C-141/73

JUDGMENT OF 11. 12. 1973 — CASE 141/73

sufficient time for consideration and meaning that if the Commission, investigation to form a prima facie during the preliminary examination opinion on the partial or complete of aid which has been notified to it, conformity with the Treaty of the arrives at the conclusion that there is plans which have been notified to it. no need to initiate the contentious procedure, it is not bound to issue a 2. In the absence of any Regulation decision within the meaning of Article specifying this period, the Member 189. States cannot unilaterally terminate it, but the Commission would not act 6. The prohibition upon the Member with proper diligence if it omitted to State concerned putting its proposed define its attitude within a reasonable measures into effect extends to all aid period, guided by Articles 173 and which is granted without being 175, which provide for a period of notified; in the event of notification, two months. it operates during the preliminary 3. When this period has expired, the period, and where the Commission Member State concerned may sets in motion the contentious implement the plan, but the procedure, up to the final decision. As requirements of legal certainty regards the whole of this period it involve that prior notice should be confers rights on individuals which given to the Commission. The aid the national courts are bound to thereupon comes under the system of safeguard. existing aid. 7. While the direct effect of the last 4. The objective pursued by Article sentence of Article 93 requires 93 (3), which is to prevent the national courts to apply this implementation of aid contrary to the provision without any possibility of Treaty, implies that this prohibition is its being excluded by rules of national effective during the whole of the law of any kind whatsoever, it is for preliminary period. the internal legal system of every 5. The third sentence of paragraph 3 of Member State to determine the legal Article 93 must be interpreted as procedure leading to this result.

LOHREY v GERMANY

LAND HESSE, represented by the Minister for Economics and Technology, 62 Wiesbaden, Kaiser-Friedrich-Ring 75,

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,

September 1969, until 18 December procedure in accordance with the 1969. The Commission took the view second sentence of Article 93 (3) of that the proposed aid scheme was not the EEC Treaty, in spite of the compatible with the common market, Commission having been informed and accordingly initiated the procedure by the Member State in sufficient under Article 93 (2) of the Treaty on 13 time, is not initiated until after the January 1970. system of aid has come into effect? In 1969 the plaintiff in the main action (d) If question (b) is answered in the invested 46 326 DM in extending its negative and question (c) in the metal construction and metal working affirmative, is the making of a 'final plant by erecting a warehouse. An decision' a precondition of the application for a certificate confirming validity of the proposed national the value to the economy of this law, and must a national law investment, submitted through the enacted contrary to this provision be Ministry for Economics and Technology regarded as invalid or inapplicable to the defendant in the main action, was until the decision has been reached? rejected by the latter.

ruling: As to the first question, the national (a) Has the third sentence of Article court favours a reply in the affirmative, 93 (3) of the EEC Treaty to be particularly in view of the requirements interpreted as meaning that the of legal certainty and the principle which Commission has in any case to reach holds that all legal procedure must a final decision, i.e. even when the terminate in a decision. proposed national law has been held by the Commission to be compatible As to the second, the Verwaltungsgericht with Article 92 of the EEC Treaty? is far from certain that the Commission's failure to speak or act can be construed (b) If the Commission does not 'without as an indication of approval.

As regards the third and fourth questions, the court is of the opinion (c) Does the prohibition contained in that if a national legislator has not this provision still apply if the waited for a decision from the

Commission on the provisions planned, 11 — Ob s e r v a t i o n s submitted he takes the risk of having either to under Article 20 of the repeal it or to see it annulled by the Statute of the Court of courts, since otherwise the third sentence Justice of Article 93 (3) would be deprived of any real effect. According to the court making the reference, the restriction A — Observations of the plaintiff in the imposed by the third sentence of Article main action 93 (3) must therefore amount to a formal condition of validity, applicable The rules laid down by Articles 92 and in particular to any law whereby the 93 do not invalidate or render system of aid is introduced. inapplicable aids which distort competi tion and give favourable treatment to In respect of the last question, the certain businesses, but provide simply Frankfurt Verwaltungsgericht considers that the Commission may initiate a that even if the third sentence of Article procedure with a view to removing or 93 (3) is not direct in its effect, the altering such aid. national court is competent to hold that No decision to that effect has been taken a breach of the Treaty has occurred and by the Commission in this instance, nor to attach to it the legal consequence of could such a decision in any case be of nullity, by reason precisely of the fact direct effect.

No to dispense with a preliminary inquiry. obligation to refrain" from implementing their proposals can be incurred by the Written observations were submitted by parties when the Commission merely the plaintiff in the main action, by the indicates that it has doubts. Commission, and by the Governments of Moreover, the aid in question is the Federal Republic of Germany and perfectly compatible with Article 92 the United Kingdom. since it will not affect trade within the Oral observations were heard from the Community and will ameliorate rather plaintiff in the main action, represented than distort competition trends.

on 10 October 1973. the first Resolution of 20 October 1971, of the government representatives of the The Advocate-General delivered his Member States meeting in the Council, opinion at the hearing on 7 November on general schemes for regional aid (OJ 1973. C 111 of 4 November 1971, p. 1).

