C-142/87

Firstly, the contested decision refers to the infringement of both provisions, namely 2. Before considering the merits of the Article 93(3) and Article 92 (Article 1 : 'the application it is necessary to consider a aid cannot be considered compatible with question with which the Commision dealt in the common market under Article 92(2) or some detail in its pleadings and at the (3) of the EEC Treaty'), and the reasoning hearing, and on which it has asked the set out in the decision relates to both Court to rule expressly. provisions. Consequently, the Belgian Government's submission concerning the application of Article 92(3) is clearly 'admissible'. Secondly, the Commission, as it The Commission has raised an objection of expressly confirmed at the hearing, is asking inadmissibility to the submissions based on the Court to apply a criterion of procedural the application of Article 92(3) of the EEC economy according to which, once it has Trpntv been determined that the national measure

" Original language Italian

I-979

OPINION OF MR TESAURO — CASE C-142/87

In the first place, the longer the verification procedure lasts the more difficult it is to recover the aid and, according to the Commission, the Member States have a The Commission's argument is quite clear: tendency to prolong the procedure arti­ infringement of Article 93(3) is incapable of ficially by dilatory conduct. being remedied since the provision is one of public policy endowed with direct effect; such an infringement therefore renders the aid unlawful definitively and per se and also In the second place, in so far as the aid is incompatible with the common market, so granted during the verification procedure, that further substantive examination is notwithstanding the standstill obligation in unnecessary. Whereas in this case the the last sentence of Article 93(3), there is a infringement is not denied, submissions on the substance are 'inadmissible', in the sense 1 — It should be pointed out that the question of the conse­ quences of aid granted in breach of Anicie 93(3) being that the Court should not consider them. unlawful per se has been raised by the Commission in a series of applications. See, in particular, the judgments of 14 February 1990 in Case C-301/87 France v Commission [1990] ECR 1-307, of 10 May 1990 in Case C-61/88 Commission v France, not yet published, of 4 July 1990 in Case C-162/88 Commission v France, not yet published, of 4 July 1990 in Case C-294/88 Commission v Poclain SA and Tenneco Europe, not yet published, and the order of 17 March 1990 in Case C-303/88 Italy v Commission, not yet 4. In asking the Court to rule on this published.

Ultimately, the system of preventive super­ However, a closer analysis shows that it is vision established by the Treaty would be in not so much that which is the essential point danger of being set at naught by an in the Commission's argument. Indepen­ increasingly frequent practice of confronting dently of who declares the infringement of the Commission with a fait accompli. That is Article 93(3) to have occurred and how that certainly an unlawful situation and one is done, what counts is the consequence that which the Commission can only partially flows from such an infringement. The remedy ex post facto. It is therefore disuasive effect on the Member States, necessary to develop a new form of inter­ which is intended to ensure that they vention before the aid is granted, a sort of comply with Article 93(3), depends in fact 'deterrent' which would induce the Member on the illegality of the aid, once established, States either to give notice in good time of releasing the Commission from the plans to grant aid or, in the case of aid paid requirement to assess whether it comes prematurely (during the verification within the exceptions provided for in Article procedure), to return to the status quo ante 92(3), and thus whether it is compatible in at the Commission's request. The latter substance within the common market. would be able, at least when it considers it necessary to do so, to carry out the preventive examination of compatibility solely in regard to aid still at the planning stage and, as a result, under the precise conditions provided for in the Treaty. I will therefore concentrate my attention on that second aspect.

