C-226/85

DILLINGER HÜTTENWERKE v COMMISSION

O P I N I O N O F MR ADVOCATE GENERAL DA CRUZ VILAÇA delivered on 5 February 1987*

Mr President, (iii) its viability is assured without structural Members of the Court, adjustment.

1. The applicant in these proceedings — Dillinger Hüttenwerke AG, a German steel 4. A further requirement is that, during the undertaking — seeks a declaration as to the 12 months preceding the quarter in nullity of the decision addressed to it by the question : Commission on 12 June 1985, refusing to apply to it Article 14A of Commission Decision No 234/84/ECSC of 31 January 1984, ' which extended the system of moni- (i) the undertaking did not receive aids toring and production quotas for certain authorized by the Commission with a products of undertakings in the steel view to covering operating losses; and industry.

OPINION OF MR DA CRUZ VILAÇA — CASE 226/85

adjustment. That provision is not therefore intended to exclude from its scope all 7. The purpose of the communication from undertakings which are being restructured, the German Government referred to by the but only those for which restructuring is Commission was, in particular, to obtain, necessary to enable them subsequently, and under Commission Decision 83/392/ECSC particularly after the closure of plant, to of 29 June 1983 2 on aids to the steel regain viability without the need for aids. industry proposed to be granted by the German Government, definitive authori- zation from the Commission for the grant of certain aids to the applicant, for the purpose of financing its restructuring plan. 10. Even if it were conceded that the The Commission gave a favourable opinion Commission implicitly accepted, in its thereon on 7 May 1984. The opinion took decision, that the applicant's viability could account of the fact that the plan simulta- not be assured without structural neously improved the products, and their adjustment, the decision would, in the surface quality, strength and dimensions, applicant's view, have to be regarded as thus enabling the applicant to adjust to inadequate, as regards the statement of the changes in demand, and that, moveover, the reasons for it, in so far as it was not based plan involved a decrease in production on a rigorous assessment of the applicant's capacity for heavy plate of 360 000 tonnes a general financial situation.

DUJJNGER HÜTTENWERKE v COMMISSION

13. Moreover, such investments would not give rise to plant closures, but rather to modernization or conversion of plant to 18. That decision applies only to those facilitate the manufacture of products not undertakings which, inter alia, Art 'engaged subject to quotas. This is illustrated by the in the implementation of a . . . restructuring fact that the applicant engaged 500 new programme . . . capable of restoring its workers between 1980 and the end of 1985. competitiveness and of making it financially viable without aid under normal market

The Commission relies, in the first Commission took the view that, having place, upon the purpose of Article 14A: in regard to the particulars furnished by the its view, in certain circumstances that article undertaking in its reply to the financial allows compensation in the form of questionnaire, there was a 'strong possibility additional quotas to be granted to under- that, under normal market conditions, Dillinger Hüttenwerke AG could re- takings which do not need restructuring, in establish its financial viability by 1986 other words, which do. not need to carry without the need for further aid'. out closures, in order to become competitive and which, therefore, receive no aid or additional quotas under Article 14B of 20.

takings which have already been restructured and hence no longer receive D — 21. Essentially, the position adopted aid'). That form of words therefore has, in by the Commission can only be said to be both cases, the same meaning as the well founded if the question whether there

