C-304/85

By Article 8 (1) plans to grant aids had to be notified by 30 September 1982 and by Article 2 (subject to special provisions) had to be approved by 1 July 1983 and must not By Article 2 of the Second Ads Code such lead to aid payments after 31 December aids may be considered compatible with the 1985. orderly functioning of the common market if the recipient is engaged in 'the implemen­ tation of a systematic and specific restruc­ turing programme covering the different aspects of restructuring (modernization, Decision 1018/85 of 19 April 1985 recited reduction of capacity and, where necessary, that what had been done indicated that financial restructuring) which programme is the objectives (of adjusting Community capable of restoring its competitiveness and production capacity better to suit demand of making it financially viable without aid and to improve the undertakings' structure under normal market conditions'; 'the said so that by 1986, with market conditions restructuring programme results in an having been put back on a healthier footing, overall reduction in the production capacity they would be financially viable without aid) of the recipient' and 'the aids in question do will be achieved. The market situation had, not entail distortions of competition and do however, led to a deterioration in the

FALCK v COMMISSION

The 'important synergies' referred to in the By letter dated 28 May 1985 (i. e. within the letter of 28 May 1985 comprised the sharing time-limit specified) the Italian Minister out of capacity reductions and other responsible wrote, pursuant to Decision restructuring efforts between publicly 1018/85, to inform the Commission of the owned and privately owned undertakings Italian Government's financial proposals and commercial cooperation to achieve that necessary for the restructuring of the Italian end. One proposal being discussed was that steel industry in order to ensure its viability Falck, the only Italian producer of flat after 1985, being proposals for aids products apart from Finsider, should close additional to those authorized (subject to its coil and strip mill at Sesto San Giovanni specified reductions of capacity in both the with a production capacity of 730 000 public and the private sectors) by the tonnes per annum and transfer its Commission's Decisions of 14 and 29 July production quota to Finsider, which would 1983. That letter gave details of proposed then open its second modern furnace, adjustments — an extra LIT 150 000 decommissioned at the insistence of the million for certain closures in the private Commission, at its hot wide-strip mill at sector and an additional LIT 2 985 000 Bagnoli. This would increase production at million for Finsider, the State-owned steel Bagnoli by, apparently, 800 000 tonnes per producer. It then added that, if it became annum which would be offset by the closure clear that further capacity reductions were of an old hoop facility at Bagnoli with a required, the Italian Government would capacity of 400 000 tonnes per annum.

Falck had already, during 1984 and 1985, decision. If synergy was achieved aids of drawn to the attention of the Minister and LIT 3 141 900 million for Finsider and of the Commission the problems it faced, LIT 600 000 million for the private sector the assistance it needed and what it were approved, subject to specified capacity considered to be discriminatory treatment, reductions of 400 000 tonnes by Finsider, in favour of Finsider and to its detriment, in 600 000 tonnes of laminated products in the respect both of previous aids and capacity private sector and 330 000 tonnes as a result reductions which it contended distorted of synergy. If the synergy was not achieved, competition. It asked the Italian Finsider was to receive the same amount of Government to propose to the Commission aids but to reduce its capacity by 800 000 an aid of LIT 300 000 million for its tonnes. Aids of LIT 50 000 million plus a financial restructuring. further LIT 275 000 million, being half the amount intended to finance the closures in the event of synergy, were approved on the basis that further reductions outside those resulting from synergy were contemplated. Approval of this LIT 275 000 million was, however, conditional on the Italian Government satisfying the Commission that the sum was to be properly allocated and After an exchange of telexes between the that reductions in capacity of 350 000 Government and the Commission in the tonnes were achieved in the private sector. early part of July, the Government, by telex No precise reduction of capacity was of 22 July 1985, proposed that the specified for Falck if synergy was not Commission should approve two alternative achieved though Falck feared that further plans: (a) if the synergy discussed was reductions would be imposed upon it. The achieved then in addition to LIT 50 000 Commission stated that the request in the million for the private sector and telex of 22 July 1985 to use part or all of LIT 2 985 000 million for Finsider, a the LIT 275 000 million for financial further LIT 550 000 million necessary not restructuring was inadmissible because such only to facilitate the synergy by contri­ a demand had not been mentioned in the butions to closures in the flat product sector letter of 28 May 1985 and this was out of but also for possible further closures in the time. long product sector and operations of financial restructuring in the private sector, in conformity with Decision 1018/85; (b) if synergy could not be achieved then the LIT 550 000 million should be reduced by that part referable to closures in the flat product sector which was said to be approximately half of the LIT 550 000 million. In the event, Falck did not accept the Italian Government's proposal put to it and, its counter-proposals for a higher subsidy and a price for the transfer of the Sesto San Giovanni quota being rejected, no agreement was reached. Falck had already, by letter of 1 July 1985, informed the Commission that its viability depended on By letter to the Italian Government dated 1 August 1985, the Commission gave its appropriate aids and if aids were not

