C-67/85

My Lords, Court in Case 213/85 under Article 93 (2) of the Treaty for a declaration that the Kingdom of the Netherlands is in breach of its Treaty obligations by not complying with Articles 1 and 2 of the contested decision. The Danish and United Kingdom By Decision 85 / 215 / EEC (Official Journal Governments have intervened in support of 1985, L 97, p. 49), the Commission declared the Commission in all four cases, the that the preferential tariff applying to German Government in the three joined natural gas sold to glasshouse growers in cases only. the Netherlands constituted aid incom­ patible with the common market within the meaning of Article 92 of the Treaty. It ordered the Dutch Government to discontinue the aid (Article 1) and to inform the Commission by 15 March 1985 of the The legality under Community law of the action it had taken to comply (Article 2). natural-gas tariff applying to the horti­ cultural sector in the Netherlands has been in issue for several years and has been the subject of a previous decision by the Commission. The background is as follows. The applicants seek the annulment of that decision under Article 173 of the Treaty. They are, respectively, two horticultural undertakings, namely, Kwekerij Gebroeders Van der Kooy BV, a limited company, and Mr Van Vliet, an individual (Case 67 / 85 ; I The Netherlands has considerable reserves shall refer to these applicants as 'Van der of natural gas. In the mid-1970s, partly for Kooy'), the Landbouwschap, a statutory environmental reasons, it gave fiscal body which is acting in these proceedings as incentives for horticulturalists to convert a representative of the interests of the Dutch from heavy fuel to natural gas. Now, glasshouse horticulture sector (Case 68/85) according to the Commission's decision, and the Kingdom of the Netherlands to over 95 % of the energy consumed in horti­ whom the decision was addressed (Case culture in the Netherlands is obtained from 70/85). The applicants submitted a request natural gas. for interim measures including the suspension of the decision, which was refused by order of the President of the Court dated 3 May 1985. After that order was made, the gas tariff applying to glasshouse growers was increased but, in the NV Nederlandse Gasunie apparently enjoys Commission's estimation, not to a level a monopoly over natural gas produced off which eliminated the aid element. The shore and on shore in the Netherlands. It is Commission accordingly applies to the a private law company, the shares of which

are held as to 10% directly by the State and threshold for obtaining volume rebates was as to 40 % by De Staatsmijnen ('DSM'), set much lower for glasshouse growers than itself wholly owned by the State but said by 3 for industrial consumers (30 000 m as the Commission to act 'solely on the basis 3 opposed to 170 000 m ). Moreover, the of market forces'; Esso and Shell companies review period was much less frequent for each hold 25 %. Gasunie delivers gas growers than for either industrial users or directly to distribution companies and major small consumers. Under the arrangements consumers of gas. Small consumers are then in force, the horticultural price for gas supplied by local distribution companies was linked to the fuel oil price for the belonging to an association called Vegin. preceding 15-month period and adjusted once a year. The adjustment formula itself was to be renegotiated only once during the five-year period of the validity of the agreement between Gasunie, the Land­ bouwschap and Vegin. The industrial tariff, The extent to which the Government is however, was adjusted quarterly on the involved in the fixing of Gasunie's tariff basis of a notional 'parity' price for heavy levels is one of the major issues in the fuel oil. The agreement provided that the proceedings. It is, however, uncontested disparity between the horticultural tariff and that, as stated in the decision, the tariff the industrial tariff would be progressively levels have to be approved by the board of reduced over a two-and-a-half-year period Gasunie by a three-quarters majority of starting in April 1982 and that from votes cast. The board currently has eight October 1982 onwards the horticultural members, one appointed by the State, three tariff would be index-linked to the parity by DSM and two each from the oil price. companies. Thus the State does not have a majority on the board and Shell and Esso can block proposals which do not suit them. The prices thus agreed are subject to approval by the Minister for Economic Affairs. The Minister's powers in this By Article 1 of the 1981 Decision it was respect derive both from statute and from ordered that 'the aid consisting in a pref­ an agreement with Gasunie dating back to erential tariff for horticulture shall be 1963. abolished by 1 October 1982 by alignment of the horticultural tariff on the industrial tariff' and that the disparity should not be increased beyond that existing on 1 December 1981.

