C-310/85

DEUFIL v COMMISSION

OPINION OF MR ADVOCATE GENERAL DARMON delivered on 10 December 1986*

OPINION OF MR DARMON —CASE 310/85

The statistical mentioned above. tables produced by the Commission at the Court's request show that the polyamide and polypropylene sectors still suffer from overcapacity. Even though the operating rates, which express the relationship between the quantities produced and That series of measures calls for a comment. production capacity, has improved and Although it reflects the Commission's reached 82% for polyamide and 86% for concept of Community interest and defines polypropylene in 1985, there is still surplus the line of conduct which it wishes to see capacity. Most importantly, however, it Member States adopt, it in no way dispenses must be emphasized that when the applicant the latter, when they are considering aid in obtained the contested aid, the imbalance a given case, from complying strictly with was even greater because in 1982 and 1983 the terms of Articles 92 and 93. In other the operating rates were 52 and 72% words, the 'guidelines' and the 'aid code' respectively for polyamide and 56 and 64% constitute a frame of reference, reinforcing, respectively for polypropylene. in particular, the obligation of notice laid down in Article 93 (3) but they cannot be regarded as legally binding and thus capable of forming the basis of a negative decision by the institution.

The reductions made had 1 — Official Journal L 207 of 2 August 1984, p. 17.

However, the file shows unequivocally that the federal subsidy and regional premium Two decisive factors must also be emphasized in order to complete this sketch granted constitute together regional of the economic context. investment aid in favour specifically of Deufil. It is for that reason that it is entitled to regard itself as directly and individually concerned by the Commission's decision. The polyamide and polypropylene market Furthermore, the conditions on which the tends to be 'atomized' because it is divided federal subsidy was granted reveal its between a large number of undertakings regional nature because the undertaking's each of which holds only a small share of it. intended investment must, in particular, be In that regard the Commission stated at the 'carried out in an area in need of aid'. hearing, and was not contradicted, that 33 Moreover, the premium granted by North producers share the polypropylene market, Rhine-Westphalia was granted in with Deufil occupying the third place far accordance with the 'directives for the ahead of all its other competitors. Added to granting of aid for investments designed to the crisis of overcapacity, therefore, the improve the regional economic structures' structure of the market explains the stiff of that area. competition between Community producers and the relative stagnation of prices.

Thus precisely described, is the effect of the Furthermore, the information supplied by aid at issue, which certainly benefits the Deufil at the request of the Court shows recipient undertaking because it represents that in 1985 the undertaking devoted three- nearly 15% of the total cost of the quarters of its toul production to the manu­ investment, to distort competition and to facture of polyamide, the quantities of affect intra-Community trade, with the which more than doubled from one year to result that it must be regarded as incom­ the next. patible with the common market?

competition and intra-Community trade. relevant production thus has no effect from However, its share of Community the point of view of competition and intra- production of polyamide was only 0.18% in Community trade. 1984. With regard to its production of poly­ propylene, it produced at that time only 0.65% of the total production of continuous synthetic yarns in the Federal Republic of Germany. Those figures are much too small It must be pointed out that those statements for the aid granted, which represents only a are mere assertions which cannot be small part of the investment, to have the regarded as decisive. Moreover, they are effect complained of 'at the level of the partly inadmissible, having been made out common market'. of time. In any event, even if the additional quantities produced by Deufil as a result of receiving public aid were delivered to other undertakings in the group, they could not but have an effect on the Community market in polyamide. That argument is not consistent with the facts. In the first place, the abovementioned figures are meaningless. They omit, inter alia, the quantities exported to non-member countries on the ground that such quantities 5. The applicant's objections designed to have no influence on the Community minimize its position on the market must market. However, whatever their desti­ therefore be rejected. Moreover, that nation, they must be taken into analysis is confirmed by the facts. According consideration having regard to the criteria to the résumé presented by the Commission laid down in Article 92 (1). The depression at the hearing, and which was not chal­ in the Community market for the products lenged, the figures concerning the actual concerned could only sharpen competition development of Deufil's share of production between producers and lead them to seek capacity and total production of polyamide additional outlets on the world market, and polypropylene in the Community make which is itself saturated. In such a context, it possible to appreciate fully, in the context investment aid, reducing the production of a depressed market, the distortions of costs of one producer, could not possibly competition and the effect on trade to have no effect on the competitive capacity which the aid could have contributed. of all the others, both outside and inside the common market, and, therefore, on intra- Community trade.