(i) the undertaking had submitted a 22. It is a matter which the Court has restructuring programme; already dealt with in the Finsider and Krupp Stahl AG and Thyssen Stahl AG judgments, both of which were delivered in 1985.3 (ii) that programme entailed an 'irreversible reduction' of sheet production-capacity 23. The first of those judgments 4 makes it as a result of the dismantling of a clear that the quota system and the rules for furnace and the removal from service aids 'pursue a common aim, namely to of a rolling mill for finished products; promote the restructuring needed to adapt production and capacity to foreseeable demand and to re-establish the competi­ (iii) it also involved various investments in tiveness of the European steel industry*. research and development projects and in the introduction of technological innovations, which would enable 24. And the judgment in Krupp Stahl AG production quality to be improved and and Thyssen Stahl AG v Commission states5 innovations to be made regarding the that 'despite the differences in their legal type of products manufactured; basis and the criteria for their application, the objective of those systems is restruc­ turing. It is therefore neither arbitrary nor (iv) Implementation of the programme discriminatory if factors resulting from the would contribute to creating 'a strong application of one of the systems are used as probability that, under normal market a point of reference in the other'. conditions, Dillinger Hüttenwerke AG could regain its financial viability by 1986 without additional aid'. 25. It is therefore, in principle, lawful for the Commission, in defining the criterion of viability without structural adjustment 28. Nevertheless, the Commission requested referred to in Article 14A of Decision No that the half-yearly reports to be given to it 234/84, to apply the same methods as those should include 'information as to the used by it to appraise the same concept in progress achieved by Dillinger Hüttenwerke applying Article 2 (1) of the rules for aids. AG towards re-establishing financial viability', it being empowered to require 26. In this case, the applicant submitted a payment of the aid to cease or to impose restructuring programme and applied for additional obligations regarding restruc­ State aids in order to finance it. turing of the undertaking if the half-yearly reports were to raise 'doubts as to the resto­ ration of the undertaking's viability by the 3 — Judgment of 15 January 1985 in Case 250/83 Bnsider v end of 1985'. Commission [1985] ECŔ 131, at p. 152; judgment of 15 October 1985, Joined Cases 211 and 212/83, 77 and 78/84 Krupp Stibi AG and Thyssen Stahl AGv Commission [19$ 5] ECR 3409. 4 — Case 250/83, supra, paragraph 9. 5 — Joined Cases 211 and 212/83, 77 and 78/84, supra, 29. In other words, the Commission paragraph 34. regarded the applicant as an undertaking

30. In transposing those conclusions to the 34. In that • connection, it is interesting to sphere of application of Article HA of note that the Commission fixed a threshold Decision No 234/84, and thus in verifying of 3.5% for the minimum return on capital whether the conditions laid down therein and reserves in 1986 as an essential criterion were fulfilled, the Commission did no more for recognizing viability without the need than demonstrate the close logical for restructuring. relationship between the rules for aids and the quota system, already upheld by the Court. 35. It was on the basis of those criteria that the Commission, relying upon the particulars furnished by the applicant in its 31. In its rejoinder, the Commission further restructuring programme and in the explains that it regards the word 'viability', financial questionnaire, made the calcu- used in relation to the rules for aids and to lations necessary to assess the viability of Article 14A, as a technical term, for the Dillinger Hüttenwerke AG as from 1986, appraisal of which it used a quantitative for the purpose of deciding whether or not method whose results, in the applicant's to authorize the aid applied for. case, did not appear in the contested decision for reasons of convenience, but of which the criteria and basic assumptions are published in the 12th, 13th and 14th reports 36. The study carried out provided grounds On competition policy, with the result that for the view that, having regard to the the applicant cannot be unaware of them. investment plans and the envisaged aids, the applicant's viability for 1986 could be regarded as 'on the borderline', since its results were not sufficient to enable a return 32. Thus, in considering the restoration of on capital and reserves of 3.5% to be paid viability, the Commission applies identical (DM 21.8 million instead of DM 24 criteria to all undertakings, with a view to million). ensuring, in the context of the market prospects indicated by the 'General objectives', that they are capable of achieving the necessary margins to cover all 37. Moreover, its results would show a their production costs, including depre- deficit of DM 43.2 million if the applicant ciation, financial charges and a minimum did not proceed with the restructuring return on capital and reserves. measures, and a surplus of only DM 15.8 million if the measures were implemented without any aid. 33. In that regard, the Commission states that its appraisal is based not on past results obtained in a market regulated by the public 38. It was the results of that calculation that authorities (quotas, price regulation, import the Commission transposed to the quota