Gasunie and the Landbouwschap. The By telex of 4 October 1984, the Dutch Commission's understanding of the position Government informed the Commission that is set out in its letter to the Dutch Gasunie, Vegin and the Landbouwschap Government dated 29 July 1982. had agreed new arrangements to apply from 1 October 1984 to 1 October 1985. These arrangements, whilst retaining the principle that the horticultural tariff should be linked to the industrial tariff, put a ceiling on the horticultural tariff: it was not to exceed the average of the horticultural tariff, as adjusted by operation of the formula, charged in 1983 plus 10%, which worked Gasunie and the Landbouwschap agreed out at a ceiling of 42.5 cents per cubic metre 3 that the disparity between the horticultural (cents/m ). According to the contested and industrial tariff would be phased out in decision, application of the formula valid three steps between 1 April 1982 and 1 April from 1 April 1983 would have resulted in 3 1983 and that on that date the horticultural prices of 46.6 cents/m in the fourth quarter 3 tariff would be the same as the industrial of 1984 and 48 cents/m in the first quarter tariff plus half a cent per cubic metre. Like of 1985. So, as a result of the new the industrial tariff, the horticultural tariff arrangements, horticulturalists were saving 5 J was to be pegged to the parity price for respectively 4.1 cents/m and 5.5 cents/m heavy fuel oil, as determined by the in those periods. If, however, the price fell Centraal Bureau voor de Statistiek (CBS), below 42.5 cents in any period, adjustments and likewise adjusted quarterly. The were to be made in respect of prices for Commission was to be informed of the previous quarters when the price would quarterly parity price and the resulting otherwise have been above the ceiling price. horticultural tariff, any modifications to the formula resulting from developments in heating techniques or changes in the economic situation and the method of calculation of any future adjustments.

The Commission then opened the Article 93 (2) procedure in the usual way by publishing a notice in the Official Journal and by The Commission first challenges the writing to the Member States. In its letter to admissibility of the actions brought by Van the Dutch Government of 27 November der Kooy and by the Landbouwschap. 1984 seeking its comments, the Commission again criticized that Government for implementing the measure without notifying it in accordance with Article 93 (3), reminded it that illegal implementation of aid could lead to recovery orders or with­ Since the close of written pleadings in these holding of EAGGF payments and requested cases, the Court has delivered its judgment it to take all necessary measures to suspend in Case 169/84 Compagnie française de the operation of the alleged aid. l'Azote (Co/az) v Commission (judgment of 28 January 1986, [1986] ECR 391) holding admissible an action brought in the context of the State aid provisions by private parties under Article 173 (2) of the Treaty, the questions of substance in that case The Commission received comments from remaining to be decided. various Member States and interested parties, including the Landbouwschap, the only interested party to comment favourably on the preferential tariff. All the other Member States and parties who submitted observations to the Commission apparently That case also concerned the tariff for stated that they considered the measure to natural gas in the Netherlands. After be an aid within the meaning of Article 92 the Commission began Article 93 (2) (1) which was incompatible with the proceedings in relation to allegedly pref­ common market and distorted competition erential rates granted to the producers of in the horticultural sector. Several Member ammonia used to make nitrate fertilizer, a States expressed their concern on this score new rate was adopted for major industrial at Council meetings between October 1984 users of which ammonia producers were and January 1985, saying that they were able to take advantage. The Commission coming under pressure from horticulturalists considered that this was not a State aid and in their country to do something about what closed the Article 93 (2) proceedings, since they saw as unfair competition from Dutch the tariff was applied without sectoral growers. distinction and was commercially justified on the basis that the revenue from the lower tariff was made up by other savings. Three French nitrate fertilizer producers sought, pursuant to Article 173 of the EEC Treaty, Having considered the observations received to annul the decision to close the Article 93 and the results of its investigations, the (2) proceedings.

The Commission's second argument is that certain legal consequences flow from the fact that the preferential tariff was In that case, the applicants had shown that implemented without prior notification to the Commission's decision might seriously the Commission under Article 93 (3). This jeopardize their position on the market in illegal implementation before the Com­ view of the allegedly substantial aid to mission had reached a decision must not put Dutch producers, the fact that natural gas the recipients of the aid in a better position represented 80 % of the ex-works price of than they would have been if the Dutch ammonia and the great increase of the Government had complied with its duty to Dutch share of the French market. notify. Thus the situation is to be distin­ guished from that of a challenge to a Commission decision ordering the abolition or amendment of an existing aid legally in force, which the Commission doubts would in any event be admissible. The These factors led the Court to hold that the Commission's requirement that the Dutch decision was of individual concern to the Government should not implement an aid applicants. As for direct concern, the Court which it had illegally implemented cannot held that it was 'sufficient to observe that be validly challenged by Dutch growers or the decision had left intact all the effects of their representatives. Since Member States the tariff system set up, whilst the procedure were not obliged to introduce aid schemes, sought by the applicants would lead to the there was no corresponding right to receive adoption of a decision to abolish or amend aid and it could not be said that a negative that system' (paragraph 30 of the judgment). decision by the Commission affected the potential recipient's market position within the meaning of the test laid down by the Court in Cofaz.