This resolution, the aim of which was to certainty and confidence in the law are achieve as from 1 January 1972 the not involved, the scheme of Article 93 gradual coordination of regional aid, (3) is more exacting. A double obligation both between different areas and at is imposed on Member States: they must various levels of intensity, would not be inform the Commission of the proposed compatible with Article 92 of the Treaty aid scheme in sufficient time to enable it if the prohibition contained in that to submit its comments, and must not provision was intended to have put the proposed measures into effect immediate effect. until the Commission has given its The plaintiff in the main action submits opinion. This second obligation raises that the Commission's letter of 13 the following questions: when does it January 1970 makes it clear that the aid arise, how long does it subsist and what remains below the 20 % ceiling fixed by are the consequences, for the validity or the above Resolution of 20 October applicability of a national aid scheme, of 1971 and that it complies with the its infringement? requirement of publication set by section As to the first point, the Commission is 5 (b) of the Annex to the Resolution. of the opinion that the obligation to The plaintiff in the main action refrain from putting the measures into concludes its observations by saying that effect cannot depend solely on the the German legislation on investment Commission's initiation of the procedure allowances cannot be compared to the set out in Article 93 (2).

aid. If aid is already being given, then a application of Article 93, the procedure initiated by the Commission Commission envisaged a period, the under Article 93 (2) cannot of itself normal duration of which would be 8 affect the internal validity of the national weeks and which would not in any case law in question. The same would be true exceed 16 weeks, at the end of which of a decision by the Court of Justice Member States might, in the absence of under Articles 169 and 170 of the any express decision, proceed to put the Treaty, that the State concerned has aid scheme into effect. failed to fulfil an obligation. According However, it is conceded by the to Article 171, the Member State must Commission that since the draft was not take the necessary measures to comply adopted by the Council, the suggestion with' the judgment of the Court of above is open to the criticism, already Justice. expressed by the court referring the As regards new aid, on the other hand, questions, that it lacks precision, since the requirements of maintaining contrary to the requirement of legal

certainty. For this reason it sees no Commission has initiated a procedure grounds for objection if the within the meaning of the second Commission's constant practice of sentence of Article 93 (3). Direct effect expressing an opinion even when it did should also attach to the restrictive not consider any objection need be made obligation during the time for to the plans of which it was informed, consideration, running from notification should be interpreted as founding a legal of the aid scheme. Failure to observe this obligation.

2 of Article 93. On the other hand, the Commission considers that it ought, in Commission concedes that, once a every instance, to express its opinion of reasonable period has elapsed, the the aid scheme. This obligation, which, restriction ceases to apply and it is not however, does not necessitate a formal necessary to await any decision which decision, derives from general principles might be given outside that period. The of legal certainty rather than from the third sentence of Article 93 (3) applies third sentence of Article 93 (3). only to the procedure mentioned in The second question should be answered Article 93 (2). in the affirmative.

It wishes merely other hand, extended if the Article 93 (2) to amend it in certain respects and to procedure is initiated before the time for restrict its scope. That is why the consideration has passed. Finally, if this Commission informed the Federal procedure is not commenced until after Government that it regarded the German the period for consideration has elapsed, regional economic subsidies as aid it ought to be treated as a procedure already in existence, so that the against an aid scheme already existing, procedure initiated on 13 January 1970 and as such be effective only as to the did not prevent that law from being put

Outside that the direct effect of the final sentence of initial period no restriction would be in Article 93 (3). force, therefore the procedure would be But this direct effect cannot be limited one taken against an existing aid, which exclusively to cases where the could only have effect ex nunc.

As to the fifth question, the Commission market. The third sentence of Article considers that both the normal 93 (3) relates exclusively to the restriction during the examination procedure above, under Article 93 (2). period and the extended restriction The only duty laid upon Member States, provided for in the third sentence of then, is to notify proposed measures for Article 93 (3) are of direct effect. Failure granting aid and to suspend those to observe this restriction would not, measures, if the Commission considers however, result in nullity. The national them to be incompatible with the courts could declare the scheme not to common marker and initiates without be applicable until the Commission's delay the procedure under Article 93 (2).

expressly. The absence of authorization decision, the fact that Article 93 contains does not prevent a system of aid from no general prohibition against granting being introduced or altered. On the aid makes it clear that failure on the part other hand, there is no obligation on the of the Commission to take action within part of the Commission to make a reasonable period of time or before the comments at the stage referred to in the date on which the plans are due for first sentence of Article 93 (3). The implementation constitutes tacit approval Commission can only initiate the or waiver of the requirement of awaiting procedure under Article 93 (3), second a final decision, as is evident from the sentence, if it is of the opinion that the opinion of Mr Advocate-General plans are incompatible with the common Lagrange on Article 102 in Costa v Enel,

