C-121/73

JUDGMENT OF 11. 12. 1973 — CASE 121/73

1. In stating that the Commission shall effective during the whole of the be informed of plans to grant new or preliminary period. alter existing aid 'in sufficient time to 5. The third sentence of paragraph 3 of enable it to submit its comments', the Article 93 must be interpreted as draftsmen of the Treaty have sought meaning that if the Commission, to provide this institution with during the preliminary examination sufficient time for consideration and of aid which has been notified to it, investigation to form a prima facie arrives at the conclusion that there is opinion on the partial or complete no need to initiate the contentious conformity with the Treaty or the procedure, it is not bound to issue a plans which have been notified to it. decision within the meaning of Article 189. 2. In the absence of any Regulation specifiying this period, the Member 6. The prohibition upon the Member States cannot unilaterally terminate it, State concerned putting its proposed but the Commission would not act measures into effect extends to all aid

MARKMANN v GERMANY

liche Wirtschaft (Federal office for trade), 6 Frankfurt-on-Main, Bockenheimeß Landstraße 38, and

Land SCHLESWIG-HOLSTEIN, represented, by the Minister for Agriculture and Transport, 23 Kiel 1, intervening party

on the interpretation of Article 93 (3) of the Treaty,

THE COURT

composed of: R. Lecourt, President, A. M. Donner, M. Sørensen, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars (Rapporteur), P. Pescatore, H. Kutscher, C. Ó Dálaigh, A. J. Mackenzie Stuart, Judges,

1969 in the multilateral consultations after being informed by the Member arranged by the latter. After being State in accordance with the first approved by the Bundestag and the sentence of Article 93 (3) of the Bundesrat, the draft became the EEC Treaty, does this have the Investment Allowance Law of 18 August consequence in law that the 1969 (Investitionszulagegesetz, BGBl. I, prohibition contained in the third p. 1211), which came into force on 22 sentence of Article 93 (3) of the

investment of 568 208 DM. regarded as invalid or inapplicable Despite a favourable opinion from Land until the decision has been reached? Schleswig-Holstein, the application was (e) Are the words 'Member State' in the rejected. An appeal against the decision was likewise dismissed, and the plaintiff third sentence of Article 93 (3) EEC in the main action commenced an action Treaty to be interpreted as meaning in the Verwaltungsgericht of Frankfurt- that failure to observe this provision on-Main to obtain the certificate refused. infringes the direct rights of private parties, or must the national court, Considering that the action raised in the circumstances of question (d), questions concerning the interpretation of its own motion take account of of Community law, the court, by an the invalidity of the law in its order dated 19 March 1973, referred the decision? following questions for a preliminary

In such a (b) If the Commission does not 'without case Member States should make a delay initiate the procedure' in formal complaint and commence accordance with the second sentence proceedings for failure to act, in of Article 93 (3) of the EEC Treaty, accordance with Article 175, first and

As regards the third and fourth questions, the court is of the opinion that if a national legislator has not II — Observations submitted waited for a decision from the under Article 20 of the Commission on the provisions planned, Statute of the Court of he takes the risk of having either to Justice repeal it or to see it annulled by the courts, since otherwise the third sentence of Article 93 (3) would be deprived of A — Observations of the plaintiff in the action any real effect. According to the court making the reference, the restriction The plaintiff in the main action submits imposed by the third sentence of Article that the failure of the Commission to 93 (3) must therefore amount to a comment after being notified, on 22 formal condition of validity, applicable April 1969, of the proposals for granting in particular to any law whereby the aid should be construed as tacit system of aid is introduced. approval. It is not compatible with the In respect of the last question, the guarantee of legal certainty to which Frankfurt Verwaltungsgericht considers Member States are entitled for it to be that even if the third sentence of Article possible to initiate the procedure under 93 (3) is not direct in its effect, the Article 93 (2) eight months after national court is competent to hold that notification of the proposed laws, and a breach of the Treaty has occurred and for such procedure to have retrospective to attach to it the legal consequence of effect. In judging whether the aid scheme nullity, by reason precisely of the fact in question satisfies the requirement of that this Community provision is by compatibility, it is further necessary to nature a formal condition of validity for assess the real risk of distorting national laws. competition and to bear in mind the fact The order of 19 March 1973 making the that the subsidies provided for Kiel are, reference was registered at the Court by virtue of Article 92 (2) (c), compatible Registry on 12 April 1973. with the common market.

take the necessary measures to comply Commission that since the draft was not with the judgment of the Court of adopted by the Council, the suggestion Justice. above is open to the criticism, already As regards new aid, on the other hand, expressed by the court referring the since the requirements of maintaining questions, that it lacks precision, certainty and confidence in the law are contrary to the requirement of legal not involved, the scheme of Article 93 certainty. For this reason it sees no (3) is more exacting. A double obligation grounds for objection if the is imposed on Member States: they must Commission's constant practice of inform the Commission of the proposed expressing an opinion even when it did aid scheme in sufficient time to enable it not consider any objection need be made to submit its comments, and must not to the plans of which it was informed, put the proposed measures into effect should be interpreted as founding a legal until the Commission has given its obligation. Such a duty could be