On the arguments adduced I am not satisfied that any absolute distinction is to be drawn for present purposes between indi­ vidual aids and aid measures of more general application. In Philip Morris and As to the Commission's argument that Intermitís, where individual aid measures different considerations apply when the aid were undoubtedly in question, the concerned was implemented before notifi­ Commission did not contest the admissi­ cation, two points call for comment. The bility of the actions and the Court's first is that the Commission has a wide judgments merely record that fact. I do not range of powers dealing with the illegal see why in principle the intended beneficiary implementation of aid. In this case the of an individual aid should be in a better Commission chose not to rely solely on that position as regards access to this Court than illegal implementation but to review the aid an intended beneficiary of a measure for compatibility with the common market destined to benefit two, 10 or more under­ as if it had been duly notified. It did not takings. An individual aid need not be quali­ bring proceedings against the Dutch tatively different from aids benefiting a Government for breach of Article 93 (3); it larger number. It does not necessarily have did not seek interim measures from the a greater or lesser impact on competition Court; it did not make a recovery order in and trade within the common market. One the decision itself and, although it reserved of the features of aid-giving by the Member the possibility of seeking recovery at a later States is that a wide variety of techniques stage in the last recital of the decision, it has been developed and it would be artificial informed the Court at the oral hearing that and undesirable in my view to distinguish a no such steps had been taken. I do not priori between those which benefit one consider that the Commission can challenge undertaking and those which benefit several, the admissibility of the proceedings on this so long as the factors indicated in, for ground once the merits have been put in example, Case 25/62 Plaumann v issue. Second, beneficiaries of illegally Commission [1963] ECR 95 are satisfied. implemented aids have previously brought

On the other hand, it is quite clear that the The position of the Landbouwschap raises Landbouwschap is not a direct recipient of different issues. By a declaration of 13 the alleged aid. It is not itself engaged in October 1967 representatives of employers horticulture nor does it take gas at the pref­ and workers in the agricultural and horti­ erential horticultural rate. Moreover, it does cultural sectors entrusted the Land­ not seem to me on earlier decisions of the bouwschap with the representation of their Court that it can derive its right to come to interests in certain matters including the the Court from the mere fact that the negotiation of gas tariffs. The Commission persons it represents would have been first raises a query as to whether under beneficiaries of the reduced tariff and could Dutch law the Landbouwschap is under a establish that the Commission decision is of duty to represent horticulturalists' interests. direct and individual concern to them. The There is no doubt, however, that in fact it Court has previously held that 'an organ­ has done so in discussions with the ization formed for the protection of the Commission as to gas tariffs as prior to the collective interests of a category of persons 1981 Decision and that the latter has treated cannot be considered as being directly and it as doing so. Moreover, it seems to me individually concerned by a measure (whatever the position as to its duties under affecting the general interests of that national law) that there was ample material category' (Case 72/74 Union syndicale v on which the Court could accept the Land- Council [1975] ECR 401, at p. 410: see also bouwschap's claim to represent the growers. Joined Cases 16 and 17/62 Confédération However, that is not decisive of the nationale des producteurs de fruits et légumes question whether the decision is of direct v Council [1962] ECR 471, at p. 479, Case