(Case 6/64, Rec. 1964, p. 1185). The 93 (3), the control exercised over aid existence of the procedure for failure schemes makes use of a twofold to fulfil an obligation does not affect the procedure. The compulsory notification argument." by a Member State of its proposals to In answer to the first question, the grant aid is to enable the Commission to United Kingdom Government submits give its opinion, either that there is no that the Commission is not required by objection to the introduction of the Article 93 (3) to reach a final decision in proposed scheme, or that since some every case, even where it considers the objections do appear a formal scrutiny proposals to be compatible with the has been commenced.

Article 93 (3) requires the Commission The fourth and fifth questions do not to give a final decision at the end of the arise if the submissions of the United notification procedure. Since the Kingdom Government on the first, prohibition in Article 92 does not have second and third questions are correct. direct effect, it would be sufficient for No reply need therefore be framed. the Commission to make known by informal means that it has no objection D — Observations of the German to the proposed aid.

direct effect. The importance attached to accords with the draft regulation safeguarding the interests of Member submitted to the Council by the States is also evident from the power Commission in 1966, on the application conferred on the Council by Article of some of the provisions in Article 93. 93 (2), third indent, to grant exemptions Indeed Article 1 allows Member States in exceptional circumstances. to implement the plans notified as soon The German Government submits that as the Commission shows, expressly or the answer to the first question should by lapse of a certain period, that it has be in the negative. According to Article no objection to make.

The requirements of legal certainty To the third question, the German mentioned by the court of reference in Government would reply that a support of the requirement of a final procedure initiated against a system of decision, would be as well assured, as aid introduced after expiry of the regards matters affecting only Member consideration period could only be based States and institutions, by certifying as to on Article 93 (2) and thus be effective compatibility or by notification that a only as to the future. formal inquiry had been initiated. As to the fourth question, the German As to the consequences of the Government considers that infringement Commission's failure to act after the of the prohibition contained in Article necessary period for reaching an opinion 93 (3), last sentence, cannot have the on the aid proposals notified has elapsed consequence of invalidating the national (question two), the opinion of the law in question but can make it German Government is that the inapplicable while no final decision has restriction based on the first sentence of been given by the Commission. It is Article 93 (3) subsists only for a certain evident from the reasoning of the Court period which varies according to the in Case 34/67 (Judgment of 4 April particular case and that when that 1968, Lück, Rec. 1968, p. 370) that where period has elapsed the aid plan, if Community regulations having direct properly notified, may be implemented. effect are concerned, the national courts This was the result envisaged by the may adopt measures which guarantee Commission in its draft regulation on the precedence of Community law, the application of some of the provisions without necessarily having to declare the in Article 93. Moreover, the same view national law void. was maintained by Mr Advocate-General Mayras in Case No 70/72 (Commission Furthermore, the national law adopted v Federal Republic of Germany). The in breach of the prohibition expressed in period within which the Commission the last sentence of Article 93 (3) is not must make known any objections must deprived of effect permanently, but only subject to the final decision of the be gauged, in each case, in the light of the urgency of the aid proposed and the Commission on its compatibility with the common market. needs of the Commission regarding information. In reply to the fifth question, the If the Commission has given a German Government is wholly in accord favourable opinion, any subsequent with the Judgment of the Court of reservations it may have only entitle it to Justice given on 15 July 1964 (Case 6/64 initiate a procedure under Article 93 (2), Costa v Enel, Rec. 1964, p. 1162), which which does not have suspensory effect. If states that the third sentence of Article the Commission has allowed the period 93 (3) confers direct rights on private for consideration to elapse, the position parties. The inapplicability of the law in is no different. It might be different in question, given the precedence of the event of the procedure having been Community law, must be automatically initiated after the consideration period considered. but prior to the implementing of the proposals. But that is not the case before The report for the hearing reproduced the Court. 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 plans 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.

JUDGMENT OF 11. 12. 1973 — CASE 141/73

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.

LOHREY v GERMANY

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.

Thus the direct effect of the prohibition extends to all aid which has been implemented without being notified and, in the event of notification, operates during the preliminary period, and where the Commission sets in motion the contentious procedure, up to the final decision.

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.

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;

3. The direct effect of the prohibition on the Member State concerned from putting its proposed measures into effect extends to all aid which is granted without being notified and, in the event of notification, is granted during the preliminary period, and up to the final decision where the Commission sets in motion the contentious

procedure. As regards the whole of this period it confers rights on the individual which the national courts are bound to safeguard.

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,

OPINION OF MR REISCHL — CASE 141/73

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