C-323/82

supported b y

SA INTERMILLS-INDUSTRIE A N D E N N E , w h o s e registered office is at A n d e n n e ,

SA INTERMILLS-INDUSTRIE P O N T - D E - W A R C H E , w h o s e registered office is at Malmédy,

SA INTERMILLS-INDUSTRIE STEINBACH, w h o s e registered office is at M a l m é d y ,

all represented by L é o n Goffin, J e a n - M a r i e de Backer a n d Jean-Louis L o d o m e z , with an address for service in L u x e m b o u r g at the C h a m b e r s of Ernest A r e n d t , interveners,

v

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of Andenne, operated four factories in the procedure and the conclusions, sub­ Wallonia, at Pont-de-Warche and missions and arguments of the parties Steinbach near Malmćdy and at Saint- may be summarized as follows: Servais and Andenne near Namur.

I — Summary of the facts By a telex message dated 23 July 1980 the Commission informed the Belgian Government that it had learned that the Until March 1980 SA Intermills, a Belgian Government, and in particular Belgian paper-manufacturing undertak­ certain decentralized agencies, were ing whose registered office is at about to intervene in favour of

JUDGMENT OF 14. 11. 1984 — CASE 323/82

INTERMILLS v COMMISSION

contribution for its implementation was BFR 160 million for the conversion of fixed. Intermills and the industrial redeploy- ment of the three new companies. (a) The restructuring plan involved the following measures in particular: On 22 July 1982 the Commission adopted Decision 82/670/EEC "on aid Reduction of the total production of the granted by the Belgian Government factories from 121 000 to 83 000 tonnes; to a paper-manufacturing undertaking" (Official Journal 1982, L 280, p. 30). Progressive abandonment of bulk- production paper and conversion to Article 1 stated that the aid in the form production of special papers with a high of a low-interest loan and repayable added value; advances granted by the Belgian Government was considered compatible with the common market. However, the Closure of the factory at Saint-Servais aid in the form of the acquisition by the (and the factory in Huizingen, in Belgian Government of a holding was Flanders, operated by another under- declared incompatible with the commun taking in the group); market under Article 92 of the EPIC Treaty. Retention of the three production units considered to be profitable by a Finnish firm of experts; Article 2 of the Decision required the Kingdom of Belgium to inform the Commission, within three months of the Creation of three independent manufac- date on which the decision was notified, turing companies on the sites retained, of the measures taken to ensure that 'the namely those at Pont-de-Warche, aid which was declared incompatible Steinbach and Andenne; with the common market did not continue to distort competition in the Conversion of SA Intermills into a future. property company.

The written procedure followed the requested the Judge-Rapporteur and the normal course. Advocate General to meet the parties before the oral procedure was opened. SA Intermills claims that the Court That meeting took place on 2 April should: 1984; it was devoted essentially to examining the new structure of the Declare Commission Decision 82/670/ Intermills group, the relations within that EEC of 22 July 1982 void; group, the nature, economic justification, terms and application of the aids in In any event, formally record that the question. Commission will not ask the applicant or the intervener to repay the aid consisting The parties were requested to con- of a holding in the capital; and centrate on those same questions at the hearing, and also on the Commission's Order the Commission to pay the costs. intentions in relation to any possible conversion of the capital holdings. The intervener claims that the Court should :

Declare Commission Decision 82/670/ Ill — Submissions and argu- EEC void on the grounds of in- m e n t s of t h e p a r t i e s d u r i n g fringement of an essential procedural the written procedure requirement and infringement of the Treaty and of the rules of law relating to its application; A — Admissibility

In any event, formally record that the The Commission does not dispute that, Commission will not require the since the contested decision relates to interveners to repay the holding acquired State aids, it is of direct and individual by the Walloon Regional Executive in concern to the recipients, within the their capital; and meaning of Article 173 of the EEC Treaty, even though it is addressed to Order the Commission to pay the costs the Kingdom of Belgium; furthermore, of the intervention. the application was lodged within the prescribed period. The Commission contends that the Court should:

The interveners put forward substantially of the Court and by the practice of the the same submissions and in addition Commission. The words "the parties plead the infringement of Article 222 of concerned" must include not only the the EEC Treaty. other Member States but also the under- taking benefiting from the aid, its competitors, its employees and any The Commission considers that all the person having a legitimate interest in the submissions put forward in order to maintenance or abolition of the aid. challenge the contested decision are unfounded. The internenen submit that the obligation contained in Article 93 (2) is Infringement of the essential procedural requirement laid down in Article 93 (2) no more than an application of the of the Treaty general principle, recognized by the Court, whereby any authority is bound, before adopting a measure likely to seriously affect individual interests, to The applicant and the interveners complain that the Commission did not give the person concerned an oppor- give them notice as required by Article tunity of putting forward his point of 93 (2) of the Treaty to submit their view; that rule meets the requirements of comments before it adopted a decision justice and proper administration. on the compatibility of the aid in question with the common market. The Commission states that the re- quirement formulated by the applicant That was an essential procedural step and the interveners does not follow the and the failure to comply with it wording of Article 93 (2): that provision rendered the contested decision illegal. makes no distinction between the various parties concerned in the grant of State aid, who include not only Member States The notice published in the Official and recipients of aid but also competitors Journal on 20 March 1981 does not of the recipient undertakings or even constitute notice within the meaning of trade associations. Article 93 (2), which can be given only in the form of a decision addressed individually to the parties concerned, The Commission cannot give notice to pursuant to Article 191 of the Treaty. all the parties who may be concerned to Express notice is required, bearing the submit their comments; only publication name of the party to whom it is of a notice in the Official Journal addressed. It is perfectly possible to guarantees that all the persons con- notify individually an undertaking which cerned, including the beneficiaries of the can be easily identified. aid, are able to submit their views.

The applicant points out that in the notice published in the Official Journal The Commission would have been of 20 March 1981, and thus in a measure entitled 'to declare the aid unlawful, having the nature of a preliminary- because it was granted in infringement of decision, the Commission stated that it Article 93 (3); instead, it merely stated considered l that the aid in question "is that it was granted in breach of the likely to have an effect on conditions of requirement of advance notification. trade between Member States to an extent contrary to the common interest", that, following an initial investigation, As regards the compatibility of the aid some of the conditions required by with the common market, the Com- Article 92 (3) (c) were apparently not mission simply made a finding, following fulfilled and that at first sight it could an initial examination, that some of the not grant an exemption. Article 93 (2) conditions required by Article 92 (3) (c) does not permit the Commission to make were not fulfilled and that it therefore such a finding until it has given notice to could not at first sight, without being the parties concerned to submit their satisfied that an appropriate contribution comments; moreover, the rules of proper was forthcoming from the recipient, administration require that before grant an exemption from the rule that adopting a decision the Commission State aids falling within the terms of should not prejudge the issue, especially Article 92 (1) are incompatible with the not publicly. common market.

Infringement of Article 6 of the European Convention on Human Rights In adopting the contested decision, the Commission was merely applying the Treaty and did not exceed the powers conferred upon it by Article 93 (2). The applicant and the interveners state that the contested decision requires the Belgian State to take measures to ensure that the aid in question "does not Inadequate statement of grounds and continue to distort competition in the infringement of Article 190 of the Treaty future"; those measures should logically result in the repayment of the holding acquired by the Walloon Regional The applicant and the interveners Executive in the applicant's capital. consider that the statement of reasons on In any event, it cannot be disputed that which the contested decision is based is the Commission decided a question con- invalidated by a contradiction inasmuch cerning one of the applicant's civil rights, as the decision states, on the one hand, namely its right to the additional that the aid granted in the form of low- company assets acquired as a result of interest loans and repayable advances is the aid in question. Article 6 (1) of the linked to a restructuring operation which European Convention on Human Rights, is in the Community interest and, on the which constitutes an integral part of other hand, that the aid granted in the Community law, requires that in the form of a holding acquired in the capital determination of a person's civil rights of the recipient undertakings is not it must be possible to apply to an directly linked to that restructuring. independent and impartial tribunal with However, the aid rightly held by the jurisdiction to decide both points of fact Commission to be lawful is intended and and questions of law. used for exactly the same purpose as the aid which it declares unlawful, namely to implement all the complex and indivisible restructuring measures. On that point it should be stated that the Commission cannot be described as a tribunal and that the only remedy available to the applicant and interveners The holding of BFR 2 350 million docs is that provided by Article 173 of the not, as the Commission maintains, EEC Treaty, which merely empowers the concern a single undertaking but was Court of Justice to review the legality of divided among several legally in- the measure in question; it therefore dependent entities, each complying with does not constitute a tribunal "with full the definition of an undertaking as laid jurisdiction". down in the judgments of the Court. The holding acquired by the public auth- orities in the applicant undertaking amounted to BFR 1 500 million, not The Commission contends that, if it had 2 350 million; the balance represents the intended to require the Kingdom of participation of the Walloon Regional