This does not preclude a finding that the Landbouwschap is directly and individually concerned by the contested decision in a different manner from the horticulturalists. The Landbouwschap sought to show that it was so concerned in two respects. First, it sought to rely on paragraph 24 of the Cofaz judgment to show that participation in the Article 93 (2) procedure was sufficient to establish direct and individual concern. This Despite the advantages of allowing an asso­ is clearly mistaken, given the proviso in ciation such as the Landbouwschap to bring paragraph 25 that participants in the proceedings I do not consider that there is proceedings must also show that 'their any prejudice in this case for it in not being position on the market is significantly able to do so. The applications of the Land­ affected by the aid'. It is clear from the bouwschap and Van der Kooy are to all remainder of the judgment, as well as from intents and purposes identical; they have the Opinion of Advocate General VerLoren been represented by the same lawyer. They van Themaat, that the Court was envisaging submitted a joint reply. It is quite clear that a position on the same market as the aid what has been said in Van der Kooy's name recipients. Thus I do not consider that has drawn heavily on the know-how and Cofaz assists the Landbouwschap. Secondly, resources of the Landbouwschap. It seems the Landbouwschap alleges that it would be to me that the Landbouwschap is not affected by the withdrawal of the pref­ deprived of the possibility of defending its erential tariff in a variety of ways: it would members' interests by not being able to lose credibility as a negotiator for the horti­ bring an appeal in its own name, when it cultural sector, which might in turn lead to can stand behind one or other of its growers withholding the subscriptions or members and when the issues on the merits levies which they pay to the Landbouwschap can be fully dealt with. Accordingly, in my and, more importantly, would lead to the opinion, the Landbouwschap's application bankruptcy of many horticulturalists, again should, following earlier authorities, be held entailing a significant reduction of revenue inadmissible. Even if a case may arise where for the Landbouwschap; finally, it would be justice requires that an association should be obliged to enter into a new contract with allowed to bring proceedings it seems to me Gasunie which shows that its legal position that in this case the principle established in is affected by the contested decision. the earlier decisions should be followed.

So far as Article 92 is concerned, it is said that the Commission made a fundamental It concluded that the price charged by error in finding that, even if aid was given, Gasunie to Dutch glasshouse growers was it was 'granted by a Member State or an aid which favoured those growers in through State resources in any form comparison with other gas consumers in the whatever'. Netherlands, which distorted competition between those growers and glasshouse growers in other Member States and which affected intra-Community trade. It was accordingly incompatible with the common market by virtue of Article 92 (1) of the The Commission, as already indicated, Treaty; none of the exceptions under Article defined the question as being whether the 92 (2) or (3) was established. alleged aid was 'imposed by a public authority'. It accepted that the State did not have a controlling interest in Gasunie nor a majority of votes on pricing decisions, but found that it could block any such decisions Since the Dutch Government insists that it of which it disapproved. Moreover, any did not notify the preferential tariff under tariffs could only be applied after the Article 93 (3) (because it did not consider approval of the Minister for Economic that it constituted an aid) and in any event Affairs, and Gasunie had undertaken not to put it into effect (if it was an aid) before the apply price levels different from those final decision of the Commission, it is at approved previously by the Minister for the first glance curious that the Commission did relevant group of users. It points to not simply declare that the implemented statutory powers vested in the Minister for measure was illegal and should be Economic Affairs under a law of 19 withdrawn, if necessary resorting to the December 1974 to prohibit the delivery of

gas below the price fixed by the Minister if a private law contract to which it was not a he considers that gas is supplied at a price party. below its value, and to fix different prices for different categories of gas, whilst recalling that on the information given by the Government this law had not been applied (Decision paragraph I 5). The Commission concludes that the Government has 'a dominant influence', 'even if only in the form of a right of veto when deter­ mining the advantage which growers There is force in these latter comments but I receive' and that in fixing the horticultural am not satisfied that they rule out a finding tariff, 'Gasunie takes into consideration the that what was done here is capable of economic guidelines suggested to it by the constituting an aid within the meaning of Netherlands Government'. This conclusion Article 92. In Cases 78/76 Steinike & was confirmed by the fact that there were Weinlig [1977] ECR 595 and 290/83 no 'sound and economic reasons' to justify Commission v France [1985] ECR 439 the the differential tariff adopted. Court, as I read the judgments, recognized that in deciding whether a benefit granted to a given sector otherwise than directly by the State constitutes State aid, the surrounding circumstances can be looked at. Indeed, if it were not so, it would be too easy to avoid the intention of Articles 92 and 93 of the Treaty. Those cases are not on all fours with the present cases, but it is to be noted that in Case 290/83 the failure of the Minister for Agriculture to intervene in the making of a solidarity grant, when he As to the State's involvement, Van der had power to intervene, and the need for Kooy and the Dutch Government stress the the approval of the public authorities as to shareholding and voting structure in what was done, were accepted as relevant Gasunie which they say shows that what factors. was done was not in any event done by the State. The latter cannot impose the tariff as a shareholder. Moreover, such supervisory powers as the Minister had are principally to check a posteriori that the Government's energy policy is being implemented and to ensure that prices are neither too high for ultimate consumers nor set at less than the value of the gas sold. The Minister did not initiate this price structure nor exercise any As I understand it, it is not for the Court to of his powers in this case. It was a purely decide as a fact whether there was here private law contract made on commercial sufficient State involvement but to consider grounds in which DSM acted as an inde­ whether the Commission has misdirected pendent commercial unit not dictated to by itself as to what is capable of being State the State in matters of policy. The involvement or has acted unlawfully in Commission, therefore, totally misunder­ reaching a conclusion that there was such stood the situation and had no power to involvement on material which could not order the Dutch Government to interfere in justify such a finding. In this case DSM was

