSFER OF THE PLANT TO THE THREE NEWLY CONSTITUTED COMPANIES , SA INTERMILLS CONTINUES TO HAVE AN INTEREST IN THOSE COMPANIES . IT MUST THEREFORE BE ACCEPTED THAT , IN SPITE OF THE FACT THAT THE THREE MANUFACTURING COMPANIES EACH HAS A LEGAL PERSONALITY SEPARATE FROM THE FORMER SA INTERMILLS , ALL THOSE UNDERTAKINGS TOGETHER FORM A SINGLE GROUP , AT LEAST AS FAR AS THE AID GRANTED BY THE BELGIAN AUTHORITIES IS CONCERNED . THE COMMISSION WAS THEREFORE JUSTIFIED IN CONSIDERING THE ENTIRE GROUP TO BE A SINGLE ' ' UNDERTAKING ' ' FOR THE PURPOSES OF THE APPLICATION OF ARTICLE 92 OF THE TREATY .
12 MOREOVER , IT SHOULD BE NOTED THAT THE APPLICANTS , IN STRESSING THAT THE RESTRUCTURING CARRIED OUT BY MEANS OF THE AID IN QUESTION CONSTITUTED AN INDIVISIBLE WHOLE , FROM AN INDUSTRIAL AND FINANCIAL POINT OF VIEW , HAVE IMPLICITLY ACKNOWLEDGED THAT THE ORIGINAL UNDERTAKING AND THE NEW MANUFACTURING COMPANIES FORM A SINGLE ECONOMIC UNIT .
13 FINALLY , THE COMMISSION ' S DECISION CANNOT BE CRITICIZED FOR FAILURE TO HAVE REGARD TO ARTICLE 22 , WHICH PROVIDES THAT ' ' THIS TREATY SHALL IN NO WAY PREJUDICE THE RULES IN MEMBER STATES GOVERNING THE SYSTEM OF PROPERTY OWNERSHIP ' ' . IN FACT THE APPLICATION OF THE TREATY RULES ON STATE AIDS IN NO WAY AFFECTS THE LEGAL STATUS CONFERRED BY THE WALLOON REGIONAL EXECUTIVE UPON THE NEW MANUFACTURING COMPANIES CREATED WITH ITS ASSISTANCE .
14 THE SUBMISSION BASED ON THE COMMISSION ' S DISREGARD OF THE TRUE LEGAL STATUS OF THE APPLICANT AND INTERVENERS MUST THEREFORE BE DISMISSED . SUBMISSIONS RELATING TO PROCEDURE
15 IN RELATION TO PROCEDURAL MATTERS , THE APPLICANTS CLAIM FIRST THAT THEY WERE NOT GIVEN NOTICE INDIVIDUALLY TO SUBMIT THEIR COMMENTS BEFORE A DECISION WAS TAKEN ON THE COMPATIBILITY WITH THE TREATY OF THE AID GRANTED TO THEM , CONTRARY TO THE PROVISIONS OF ARTICLE 93 ( 2 ). THEY CONTEND THAT THE GENERAL NOTICE PUBLISHED IN THE OFFICIAL JOURNAL ON 20 MARCH 1981 ( OFFICIAL JOURNAL 1981 , C 61 , P . 3 ), DID NOT SATISFY THE REQUIREMENTS OF THAT PROVISION .
16 ACCORDING TO ARTICLE 93 ( 2 ), THE COMMISSION IS TO TAKE A DECISION IN RELATION TO AID GRANTED ' ' AFTER GIVING NOTICE TO THE PARTIES CONCERNED TO SUBMIT THEIR COMMENTS ' ' . IT MUST BE NOTED THAT THE ' ' PARTIES CONCERNED ' ' REFERRED TO IN THAT PROVISION ARE NOT ONLY THE UNDERTAKING OR UNDERTAKINGS RECEIVING AID BUT EQUALLY THE PERSONS , UNDERTAKINGS OR ASSOCIATIONS WHOSE INTERESTS MIGHT BE AFFECTED BY THE GRANT OF THE AID , IN PARTICULAR COMPETING UNDERTAKINGS AND TRADE ASSOCIATIONS . IN OTHER WORDS , THERE IS AN INDETERMINATE GROUP OF PERSONS TO WHOM NOTICE MUST BE GIVEN .