2 of Article 93. On the other hand, the refrain from putting the measures into Commission concedes that, once a effect cannot depend solely on the reasonable period has elapsed the Commission's initiation of the procedure restriction ceases to apply and it is not set out in Article 93 (2). This obligation necessary to await any decision which exists already as a corollary of the might be given outside that period. The obligation to inform the Commission, so that the Member State concerned is third sentence of Article 93 (3) applies only to the procedure mentioned in already bound by the restrictive Article 93 (2).

informed. In a draft regulation submitted consideration has passed. Finally, if this to the Council on 18 April 1966 on the procedure is not commenced until after application of Article 93,' the the period for consideration has elapsed, Commission envisaged a period the it ought to be treated as a procedure normal duration of which would be 8 against an aid scheme already existing, weeks, and which would not in any case and as such be effective only as to the future. exceed 16 weeks, at the end of which Member States might, in the absence of As regards the consequences of a breach any express decision, proceed to put the of the prohibition against putting the aid aid scheme into effect. scheme into effect, the Commission cites However, it is conceded by the the judgments of the Court of 15 July

every instance, to express its opinion of the aid scheme. This obligation, which, The opinion of the United Kingdom however, does not necessitate a formal Government is that Article 93 (3) decision, derives from general principles introduces a restrictive condition only of legal certainty rather than from the where the Commission, after being third sentence of Article 93 (3). informed in sufficient time for it to

The second question should be answered submit its comments, has formed the in the affirmative. If the Commission view that the plans are incompatible fails within a reasonable time, to initiate with the common market and when it the procedure under Article 93 (3), has without delay initiated the procedure second sentence, then the prohibition referred to in Article 93 (2). against implementation lapses. It is evident from the general scheme of The Commission observes that in the Article 93 that Member States are free to present dispute it considers the purposes exercise their own judgment in of the law of 18 August 1969, taken as a implementing and applying their existing whole, to be acceptable. It wishes merely systems of aid, subject to the to amend it in certain respects and to requirement of compatibility with the restrict its scope. That is why the common market expressed in Article 92 Commission informed the Federal and that of scrutiny by the Commission Government that it regarded the German expressed in Article 93, particularly in regional economic subsidies as aid paragraph 2. already in existence, so that the As regards the control exercisable over procedure initiated on 13 January 1970 new plans for granting aid under Article did not prevent that law from being put 93 (3), the United Kingdom Government into effect pending a final decision. observes, firstly, that there is no definite The reply to the third question depends requirement that the Commission must on when the procedure was initated. give its approval or authorization Initiation of the procedure, if done expressly. The absence of authorization

does not prevent a system of aid from decision, the fact that Article 93 contains being introduced or altered. On the no general prohibition against granting other hand, there is no obligation on the aid makes it clear that failure on the part part of the Commission to make of the Commission to take action within comments at the stage referred to in the a reasonable period of time or before the first sentence of Article 93 (3). The date on which the plans are due for Commission can only initiate the implementation constitutes tacit approv procedure under Article 93 (3), second al or waiver of the requirement of sentence, if it is of the opinion that awaiting a final decision, as is evident the plans are incompatible with the from the opinion of Mr Advocate-

Treaty. For a Member State, while contained in Article 93 (3) ineffective. awaiting such a decision, to find itself Any action taken subsequently by the bound to refrain from implementing its Commission must be taken under Article proposals, would amount to an 93 (2). undesirable and unnecessary infringe ment of the Member State's liberty, The third question should be answered making it wait upon the Commission's in the negative since any procedure pleasure. The possibility of commencing initiated by the Commission outside the an action for failure of the Commission period allowed is out of time. to fulfil its obligations in no way reduces The fourth and fifth questions do not the unreasonableness of this restriction. arise if the submissions of the United Where there is delay in reaching a Kingdom Government on the first, decision by the Commission due to the second and third questions are correct. complexity of the proposals submitted, it No reply need therefore be framed. is only right that the Member State should be allowed to implement the plans, subject always to the permanent restriction contained in Article D — Observations of the German 93 (1) and (2).