wholly owned by the State. DSM's 40 % were involved. The State surrendered its shareholding added to the State's direct share of the profits which would have been holding of 10 %, and the voting made by Gasunie had prices been higher percentages, may not have enabled the and it seems to be accepted as the recipient combined vote to put through independently of corporate taxes, even if the other share­ a preferential tariff; they did, however, holders also lose money in the result. This is make it possible to block any proposal of obviously not to say that every time a which they disapproved and to exercise a commercial concern in which the State has a considerable influence on decisions of shareholding reduces its prices or fails to Gasunie. Even accepting that the powers of maximize its profits the loss is to be the Minister for Economic Affairs were to regarded as a State aid. It is only when that be exercised ex post facto it seems to me happens at the behest or under the unreal to assume that Gasunie would dominant or effective influence of the State proceed with tariffs and policies which were that it is capable of being a State aid. not going to be approved by the Minister. Moreover, it is to be observed that the Government was involved in negotiating a settlement with the Commission following the 1981 Decision and that Gasunie and the Landbouwschap amended their arrange­ ments to give effect to that settlement. The The question then arises as to whether the Government was also involved, as I see it, in fixing of this preferential tariff, even if the negotiations following the 1985 under State influence and causing loss to Decision in issue to produce an alternative the State, was necessitated by commercial plan. Taking the picture as a whole it seems considerations incompatible with it being to me that it cannot be said that all the State 'an aid'. Was the Commission entitled to did was to proffer ineffectual encour­ find that there were no 'sound and agement. What happened was at the behest economic reasons' to justify the differential or under the influence of the State and in tariff adopted? my opinion there was material upon which the Commission could conclude that there was here State involvement which, if the prices fixed were low and not commercially justified and if directly or indirectly State resources were involved, could constitute a State aid. I do not accept that the I do not read the decision, as the Dutch Commission misdirected itself in referring to Government appears to argue, as the 'dominant influence' of the State. It propounding that if a tariff set is lower for began by requiring that the tariff be one sector than for others, it is auto­ 'imposed' by a public authority. If the State matically an aid. That is not the exercised a dominant influence in the fixing Commission's position. A lower tariff is only of the tariff, that is capable of amounting to an aid if it is not commercially justifiable. the imposing of the tariff for these purposes.

In the decision, the Commission took a The question of the commercial justification different view as to these matters. The of the tariff has been examined from two switch from aligning the gas price on the angles. Were there good reasons for heavy fuel oil price to the coal price was differentiating between horticulturalists and both temporary and partial, since it was other industrial sectors? Was the actual level only to last in the first place for one year of the tariff justified in the light of the and the parity price for fuel oil was not alleged risk of conversion to coal? wholly abandoned. Thus its influence on growers considering whether to convert to coal could only be limited. Furthermore, whilst the Government's ostensible desire to ensure price stability and to limit the risk of conversion to coal was understandable (although Gasunie might have been expected to take advantage of market conditions operating in its favour), it is not The Dutch Government has contended that explained why a similar approach was not this differential was justified by the steep taken to comparable sectors of industry. rises in heavy fuel oil prices and the Furthermore, the Commission claims that it likelihood of fluctuations which would lead is more expensive to deliver gas to horticul-

OPINION OF SIR GORDON SLYNN—JOINED CASES 67, 68 AND 70/85

turalists (presumably because they tend to The price for gas for horticulture is be smaller consumers) than to industrialists, therefore too low and is discriminatory.' thus further detracting from the justification of the differential tariff.