17 IT FOLLOWS THAT ARTICLE 93 ( 2 ) DOES NOT REQUIRE INDIVIDUAL NOTICE TO BE GIVEN TO PARTICULAR PERSONS . ITS SOLE PURPOSE IS TO OBLIGE THE COMMISSION TO TAKE STEPS TO ENSURE THAT ALL PERSONS WHO MAY BE CONCERNED ARE NOTIFIED AND GIVEN AN OPPORTUNITY OF PUTTING FORWARD THEIR ARGUMENTS . UNDER THOSE CIRCUMSTANCES , THE PUBLICATION OF A NOTICE IN THE OFFICIAL JOURNAL IS AN APPROPRIATE MEANS OF INFORMING ALL THE PARTIES CONCERNED THAT A PROCEDURE HAS BEEN INITIATED .
18 IN THIS CASE , THE DETAILS SET OUT IN THE AFORESAID NOTICE , WHICH REFERRED TO ' ' THE GRANTING OF AID IN BELGIUM TO A PAPER-MANUFACTURING FIRM WHICH HAS SIX FACTORIES IN BELGIUM AND WHOSE PRINCIPAL PRODUCT IS WRITING AND PRINTING PAPER ' ' , WERE SUFFICIENTLY PRECISE FOR THE UNDERTAKINGS CONCERNED - WHICH WERE AT THAT TIME FULLY AWARE OF THE AID ALREADY GRANTED TO THEM - TO BE ENTIRELY CERTAIN THAT THEY WERE THE SUBJECTS OF THE INQUIRY .
19 THE SUBMISSION MUST THEREFORE BE DISMISSED .
20 IN ADDITION THE APPLICANT CLAIMS THAT IN THE NOTICE IN QUESTION THE COMMISSION PUBLICLY PREJUDGED ITS DECISION BY USING THE FOLLOWING WORDS : ' ' THE COMMISSION CONSIDERS THAT THE AID IS LIKELY TO HAVE AN EFFECT ON CONDITIONS OF TRADE BETWEEN MEMBER STATES TO AN EXTENT CONTRARY TO THE COMMON INTEREST ' ' .
21 IT IS TRUE THAT THE COMMISSION ' S USE OF THE WORD ' ' CONSTATE ' ' MAY AT FIRST SIGHT GIVE THE IMPRESSION THAT THE COMMISSION HAD ALREADY MADE A FINDING WHICH ARTICLE 93 ( 2 ) DOES NOT PERMIT IT TO MAKE UNTIL AFTER IT HAS INVITED THE PARTIES CONCERNED TO SUBMIT THEIR COMMENTS ; NEVERTHELESS , VIEWED IN THE CONTEXT OF THE PROCEDURE LAID DOWN BY THAT PROVISION , THE NOTICE DID NOT AND COULD NOT HAVE ANY EFFECT OTHER THAN TO MAKE KNOWN THE INITIATION OF THE PROCEDURE FOR THE INVESTIGATION OF THE AID GRANTED BY THE BELGIAN AUTHORITIES . MOREOVER , THAT WAS APPARENT FROM THE FACT THAT THE NOTICE REQUESTED THE PARTIES CONCERNED TO SUBMIT THEIR COMMENTS WITHIN A SPECIFIED PERIOD . IN ANY EVENT , THE COMMISSION WAS AT THAT STAGE FULLY ENTITLED TO MAKE KNOWN ITS RESERVATIONS ABOUT THE PLAN WHICH HAD COME TO ITS ATTENTION , SO AS TO NOTIFY ALL THE PARTIES CONCERNED OF ITS INITIAL REACTION AND THUS PERMIT THE UNDERTAKING CONCERNED TO ENSURE THAT ITS INTERESTS WERE DEFENDED .
22 THIS SUBMISSION MUST THEREFORE ALSO BE DISMISSED . SUBMISSIONS ALLEGING AN INACCURATE ASSESSMENT OF THE FACTS AND A CONTRADICTORY AND INADEQUATE STATEMENT OF REASONS
23 THE APPLICANTS CRITICIZE THE CONTESTED DECISION - WITHOUT DISTINGUISHING BETWEEN THE APPLICATION OF ARTICLE 92 ( 1 ) AND THAT OF ARTICLE 92 ( 3 ) - ON THE GROUND THAT IT IS BASED ON A MISTAKEN ASSESSMENT OF THE FACTS AND ON A CONTRADICTORY AND INADEQUATE STATEMENT OF REASONS .