MARKMANN v GERMANY

not apply to all grants of aid but only to would be incompatible with the purely those which affect trade between informative nature of the initial Member States and distort competition. procedure to appeal against any such That is why the prohibition is addressed decision. solely to Member States and has no This interpretation, confirmed by the direct effect. The importance attached to practice followed by the Commission, safeguarding the interests of Member accords with the draft regulation States is also evident from the power submitted to the Council by the conferred on the Council by Article Commission in 1966, on the application 93 (2), third indent, to grant exemptions of some of the provisions in Article 93. in exceptional circumstances. Indeed Article 1 allows Member States

procedure by initiating the investigatory If the Commission has given a procedure mentioned in the second favourable opinion, any subsequent sentence of Article 93 (3), a formal reservations it may have only entitle it to decision would not be necessary, since it initiate a procedure under Article 93 (2),

JUDGMENT OF 11. 12. 1973 — CASE 121/73

which does not have suspensory effect. If Community regulations having direct the Commission has allowed the period effect are concerned, the national courts for consideration to elapse, the position may adopt measures which guarantee is no different. It might be different in the precedence of Community law, the event of the procedure having been without necessarily having to declare the initated after the consideration period national law void. but prior to the implementing of the Furthermore, the national law adopted proposals. But that is not the case before the Court. in breach of the prohibition expressed in the last sentence of Article 93 (3) is not To the third question, the German deprived of effect permanently, but only Government would reply that a subject to the final decision of the ptocedure initiated against a system of Commission on its compatibility with aid introduced after expiry of the the common market. consideration period could only be based on Article 93 (2) and thus be effective In reply to the fifth question, the only as to the future. German Government is wholly in accord with the Judgment of the Court of As to the fourth question, the German Justice given on 15 July 1964 (Case 6/64 Government considers that infringement of the prohibition contained in Article Costa v Enel, Rec. 1964, p. 1162), which states that the third sentence of Article 93 (3), last sentence, cannot have the 93 (3) confers direct rights on private consequence of invalidating the national parties. The inapplicability of the law in law in question but can make it question, given the precedence of inapplicable while no final decision has Community law, must be automatically been given by the Commission. It is considered. evident from the reasoning of the Court in Case 34/67 (Judgment of 4 April The report for the hearing reproduced 1968, Luck, Rec. 1968, p. 370) that where above was followed by oral proceedings.

Paragraph 3 institutes prior control of plans to grant new or alter existing aid and provides that 'the Commission shall be informed, in sufficient time to enable it to submit its comments, of any plants to grant or alter aid. If it considers that any such plan is not compatible with the common market having regard to Article 92, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision'.

3 In stating that the Commission shall be informed of plans to grant new or alter existing aid 'in sufficient time to enable it to submit its comments', the draftsmen of the Treaty have sought to provide this institution with sufficient time for consideration and investigation to form a prima facie opinion on the partial or complete conformity with the Treaty of the plans which have been notified to it.

It is only after being put in a position to form this opinion that the Commission is bound, if it considers the plan incompatible with the common market, to initiate without delay the contentious procedure provided for in Article 93 (2), by giving notice to the Member State to submit its comments.

4 According to the last sentence of Article 93 the Member State shall not put its proposed measures into effect until this procedure has resulted in a final decision.

The objective pursued by Article 93 (3), which is to prevent the implementation of aid contrary to the Treaty, implies that this prohibition is effective during the whole of the preliminary period.

5 On the other hand although it is in the interests of good administration for the Commission, when, at the end of the preliminary examination, it considers that the aid conforms with the Treaty, to inform the State concerned, it is not however bound to take a decision thereon within the meaning of Article 189 of the Treaty, since Article 93 requires such a step only at the end of the contentious procedure.

It is not possible to conclude that the measure of aid is compatible with the Treaty from the fact that the Commission did not consider itself obliged to initiate the contentious investigation procedure within the reasonable period referred to above.

Article 93 (1) requires the Commission, in cooperation with Member States, to keep under constant review all existing systems of aid.

Aid implemented, during the Commission's silence, after a period necessary for its preliminary examination, is thus subject, as an existing aid, to the provisions of Article 93 (1) and (2).

6 In the first place, therefore, it is proper to reply to the questions put that Article 93 (3) of the Treaty must be interpreted as meaning that if the Commission, during the preliminary period, arrives at the conclusion that there is no need to initiate the contentious procedure, it is not bound to issue a decision within the meaning of Article 189.

MARKMANN v GERMANY

9 As regards the second part of this question, while the direct effect of the prohibition in question requires national courts to apply it without any possibility of its being excluded by rules of national law of any kind whatsoever, it is for the internal legal system of every Member State to determine the legal procedure leading to this result.

JUDGMENT OF 11. 12. 1973 — CASE 121/73

Costs

10 The costs of the Governments of the Federal Republic of Germany and of the United Kingdom, as well as those of the Commission of the European Communities, which have submitted observations to the Court, are not recoverable, and as these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before a national court, the decision on costs is a matter for that court.

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the observations of the Government of the Federal Republic of Germany, the Government of the United Kingdom and the Commission; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 92, 93, 173, 175 and 177; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community, especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the European Communities;

4. While the direct effect of the last sentence of Article 93 compels national courts to apply this provision without it being possible to object on the grounds of rules of national law, whatever they may be, it is for the internal legal system of every Member State to determine the legal procedure leading to this result.

Lecourt Donner Sørensen Monaco Mertens de Wilmars

Pescatore Kutscher Ó Dálaigh Mackenzie Stuart

Delivered in open court in Luxembourg on 11 December 1973.

A. Van Houtte R. Lecourt

Registrar President