E — 39. The Court has, as we have seen, 48. If preference were given to the interpre- already upheld the lawfulness of this tation of Article 14A which seems closest to combined interpretation of the provisions the Italian or even the German version, this governing the two systems of rules, regard would be tantamount to adopting a being had to their common objectives. somewhat subjective approach, since the 'continuation of business' or the 'keeping alive' of an undertaking when it is not 40. However, a number of specific diffi- 'profitable', but is not insolvent, depends culties arise in the present case. largely on the wishes of those who own its capital. 41. Naturally, the terminology used iņ the relevant provisions of each of the two 49. Furthermore, as the Court has stated, systems does not coincide entirely. 'in the case of divergence between the language versions the provision in question must be interpreted by reference to the 42. Article 14A (4) speaks of 'viability1 purpose and general scheme of the rules of without structural adjustment; and Articles which it forms part'. 6 1 and 2 of the rules for aids refer t o programmes capable of restoring 'competi­ 50. There is no doubt as to the interpre- tiveness' and of making undertakings tation which the Commission gives to the 'financially viable' without aids. concept of viability (or financial viability) in the context of the rules for aids. 43. In the German version of those provisions, the terms used are 'Lebens­ 51. In the light of the purpose of Article fähigkeit' (for 'viability\ or 'viabilité' in the 14A, as determined by the Commission, French text) and 'Rentabilität' (for 'finan­ whose interpretation I agree with, and of cially viable', or 'financièrement viables'). the common objectives of the rules for aids and the quota system, there is no substantive argument to prevent the Commission from 44. Similarly, the terms used in the Italian applying the same criteria to the quota text are, respectively, 'possa continuare la system as well. Moreover, they are general sua attività' and 'rendere l'efficienza finan- criteria which are applicable to all under- ziaria dell'impresa'. takings, and the definition thereof without any doubt falls within the margin of discretion enjoyed by the Commission as the 45. However, it is significant that the institution responsible for managing both English version of Article 2 of the rules for systems. aids does not speak of 'profitability* but instead uses the term 'making it financially 52. The legislature itself made clear that viable'. Article 14A is addressed to undertakings which have 'already been restructured and hence no longer receive aid', they being 46. It is incumbent upon the institutions to granted a compensatory adjustment by interpret and apply the rules of Community law uniformly, without relying on individual 6 — Judgment of 28 March 1985 in Case 100/84 Commission v language versions. Untied Kingdom [1985] ECR 1169, paragraph 17.

55. That was the interpretation of Article F — 63. The applicant claims, however, as 14A, which emerged clearly from Decision we have seen, that the reasons on which the N o 2177/83, according to the preamble contested decision is based are not clearly thereof. apparent, as they should be, from the text thereof, with the result that it is not an adequately reasoned decision. T h e 56. However, Decision N o 234/84 made a Commission only refers to the fact that number of amendments to the wording of restructuring measures are envisaged, Article 14A. without expressing a view as to the only truly decisive condition, namely viability 57. The Commission adheres to the same without structural adjustment. In any event, interpretation of that article. the contested decision makes no reference to any calculations or criteria which might 58. The fact that — by contrast with what have prompted the Commission to consider happened in the case of other provisions, in that the applicant's viability was not assured without structural adjustment. particular Article 14B — the legislature felt no need to give an explanation for those changes in the preamble to the decision 64. The Commission, on the other hand, points to the conclusion that it did not considers that the meaning of the decision regard them as changing the previous can be understood even without any indi- meaning of the provision, which thus still cation of the calculations on which it was has the same objectives. based. 65. In referring to the need for restruc- 59. In my opinion, therefore, it has not turing and to the grant of aids, using the been shown that the Commission was same expressions as those used in the wrong to interpret the concept of preamble to Decision No 2177/83, the 'viability . . . without structural adjustment' Commission properly sought to indicate that in the same terms as it did in relation to the viability of the undertaking was not Article 2 of the rules for aids. assured without such restructuring.