The Commission itself admitted that the cost of redundancies, estimated at BFR Experience has shown that the great 289 million, formed an integral part of majority of injections of capital by public the restructuring plan. Those redundancy agencies occur in the framework of payments were made without distinction financial restructuring necessitated by out of the funds from the capital holding difficulties confronting the undertaking and those from the loans. concerned. In this case, if the public agencies had not intervened, the under- taking would have disappeared; it was The Commission denies that the holding therefore a rescue operation. Where the acquired by the public authorities in the capital injection exceeds the sum of the capital of the applicant and interveners net assets of the undertaking and where forms an integral part of the restruc- its losses and resulting indebtedness are turing operation. In relation to an under- such that there is nothing to justify any taking which had consistently suffered expectation of a normal return on the losses since 1975, averaging BFR 350 capital invested within a reasonable million a year, including about BFR 300 period, the undertaking in question million in debt-servicing costs, and would not have been able to obtain on whose capital and reserves amount to the unsubsidized capital market the

INTERMILLS v COMMISSION

JUDGMENT OF 14. 11. 1984 — CASE 323/82

Infringement of Article 92 (1), inaccurate wishes, on products with a high added assessment of the facts value.

The applicant complains that the The Commission considers that it has contested decision was wrongly based on refuted the arguments put forward by the view that the aid granted by means the applicant and interveners in the of a holding acquired in its capital was course of tis discussion of their other merely "rescue aid intended to allow submissions. the undertaking to meet its financial commitments".

The Commission observes that Article 92 The interveners observe that the capital (3) does not authorize aid: it merely aid of BFR 850 million was used solely provides for exemptions from the rule to create the three new undertakings and that aid is in principle incompatible with to provide them with the means needed the common market; those exemptions to go into production: they did not have are applicable only where the Com­ to meet any financial commitments or mission is able to establish that there is a contend with any precarious financial specific compensatory justification situation predating their constitution. forthcoming from the particular re­ The new production units set up by cipient: the aid must be necessary in means of the aid were considered prof­ order to promote the attainment of one itable by a Finnish firm of experts of the objectives set out in Article 92 (3). and their production was centred, in There should therefore be a direct accordance with the Commission's connection between, on the one hand,

INTERMILLS v COMMISSION

IV — Oral procedure

The Commission takes the view that there is a contradiction in the interveners' argument: either new under­ takings were in fact created with public At the sitting on 23 May 1984 the participation and there could be no State following persons presented oral aid since the public authorities were no argument and replied to questions asked different from a contributor of risk by the Court: Léon Goffin and Jean- capital under the normal conditions of a Louis Lodomez, for the applicant and market economy, or the creation of the the interveners; and Marie-Josć Jonczy, new undertakings was part of the restruc­ for the Commission. turing operation and the injection of capital by the public authorities constituted State aid within the meaning The Advocate General delivered his of Article 92 (1) in the same way as the opinion at the sitting on 11 July 1984.

JUDGMENT OF 14. 11. 1984 — CASE 323/82

Decision

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-manu- facturing 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.

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 auth- orities; 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.

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 inac- curate 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

INTERMILLS v COMMISSION

referred to by the contested decision. That fact was ignored by the Commission.

u 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

JUDGMENT OF 14. 11. 1984 — CASE 323/82

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 "under- taking" 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 re- structuring 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 manufac- turing companies form a single economic unit.

n 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.

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.

is 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 inquiiy.

i9 The submission must therefore be dismissed.

zo 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 l that the aid is likely to have an effect on conditions of trade between Member States to an extent contrary to the common interest".

2i 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

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

INTERMILLS v COMMISSION

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 inad- equate 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 under- takings competing in intra-Community trade".

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.

3i 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 under- taking. 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.

INTERMILLS v COMMISSION

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 n o t make clear the g r o u n d s for the Commission's action o n certain vital points. Such doubts and contradictions relate both to the e c o n o m i c justification for the aid and the question w h e t h e r the aid was likely to distort competition within the c o m m o n market.

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.

JUDGMENT OF 14. 11. 1984 — CASE 323/82

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.

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 disap- pearance would have been preferable to its rescue.

40 On those grounds, the contested decision must be declared void.

INTERMILLS v COMMISSION

4i In view of the foregoing it is not necessaiy 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.

2. Orders the Commission to pay the costs, including those of the interveners.

Mackenzie Stuart Bosco Due Kakouris

Pescatore O'Keeffe Koopmanns Everling Bahlmann

Delivered in open court in Luxembourg on 14 November 1984.

For the Registrar D. Louterman A. J. Mackenzie Stuart Administrator President