24 THEY CLAIM , MORE PARTICULARLY , THAT THE AID GRANTED IN THE FORM OF A CAPITAL HOLDING IS NOT , AS THE COMMISSION ALLEGES , MERELY ' ' RESCUE AID ' ' INTENDED TO RESOLVE THE UNDERTAKING ' S FINANCIAL PROBLEMS ; ACCORDING TO THEM , THAT PART OF THE AID - TOGETHER WITH THE LOANS AND ADVANCES CONSIDERED BY THE COMMISSION TO BE COMPATIBLE WITH THE TREATY - WAS USED TO FINANCE THE CLOSURE OF UNPROFITABLE FACTORIES AND THE CONVERSION TO PRODUCTS OFFERING A BETTER PROSPECT OF PROFITABILITY . IN THAT REGARD , THE APPLICANTS STRESS THAT THE VARIOUS FINANCIAL CONTRIBUTIONS WERE ALL USED FOR THE IMPLEMENTATION OF THE RESTRUCTURING PLAN AS A WHOLE , WITHOUT ITS BEING POSSIBLE TO DISTINGUISH BETWEN THE USE OF THE CONTRIBUTION MADE IN THE FORM OF A CAPITAL HOLDING AND THE USE OF THE CONTRIBUTION MADE IN THE FORM OF LOANS AND ADVANCES .
25 SECONDLY , THE APPLICANTS COMPLAIN THAT THERE IS A CONTRADICTION IN THE STATEMENT OF REASONS ON WHICH THE CONTESTED DECISION IS BASED . THE AID DESCRIBED AS INCOMPATIBLE WITH THE TREATY WAS SPECIFICALLY INTENDED TO ACHIEVE A FORM OF RESTRUCTURING - NAMELY THE ABANDONMENT OF BULK-PRODUCTION PAPER AND THE UNDERTAKING ' S CONVERSION TO SPECIAL PAPER - WHICH THE COMMISSION DESCRIBES IN THE SAME DECISION AS AN ECONOMIC OBJECTIVE THAT DESERVES TO BE PURSUED IN THE COMMUNITY INTEREST .
26 FINALLY , THE APPLICANTS CONSIDER THAT THE CONTESTED DECISION CONTAINS AN INADEQUATE STATEMENT OF REASONS , IN SO FAR AS THE COMMISSION FAILED TO SHOW THAT TRADE BETWEEN MEMBER STATES WAS AFFECTED AND COMPETITION IN THE COMMON MARKET DISTORTED BY THE GRANTING OF THE AID . THEY MAINTAIN THAT THE AID , FAR FROM HAVING STRENGTHENED THE APPLICANT ' S POSITION ON THE MARKET , WAS INTENDED TO BE USED TO REDUCE OUTPUT AND CONVERT PRODUCTION TO MORE PROFITABLE SECTORS . ON THAT POINT THE APPLICANTS REFER TO THE JUDGMENT OF 17 SEPTEMBER 1980 IN CASE 730/79 ( PHILIP MORRIS V COMMISSION , ( 1980 ) ECR 2671 , AT P . 2688 , PARAGRAPH 11 ), IN WHICH THE COURT RECOGNIZED THAT COMPETITION WAS ADVERSELY AFFECTED ONLY WHEN ' ' STATE FINANCIAL AID STRENGTHENS THE POSITION OF AN UNDERTAKING COMPARED WITH OTHER UNDERTAKINGS COMPETING IN INTRA-COMMUNITY TRADE ' ' .