VAN DER KOOY AND OTHERS v COMMISSION

The Dutch Government makes similar points. It observes that the LEI report divides holdings into four categories, those with a combined condenser, those with a Van der Kooy considers that the GFE simple condenser connected to a separate report is too narrowly based. The 1984 and circuit, those with a simple condenser

OPINION OF SIR GORDON SLYNN — JOINED CASES 67, 68 AND 70/85

connected to the return circuit and those The report on which they rely seems to without condensers and gives a different assume that the choice is between equilibrium price for each of them converting to coal or renewing existing (respectively 46.9, 45.3, 42.9 and 41 equipment of exactly the same nature. It 3 2 cents/m for a holding of 12 500 m under was only in the case of holdings not glass). The Dutch Government claims that equipped with a condenser that the LEI these categories represent respectively 18 %, report established an equilibrium price 3 37 %, 6 % and 39 % of holdings consuming below 42.5 cents/m irrespective of whether 3 2 at least 50 m of energy per m . The Dutch the theoretical coverage of holdings' Government also considers that GFE over­ calorific needs by coal could be achieved. estimates boiler efficiency and extra work On this point Van der Kooy refers to the caused by coal. lower equilibrium price achievable if full theoretical coverage is achieved and the Dutch Government, more prudently, assumes that full theoretical coverage cannot be obtained. As to other factors, such as the extra work allegedly necessary for coal (Van der Kooy suggests 125 hours per year as against 250 put forward in the GFE report), these consist of bare assertions and costings on each side on which the Court cannot adjudicate.

VAN DER KOOY AND OTHERS v COMMISSION

undermined. The hypothetical case which correctness of its conclusions that the pref­ GFE takes as its starting point, namely the erential tariff distorted competition and grower who , when renewing his equipment, affected trade between Member States and buys the most advanced and economical was incompatible with the common market equipment available seems more convincing is now challenged. to me than the case of the grower who chooses between converting to a different fuel source or renewing his existing In the decision, the Commission gave some equipment without upgrading it. statistics on Dutch exports which I quote:

'The Netherlands: I thus consider that there was evidence on which the Commission was entitled to rely that the horticultural tariff had been set at a level significantly below that necessary to (a) supplies at present: take account of the risk of conversion to coal or, in other words, a level which was not commercially justified. For the reasons 75 % of Community production of already given, I also conclude that it was gherkins and cucumbers in heated glass­ open to the Commission to draw the houses, inference that the Dutch Government had played a significant role in setting that tariff. The Commission was entitled to decide that 40 % of lettuces and the tariff was a State aid within the meaning of Article 92 (1) which should have been notified to the Commission before 65 % of tomatoes; implementation.

(b) exports:

Strictly speaking, it is not necessary to consider either whether such aid distorts 91 % of the tomatoes it produces, competition and affects trade between Member States or whether it is compatible with the common market. I agree with the submission made by the Commission in its 68 % of the gherkins and cucumbers it rejoinder that the scope of Article 93 is produces, wider than that of Article 92 (1) in that Article 93 does not limit the scope of the obligation to notify to aid which distorts or 84 % of the cut flowers it produces. threatens to distort competition and affects trade between Member States. As the Commission says, those are matters to be The Federal Republic of Germany alone examined by the Commission during its absorbs : review of the aid plan.