It seems to me that the Court's decision in Case 214/83 Germany v Commission Its first point is that the Decision of 1 (judgment of 30 October 1985), however, August 1985 should be set aside because it indicates that a formalistic view is not to be amounted to a discriminatory application of taken. That case was concerned with the the Second Aids Code as amended. On the Second Aids Code but the position on this one hand, the Commission refused to take point must be the same in respect of the account of the notification of a plan for aid Second Aids Code as amended. The Court for financial restructuring contained in the considered that: telex of 22 July 1985 because it was out of time, 31 May being the last date for such a notification; on the other hand, it treated as in time a proposal in the same telex to grant aid of LIT 275 000 million for closures in 'the "plans" which were to be notified to the private sector, a proposal which was not the Commission no later than 30 September itself contained in the letter of 28 May 1982 were programmes which, within the 1985. framework of a restructuring plan, iden­ tified the type, the aim and the proposed use of the aid; it was not necessary, at that stage, for the exact amount of aid requiring authorization to have been determined. Whilst it is true that the Commission cannot The first question is, thus, whether these two proposals were out of time. As I read it establish whether certain aid is compatible the proposal for granting aid in the private with the common market unless it is sector outlined in the letter of 28 May 1985 informed of the order of magnitude of the is limited to that needed for plant closures. amounts of aid contemplated, knowledge of It does not cover financial restructuring at the exact figures is not necessary at the all. That proposal came for the first time in initial stage of the examination of the aid the telex of 22 July 1985 and was notified plans; exact figures could therefore be out of time. In the letter it is clear that aid specified at a later stage. for plant closures was contemplated but on the basis that it would result from cooperation between different producers. In the telex there are two alternatives. One was a proposal for aid for reductions in capacity Consequently, the fact that the amount of if there was cooperation and one if there aid finally approved by the Commission was not. It is the latter which was put into exceeded the amount notified on 30 effect. September 1982 does not in itself constitute a breach of Article 8 (1) of the Second Aids Code, unless the increase which took place after that date had the effect of changing the nature of the proposed aid and, as a result, the plan which was implemented was If a formalistic approach is to be adopted it no longer that which was notified.' can obviously be said that this second alter­ (paragraphs 50 and 51 of the judgment).

It can be said here that this case is the If I had come to the opposite conclusion it converse of the case brought by the Federal would seem to follow that the authorization Republic of Germany. Here a figure of to grant aid of LIT 275 000 million should approximately LIT 550 000 million was be quashed; if the decision that proposed given in the letter and the Commission aid for the financial reconstruction of Falck accepted, in the light of the proposal in the was out of time is set aside, it is now too telex, that if there was synergy, aid of late for the aid to be authorized or paid in LIT 550 000 million could be approved and accordance with the terms of the Second that if there was no synergy, the amount of Aids Code as amended. Financial recon­ aid would be approximately half that struction is not a permitted category of amount. It can also be said that the letter of aid under Commission Decision 3484/85 28 May did not specify within the (Official Journal 1985, L 340, p. 1) estab­ framework of a restructuring plan the type, lishing Community rules for aid to the steel the aim and the proposed use of the aid. On industry for the period 1 January 1986 to 31 the other hand, it did 'identify' that the aid December 1988. was proposed for capacity reduction resulting from plant closures. What was contemplated was cooperation to achieve that reduction but the essential aim was capacity reduction from plant closures. When the proposals were put forward in the telex, capacity reduction was dealt with on alternative bases and the Commission accepted it in that way. Since the producers concerned were not able to agree aid was granted for capacity reduction other than by I do not in any event accept that there was cooperation. It is unfortunate that inconsistency in the Commission's decision cooperation could not be achieved but for in that the aid approved if there was my part I do not regard what happened cooperation included an amount for subsequent to 31 May, even if a variation on financial restructuring. The LIT 550 000 the original proposal as to the way it was to million asked for initially and approved was be achieved, as having the effect of for capacity reduction only, even if the telex 'changing the nature of the proposed aid' so of 22 July is to be read as contemplating that 'the plan which was implemented was some part of that amount for financial no longer that which was notified'. The restructuring. substance of the matter was that aid should be given for capacity reduction resulting from plant closures. Accordingly, I do not accept that the proposal for aid for plant closures, even if cooperation could not be achieved, is to be treated as out of time.

The Commission seems to counter that it can only approve rather than initiate plans for aid and that if there is discrimination it is the fault of the Member State putting ' ... the factors which are likely to influence forward the plan. That, in my view, cannot the exact amount of aid to be authorized do be a complete answer. What is done by way not consist simply in the number of tonnes of aids may favour one company and of production capacity having to be cut; disfavour another but if there is patently there are other factors, too, which vary discrimination between the public and the from one region of the Community to private sectors the Commission should not, another such as the restructuring effort in my view, approve the aids, any more than made before 1980, the regional and social it should do so if it is satisfied that the aids problems occasioned by the crisis in the entail distortions of competition or have an steel industry, technical change and the effect on trading conditions to an extent adaptation of undertakings to suit market contrary to the common interest. That is requirements.' particularly so in a case like the present, when the Italian Government proposed aid for Falck whether or not there was synergy, even if in the latter case on a basis including aid for financial restructuring.

It seems to me that it cannot be said, as Falck appears to be saying, simply that it should receive an amount proportionately equivalent to that granted to Finsider, or that fairness requires that it should receive an appropriate proportion of the aid accorded to Finsider in respect of financial Falck has given details of its production restructuring, even if that application on capacity (to show that it is some 10% of the behalf of Falck was notified out of time.

There is no doubt that the letter of 28 May was, save as to the proposal for Finsider, tentative and lacking in details. It does, however, indicate that the Government considered necessary a reduction in capacity Falck takes as its third point the argument by plant closures at a cost of LIT 550 000 that there was no systematic and specific million even if the precise closures were to restructuring programme in existence so be reached by cooperation. By the time of that the decision under attack was defective its decision, the Commission had further for lack of reasons. The Commission details of the alternative plans on which it required to be informed of the outcome of could act. It was, in my view, entitled, since the Italian Government's proposals for cooperation was still being discussed and cooperation by 30 October. Hence it could was desirable if it could be achieved, to not see whether the conditions which the approve the plan in the alternative form and Second Aids Code required to be satisfied to make its approval subject to final details had been satisfied at the time it took its in respect of synergy being worked out by decision, not least since Finsider was to get 31 October 1985.

FALCK v COMMISSION

In all the circumstances, it seems to me that this application should be dismissed and that Falck should pay the Commission's costs.