27 THE COMMISSION JUSTIFIES ITS DECISION BY CONTENDING THAT IT IS ' ' OBVIOUS ' ' THAT A HOLDING OF BFR 2 350 MILLION ACQUIRED BY PUBLIC AGENCIES IN AN UNDERTAKING WHOSE CAPITAL AND RESERVES AMOUNT TO BFR 1 250 MILLION MUST BE REGARDED AS AN OPERATION INTENDED TO EXTRACT THE UNDERTAKING FROM A PRECARIOUS FINANCIAL SITUATION , AS THE CRUCIAL PROBLEM POSED BY THE BURDEN OF THE UNDERTAKING ' S DEBT-SERVICING COSTS IS THUS LARGELY RESOLVED BY THE INJECTION OF FRESH CAPITAL ON WHICH THE UNDERTAKING DOES NOT EVEN HAVE TO PAY INTEREST . THE AID THUS GRANTED REDUCES THE UNDERTAKING ' S FIXED COSTS AND THEREBY DISTORTS COMPETITION IN THE COMMUNITY . WHERE THE INJECTION OF CAPITAL EXCEEDS THE SUM OF THE NET ASSETS OF THE RECIPIENT UNDERTAKING , IT CONSTITUTES RESCUE AID , INTENDED TO ENSURE THE SURVIVAL ON THE MARKET OF AN UNDERTAKING OTHERWISE DESTINED TO DISAPPEAR . SUCH A MEASURE , ESPECIALLY IN AN INDUSTRY IN DIFFICULTY , IN REALITY INVOLVES THE EXPORTATION OF UNEMPLOYMENT TO OTHER MEMBER STATES .
28 HOWEVER , THE COMMISSION CONCEDES THAT THE COSTS DIRECTLY ATTRIBUTABLE TO THE REDUNDANCIES ARISING FROM THE CLOSURE OF PLANTS MAY BE CONSIDERED TO BE PART OF THE RESTRUCTURING COSTS PROPERLY SO CALLED , IN RESPECT OF WHICH THE UNDERTAKING RECEIVED AID CONSIDERED COMPATIBLE WITH THE COMMON MARKET . SINCE THE COMMISSION WAS NOT INFORMED OF THE ACTUAL COST OF THOSE REDUNDANCIES , IT WAS UNABLE TO TAKE THEM INTO ACCOUNT AND , IN ANY EVENT , THOSE EXPENSES COULD NOT HAVE EXHAUSTED THE CAPITAL HOLDING IN ITS ENTIRETY .
29 ARTICLE 92 ( 1 ) PROVIDES THAT ' ' SAVE AS OTHERWISE PROVIDED IN THIS TREATY , ANY AID GRANTED BY A MEMBER STATE OR THROUGH STATE RESOURCES IN ANY FORM WHATSOEVER WHICH DISTORTS OR THREATENS TO DISTORT COMPETITION BY FAVOURING CERTAIN UNDERTAKINGS OR THE PRODUCTION OF CERTAIN GOODS SHALL , IN SO FAR AS IT AFFECTS TRADE BETWEEN MEMBER STATES , BE INCOMPATIBLE WITH THE COMMON MARKET ' ' .
30 ARTICLE 92 ( 3 ) ( C ), TO WHICH THE CONTESTED DECISION REFERS , STATES THAT AID ' ' TO FACILITATE THE DEVELOPMENT OF CERTAIN ECONOMIC ACTIVITIES ' ' MAY BE CONSIDERED TO BE COMPATIBLE WITH THE COMMON MARKET , PROVIDED THAT SUCH AID DOES NOT ADVERSELY AFFECT TRADING CONDITIONS TO AN EXTENT CONTRARY TO THE COMMON INTEREST .
31 IT IS CLEAR FROM THE PROVISIONS CITED THAT THE TREATY APPLIES TO AID GRANTED BY A STATE OR THROUGH STATE RESOURCES ' ' IN ANY FORM WHATSOEVER ' ' . IT FOLLOWS THAT NO DISTINCTION CAN BE DRAWN BETWEEN AID GRANTED IN THE FORM OF LOANS AND AID GRANTED IN THE FORM OF A HOLDING ACQUIRED IN THE CAPITAL OF AN UNDERTAKING . AID TAKING EITHER FORM FALLS WITHIN THE PROHIBITION LAID DOWN IN ARTICLE 92 WHERE THE CONDITIONS SET OUT IN THAT PROVISION ARE FULFILLED .
32 AS THE COMMISSION HAS ITSELF ACKNOWLEDGED , THE GRANTING OF AID , ESPECIALLY IN THE FORM OF CAPITAL HOLDINGS ACQUIRED BY THE STATE OR BY PUBLIC AUTHORITIES , CANNOT BE REGARDED AS BEING AUTOMATICALLY CONTRARY TO THE PROVISIONS OF THE TREATY . THUS , IRRESPECTIVE OF THE FORM IN WHICH AID IS GRANTED , BE IT AS A LOAN OR AS A CAPITAL HOLDING , IT IS THE COMMISSION ' S TASK TO EXAMINE WHETHER IT IS CONTRARY TO ARTICLE 92 ( 1 ) AND , IF SO , TO ASSESS WHETHER THERE IS ANY POSSIBILITY OF ITS BEING EXEMPT UNDER ARTICLE 92 ( 3 ), GIVING THE GROUNDS ON WHICH ITS DECISION IS BASED ACCORDINGLY .