62 % of exports of flowers and flowers in the United Kingdom emphasized that they bud. had repeatedly pressed the Commission to take proceedings in respect of the Dutch tariff since it conferred such a significant advantage on Dutch growers. Indeed, the United Kingdom observes that the settlement agreement between the Dutch flower exports have been generating Commission and the Netherlands increasing pressure on the German market Government in 1982 amounted to a since 1975. Exports of these products to the compromise under which most Dutch United Kingdom, Denmark, Belgium and growers continued to receive a significant France have increased substantially since margin of preference over other users 1974.' because of the alignment of the horticultural tariff on tariff D. The further advantage afforded to Dutch growers under the tariff introduced in October 1984 represented a reduction in heating costs for the last quarter of 1984 of 10%, over 11 % for the The Commission's conclusion was as first quarter of 1985 and nearly 16% for the follows : second quarter of 1985. Given that heating costs amount to between 25 and 30 % of production costs, the significance of the savings is obvious. The United Kingdom quantifies it as 50 to 100% of the profits of a reasonably efficient United Kingdom 'The impact of this aid on competition and grower in 1984 and stated at the oral intra-Community trade derives both from hearing that a reasonably efficient grower in the comparison between Dutch horticultural the United Kingdom would have only production in heated greenhouses and broken even in 1985. Similarly, the Danish Community horticultural production in Government calculates that, if Danish heated greenhouses as a whole, and from growers had enjoyed the advantage the effect of even a slight advantage in conferred on Dutch growers during the heating costs. Although heating costs vary 1984/85 heating season, they would have widely from product to product and from saved on average DKR 6.83 per m 2. The one Member State to another, Dutch production is sufficiently large for even a intervening Member States also point out slight cost advantage to have an effect on the consequences for growers in their States producer prices. Dutch horticultural of not being shielded from rises in fuel costs production therefore enjoys an advantage (which in the United Kingdom, where 80 % which necessarily affects intra-Community of growers use heavy fuel oil, rose by 43 % trade, especially as a major part of Dutch between 1 April 1983 and 1 January 1985 produce is exported to other Member during which period the horticultural gas States.' tariff in the Netherlands rose by only 8%). This clearly gives Dutch growers a significant advantage in terms of planning and investment. The uncertainty facing growers in other Member States leads them, in the medium term, to scale down their output or even withdraw from the market, This conclusion was firmly supported by the in the United Kingdom's submission, and three intervening Member States. In deprives them of the necessary funds for particular, the Kingdom of Denmark and

I do not think that the applicants' attempts to meet these points are convincing. Van der Kooy emphasizes the other factors going to Dutch success, such as special­ Having found that the preferential tariff was ization, rigorous application of quality aid within the meaning of Article 92 (1), the standards, packaging and so on. These are Commission considered in the decision met by two of the interveners' argument whether it could qualify for exemption already mentioned, namely that such under Article 92 (3). It found that no factors, whilst important, would not be Community objective was furthered by the enough without the cost advantage repre­ aid; in particular, it could not be considered sented by the tariff and that specialization a measure intended to promote the only becomes a possibility when the execution of an important project of necessary forward planning and investment common European interest within the can be made with confidence. Secondly, meaning of Article 92 (3) (b) 'since this Van der Kooy alleges that production costs pricing system runs counter to the objectives have no short-term influence on selling of the common energy policy which aims at prices when dealing with live products energy saving and a rational use of energy'. whose growing cycles cannot be altered and The Commission also held that the tests set which must be marketed as soon as they are out in Article 92 (3) (a) and (c) were not ready. Whilst admitting that, in the very satisfied since the aid was granted 'only in short term, a grower cannot suddenly terms of the quantities of gas purchased, increase or reduce his output, stable and without reference to the adjustment or low production costs will enable him to plan improvement of firms' structures or of ahead and to grow more than he would energy saving or development in the otherwise have done, leading to higher avai­ regional context' and was therefore to be lability and lower prices in the market. considered as an operating aid.

The applicants have not been able to suggest Article 190 is not taking mere formal a reason why the preferential tariff, if an considerations into account but seeks to aid, should be considered compatible with give an opportunity to the parties of the common market. Van der Kooy asserts defending their rights, to the Court of exer that, for the last 10 years, the Commission cising its supervisory functions and to has accepted that ex post facto alignment of Member States and to all interested the horticultural tariff on the parity price nationals of ascertaining the circumstances for heavy fuel oil is not an aid incompatible in which the Commission has applied the with the common market and that the Treaty. To attain these objectives, it is contested decision comes to the opposite sufficient for the decision to set out, in a conclusion, thus withdrawing the benefit of concise but clear and relevant manner, the Article 92 (3) in breach of (unspecified) principal issues of law and of fact upon general principles of Community law and which it is based and which are necessary in State aids policy. This argument seems to order that the reasoning which has led the

market. Therefore I reject Van der Kooy's and affected inter-State trade), the passages submission. to which I have referred seem to me to show that the Commission has done what Article 190 as interpreted by the Court requires of it. One of the Dutch Government's specific criticisms was that It remains to consider the arguments the reasoning was defective because the concerning reasoning and breach of Commission had not shown why the calcu essential procedural requirements. As to lations contained in the two reports on reasoning, the question is whether the which the applicants rely were erroneous. decision satisfies the requirements of Article As already indicated, the Commission was 190 in the sense that it allows the Court to not in my view required to do this. review .its legality and provide the applicant with the information necessary to enable them to ascertain whether or not the