This is a mining area with a significantly Deufil has referred, of course, to the lower standard of living and a higher rate of purchases of shares by public bodies of unemployment than the national average which certain of its competitors had had the and no prospect of a significant benefit. However, no evidence of their improvement is envisaged in the medium existence was produced. Moreover, even if term. However, the establishment of a new it is true, that argument does not prove the plant would not merely make it possible to compatibility with the common market of save existing jobs; more importantly, it the aid granted to it. Finally, it must be would create new employment and, at the pointed out that, contrary to what Deufil same time, inject additional money into the claims, such interventions are not exempt regional economy. from the possibility of action by the Commission, as can be seen from the situation which gave rise to the Court's The grounds on which the Commission decision in Belgium v Commission. 2 refuted that analysis do not appear to be open to serious dispute.

The derogation provided for in Article 92 The Commission is therefore required, in (3) (c) likewise does not appear to be the exercise of its discretion, to make applicable. It can be seen from the production figures supplied by Deufil that the investment led to a doubling of its production capacity, used essentially for the manufacture of polyamide, which repre­ 'economic and social assessments which sented more than 70% of its production in must be made in a Community context'. 5 1985. Contrary to the repeated claims of the applicant, there was therefore neither a real conversion nor a restructuring leading to a decrease in production capacity. In truth, as Thus, for the application of the derogation the Commission correctly pointed out, the laid down in Article 92 (3) (a), the investment merely permitted the under­ abnormally low standard of living and the taking to modernize its equipment by serious underemployment in an area are acquiring new plant capable of producing assessed both types of fibres alternatively according to the development of demand on the market. However, that investment decision must be assessed in the light of the restruc­ 'not with reference to the national turing undertaken by competing producers, average... but in relation to the which was accompanied by a massive Community level'. 6 reduction in employment. I have already emphasized the negative effect on compe­ tition of that situation. I agree with the Commission in considering that those short-term factors played a decisive role in That is precisely what the Commission did Deufil's equipment policy. in this case. It noted that the economic situation in the Bergkamen area was precarious compared to the national average, but found that that situation could not justify granting the aid in question since Thus redefined, the investment appears, the standard of living and the rate of unem­ having regard to market conditions, to be ployment, as the applicant has not disputed, directly contrary to the general interest. As were above the Community average. can be seen both from the Commission's Although it could be regretted that the policy and from the actions taken by certain Commission has produced no figures in that producers, the general interest requires, in regard, it cannot be considered that it order to restore the balance between exceeded its discretion in considering that production and consumption of synthetic the local economic situation was not so fibres in the Community, if not a reduction exceptionally serious that the aid could be at least a stabilization of production capacity, but certainly not an increase in it. 4 — Case 730/79 cited above, paragraphs 17 and 18. Where there is structural overproduction, 5 - Case 730/79 cited above, paragraph 24 (the italics are such an investment is clearly short-term. It mine). in no way appears to provide a permanent 6 — Case 730/79 cited above, paragraph 25.

III— Legitimate expectation In those circumstances, it is for the national 8. Deufil claims that if the contested court to reconcile, if need be, the interests of the Community and the principle of decision is upheld, its implementation, legitimate expectation. which will require the Member State to obtain reimbursement of the aid unduly paid, will infringe the principle of legitimate expectation. The German authorities will be unable, owing to the law on administrative In any event, and without prejudging the procedure of North Rhine-Westphalia situation, there would appear to be no indi­ governing the reimbursement procedure, to cation that the applicant could have legit­ imately expected that the aid granted could recover the sum paid, because the applicant be definitive, having regard to the general was entitled to rely on the definitive nature interest of the Community. Prior notice was of the national decision granting the aid. not given by the German authorities to the Commission, as is required by Article 93 (3). However, I need scarcely point out that the As has been seen, that submission is directed purpose of that essential formality is not against the Commission's decision itself designed precisely to prevent the payment of but against the measures which the German unlawful aid, since authorities will have to take in order to comply with the judgment of the Court confirming the lawfulness of that decision. As such this submission does not therefore seek to show that the aid was properly |the Member State concerned shall not put granted. In the context of the present action its proposed measures into effect' therefore it is without effect.