33 IN THE LIGHT OF THOSE CRITERIA THE CRITICISM RAISED BY THE APPLICANTS APPEARS TO BE WELL FOUNDED , INASMUCH AS THE CONTESTED DECISION DOES INDEED CONTAIN CONTRADICTIONS AND DOES NOT MAKE CLEAR THE GROUNDS FOR THE COMMISSION ' S ACTION ON CERTAIN VITAL POINTS . SUCH DOUBTS AND CONTRADICTIONS RELATE BOTH TO THE ECONOMIC JUSTIFICATION FOR THE AID AND THE QUESTION WHETHER THE AID WAS LIKELY TO DISTORT COMPETITION WITHIN THE COMMON MARKET .
34 FIRST , AS REGARDS THE ECONOMIC JUSTIFICATION FOR THE AID , THE COMMISSION CONCEDES IN THE STATEMENT OF REASONS ON WHICH ITS DECISION IS BASED THAT THE RESTRUCTURING AIMED AT BY THE APPLICANTS CORRESPONDS , AS SUCH , TO THE COMMISSION ' S OWN OBJECTIVES FOR THE EUROPEAN PAPER INDUSTRY . THAT FACTOR SEEMS TO BE THE CHIEF GROUND ON WHICH THE COMMISSION RECOGNIZED THE COMPATIBILITY WITH THE TREATY OF THE AID GRANTED IN THE FORM OF LOW-INTEREST LOANS AND ADVANCES .
35 ON THE OTHER HAND , THE COMMISSION GAVE NO VERIFIABLE REASONS TO JUSTIFY ITS FINDING THAT THE HOLDING ACQUIRED BY THE PUBLIC AUTHORITIES IN THE CAPITAL OF THE RECIPIENT UNDERTAKING WAS NOT COMPATIBLE WITH THE TREATY . IT MERELY STATED THAT THAT HOLDING WAS ' ' NOT DIRECTLY LINKED TO THE RESTRUCTURING OPERATION ' ' AND , IN VIEW OF THE LOSSES SUFFERED BY THE UNDERTAKING OVER SEVERAL FINANCIAL YEARS , CONSTITUTED PURELY FINANCIAL ' ' RESCUE AID ' ' ; IN THE COURSE OF THE WRITTEN PROCEDURE , IT STATED THAT THE AMOUNT OF THE HOLDING ACQUIRED BY THE PUBLIC AGENCIES EXCEEDED THE SUM OF THE UNDERTAKING ' S CAPITAL AND RESERVES . IN MAKING THOSE ASSESSMENTS WITHOUT GIVING ANY INDICATION OF ITS REASONS , OTHER THAN THE STATEMENTS JUST REFERRED TO , THE COMMISSION DID NOT PROPERLY EXPLAIN WHY ITS ASSESSMENT OF THE RESTRUCTURING OPERATION IN QUESTION - WHICH WAS BOTH INDUSTRIAL AND FINANCIAL AND WHICH , ACCORDING TO THE APPLICANTS , FORMED AN INDIVISIBLE WHOLE - CALLED FOR SUCH A CLEAR-CUT DISTINCTION BETWEEN THE EFFECT OF THE AID GRANTED IN THE FORM OF SUBSIDIZED LOANS AND THE EFFECT OF THE AID GRANTED IN THE FORM OF CAPITAL HOLDINGS .
36 ON THAT POINT IT SHOULD BE NOTED THAT IN THE COURSE OF THE PROCEEDINGS THE COMMISSION CONCEDED THAT , ALTHOUGH IT HAD CONDEMNED THE CAPITAL HOLDINGS IN THEIR ENTIRETY , THEY MIGHT NEVERTHELESS BE COMPATIBLE WITH THE TREATY IN SO FAR AS THEY WERE INTENDED TO COVER THE REDUNDANCY COSTS ATTRIBUTABLE TO THE ABANDONMENT OF UNPROFITABLE PRODUCTION . IT THUS APPEARS THAT THE REDUNDANCY PAYMENTS DUE TO THE CONVERSION , WHICH ARE AN ESSENTIAL FACTOR IN THE OPERATION , WERE ALSO NOT GIVEN SUFFICIENT CONSIDERATION .