VAN DER KOOY AND OTHERS v COMMISSION

The last argument concerns, not the Commission's reasoning, but its alleged failure to make explicit in the decision exactly what the aid was and how and by when the Dutch Goverment was to eliminate it. On the one hand, it is said, the Commission sees no objection in principle to differentiation of tariffs as such, on the other it considers that the horticultural tariff should be that charged to comparable sectors of industry. This inconsistency and The Court held that the operative part of the failure to specify the obligation imposed the decision did not specify the time by on the Dutch Government by the decision which, or the criteria on the basis of which, constitutes a breach of essential procedural the German Government was to abolish or requirements, contrary to Article 189 of the alter the aid. It held that the background to Treaty. the decision and its preamble gave 'grounds

OPINION OF SIR GORDON SLYNN — JOINED CASES 67 , 68 AND 70/85

within which this extension was not saying also that the decision gave the Dutch applicable. Faced with this uncertainty Government until 15 March, or roughly regarding one of the essential factors of the three weeks, in order to abolish the aid. It prohibition declared by the Commission, the considers this excessively short and an German authorities cannot be blamed for infringement of the legitimate rights of having taken the necessary steps to take horticulturalists benefiting from the aid. account of the legitimate interests of investors operating within areas which are ultimately to be excluded from benefiting from the aid in question'. In attempting to meet these arguments, the Commission insists on the distinction between illegally implemented aid and duly notified aid plans. In the case of plans, there is no sense in fixing a time-limit for abolition or amendment since the plan In the LPF case the Court, having held that cannot be put into operation if it is the decision was inadequately reasoned on incompatible. Discussions on how the plan

might be rendered compatible can take measure was compatible with the common place after such a decision. In the case of an market. The aid consisted of the preferential illegal aid, such as the present, it is element of the tariff. The Dutch important to put an end to the grant as soon Government's duty was to abolish the aid. as possible to reduce problems, not only for That required a modification of the tariff. the beneficiaries from whom the aid may However, such modification of the tariff is have to be recovered, but also for compe­ not modification of the aid but its abolition. titors in other Member States. The Once the preferential element has been Commission deliberately refrained from removed, it is misleading to say the tariff is indicating what measures the Dutch compatible with the common market. It Government should take to abolish the then contains no aid element and the incompatibility with the common market. question of compatibility does not arise. According to the Commission, that was a proper use of Article 93 (2) which auth­ orizes it to decide that the State concerned 'shall abolish or alter' the aid. Nevertheless, the decision indicated in figures how the tariff was incompatible, whilst leaving the Dutch Government to choose the appro­ priate means to abolish that incompatibility. On the question of the deadline, Article 2 The Commission goes so far as to suggest provides that the Dutch Government was to that the decision creates or rather confirms inform the Commission before 15 March a duty on the part of the Dutch 1985 of the action it had taken to comply Government to put an end to the grant of with Article 1, which required it to the aid as quickly as possible and to cancel discontinue the aid. This does not imply a its effects so far as possible by recovering it retroactive element, and that impression is from the beneficiaries if necessary. reinforced by the last recital, already quoted, which states that the decision is without prejudice to the consequences the Commission might draw as regards recovery of the aid from the recipients. I consider that the Commission cannot now be heard to say that the decision created or confirmed a duty on the Dutch Government to recover the aid. It seems to me that such an obligation should be specified in the The Commission's position seems to me operative part of the decision. confused. On the one hand, it talks of the illegality of the aid and on the other, as if it were possible to render it compatible by modifying it. This confusion stems, as I see it, from the Commission's failure to take action against the tariff on the grounds of its illegality and instead opening Article 93 (2) proceedings to review its effect on trade However, it does not follow that the and competition and compatibility with the applicants' arguments are to be accepted. It common market. The Dutch Government's seems to me that the Kohlegesetz case and failure to notify the aid rendered the whole LPF can be distinguished. The decision of it illegal. Furthermore, the Commission clearly identified the aid as the preferential established, superfluously but correctly, that element in the horticultural tariff. Figures there were no grounds for holding that the were given: the equilibrium price was said

In summary , my opinion concerning the present applications is that the Land- bouwschap's action should be declared inadmissible and the applications brought by Van der Kooy and the Dutch Government should be rejected. As to costs, an appropriate order seems to be that the Dutch Government should pay one half, the Landbouwschap one quarter and Van der Kooy BV and Van Vliet one eighth each of the costs of the Commission and of the intervening Member States.