37 IN RELATION TO ITS CLAIM THAT THE CONTESTED AID DAMAGES COMPETITION IN THE COMMON MARKET , THE COMMISSION REFERRED TO THE PROVISIONS OF ARTICLE 92 ( 1 ) AND TO THE REQUIREMENT LAID DOWN IN ARTICLE 92 ( 3 ), ACCORDING TO WHICH AID MAY BE EXEMPTED ONLY IF IT DOES NOT ADVERSELY AFFECT TRADING CONDITIONS TO AN EXTENT CONTRARY TO THE COMMON INTEREST .
38 AS REGARDS THE FIRST PART OF THAT REQUIREMENT , THE RELEVANT PARAGRAPHS OF THE PREAMBLE TO THE DECISION MERELY NOTE THE OBJECTIONS RAISED BY THE GOVERNMENTS OF THREE MEMBER STATES , TWO TRADE ASSOCATIONS AND AN UNDERTAKING IN THE PAPER INDUSTRY . APART FROM THAT REFERENCE , THE DECISION GIVES NO CONCRETE INDICATION OF THE WAY THE AID IN QUESTION DAMAGES COMPETITION .
39 AS REGARDS THE SECOND PART OF THE REQUIREMENT , THE COMMISSION , HAVING STATED THAT THE AID GRANTED IN THE FORM OF A CAPITAL HOLDING IS NOT DIRECTLY LINKED TO THE RESTRUCTURING OF THE UNDERTAKING BUT CONSTITUTES ' ' RESCUE AID ' ' , ASSERTS THAT SUCH AID ' ' THREATENS TO DO SERIOUS DAMAGE TO THE CONDITIONS OF COMPETITION , AS THE FREE INTERPLAY OF MARKET FORCES WOULD NORMALLY CALL FOR THE CLOSURE OF THE UNDERTAKING , ALLOWING MORE COMPETITIVE FIRMS TO DEVELOP ' ' . ON THAT POINT IT MUST BE STATED THAT THE SETTLEMENT OF AN UNDERTAKING ' S EXISTING DEBTS IN ORDER TO ENSURE ITS SURVIVAL DOES NOT NECESSARILY ADVERSELY AFFECT TRADING CONDITIONS TO AN EXTENT CONTRARY TO THE COMMON INTEREST , AS PROVIDED IN ARTICLE 92 ( 3 ), WHERE SUCH AN OPERATION IS , FOR EXAMPLE , ACCOMPANIED BY A RESTRUCTURING PLAN . IN THIS CASE , THE COMMISSION HAS NOT SHOWN WHY THE APPLICANT ' S ACTIVITIES ON THE MARKET , FOLLOWING THE CONVERSION OF ITS PRODUCTION WITH THE ASSISTANCE OF THE AID GRANTED , WERE LIKELY TO HAVE SUCH AN ADVERSE EFFECT ON TRADING CONDITIONS THAT THE UNDERTAKING ' S DISAPPEARANCE WOULD HAVE BEEN PREFERABLE TO ITS RESCUE .
40 ON THOSE GROUNDS , THE CONTESTED DECISION MUST BE DECLARED VOID .
41 IN VIEW OF THE FOREGOING IT IS NOT NECESSARY TO EXAMINE THE SUBMISSIONS THAT THE COMMISSION ERRED IN ITS APPRAISAL OF THE FACTS OF THE CASE OR THE SUBMISSION THAT THE CONTESTED DECISION INTERFERED WITH THE APPLICANT ' S CIVIL RIGHTS WITHOUT THERE BEING AVAILABLE TO IT , UNDER THE JUDICIAL SYSTEM ESTABLISHED BY THE EEC TREATY , ANY RIGHT OF ACTION COMPLYING WITH THE REQUIREMENTS OF ARTICLE 6 OF THE EUROPEAN CONVENTION FOR THE PROTECTION OF HUMAN RIGHTS AND FUNDAMENTAL FREEDOMS .