As a further preliminary point, I would (i) they must inform the Commission in observe that the Commission's argument is good time of plans to grant or modify based on an underlying consideration, aid (commonly known as the obligation namely that at present infringement of to notify, notwithstanding the terms of Article 93(3) does not give rise to suffi­ the Treaty which, perhaps not without ciently serious consequences. Ultimately, the reason, are less precise) ; Member States have 'nothing to lose' by infringing that provision, which explains the increase in the number of cases in which State aid is paid unlawfully. (ii) they must not to grant the proposed aid before the end of the Community 4 procedure (standstill obligation or prohibition on implementing the aid). That argument reflects an analysis which is perhaps a little too pessimistic. An 4 — That procedure, as the Court will be aware, takes place in two stages. The first, preliminary in nature, consists of a infringement of Article 93(3) in fact involves summary examination of the aid project of which notice precise consequences, both internally and at has been given and is intended to determine whether the project is, prima facie, compatible with the common Community level, for the Member State in market or if, on the contrary, there is at least a reasonable doubt as to its compatibility. In that case, the Commission default. Thus, the provision appears to is required to proceed to the next stage and initiate the provide effective guarantees to the same procedure under Article 93(2) under which the audi alteram partem principle is respected. It should be pointed extent, if not to a greater extent, than other out that the preliminary stage necessarily presupposes that provisions of the Treaty. notice has been given of the project. Within two months of notice being given (in accordance with the judgment of 11 December 1973 in Case 170/73 Lorenz v Germany [1973] ECR 1471), one month if the aid is involved is individual aid, the Commission must decide whether the Article 93(2) procedure should be initiated. However, when the Commission considers that the preliminary examination is In view of the importance of that aspect of sufficient to conclude that the aid is compatible with the common market, it may close the procedure without the question, I think it is appropriate, before adopting any formal decision. I would point out, finally, considering the core of the Commission's that even if there has been no preliminary examination (because the aid was not properly notified to the argument, to set out the essential nature of Commission), the Article 93(2) procedure can still be the obligations under Article 93(3) and to initiated, either of the Commission's own motion or on the initiative of any interested party who has complained to the consider, in the light of administrative and Commission about the granting of the aid.

The infringement of the standstill obligation 7. That having been said, what are the is much more important inasmuch as it may consequences of an infringement of Article actually give rise to distortions of compe­ 93(3)? tition. As was stated in the judgment in 6 Heineken:

There is a need, firstly, to distinguish between the purely national aspects and the ' ... the final sentence of Article 93(3) is the Community aspects. means of safeguarding the machinery for review laid down by that article, which, in turn, is essential for ensuring the proper functioning of the common market. The At the national level, as has been observed, prohibition laid down by that article is the Court has ruled on several occasions intended to ensure that the aid measures do since Costa v ENEL on the direct effect of the prohibition on implementing aid. 5 — Judgment of 15 July 1964 in Cast 6/64 CoiM v ENEL [1964] ECR 585 7 — Order of 20 September 1973 in Case 171/83 R 6 — Judgment of 9 October 1984 in Joined Cases 91/83 and Commune» v French Republic [1983] ECR 2621 ; Judgment 127/83 Heineken Browenjen BV\ Impecleun der Vennootí· of II December 1973 in Case 120/73 Cebr. Lorenz GmbH cl:apibeIalling[l9S4] ECR 3435 v Gfrma7ry[1973] ECR 1471

I-983

OPINION OF MR TESAURO — CASE C-142/87

8 10 In Capolongo, it was confirmed that, in In Steinike v Germany, after deciding that, regard to plans to introduce new aid,

'the last sentence of Article 93(3) establishes 'with regard to new aid which the Member procedural criteria which the national court States intend to introduce a special can appraise'. procedure is provided and if it is not followed the aid is not regarded as being regularly introduced' (paragraph 9),

I-984

BELGIUM v COMMISSION

been lawfully introduced or, consequently, as of payment of the aid of which the compati­ capable of producing any effects. bility with the common market has not been assessed) and actions for damages against the administration (an action might be brought by competitors damaged by the In other words, it may be concluded that unlawful grant of aid or by the beneficiary the procedure (legislative or administrative) of aid payment of which has been by which aid is granted in not complete suspended or cancelled by reason of an until the Commission has carried out — infringement of the procedural rules)." with a favourable result — its 'preventive' examination of the aid's compatibility with the common market. That examination thus constitutes a legal condition of effectiveness 8. It should also be observed, however, that of an essential nature, whose importance the possibility of remedying an infringement stems from the fact that the examination of Article 93(3) at the national level appears relates to the merits of the State inter­ to be limited by a series of factors. Among vention, entailing, as the Court has also them are the following: emphasized, assessments of a political and economic nature made on the basis of a wide discretion.

I-985

OPINION OF MR TESAURO — CASE C-142/87

(c) difficulties specifically in regard to the Court in which it was decided that bringing of certain types of actions (for regional laws granting aid which were example, in actions for damages, there approved by the Regional Assembly before is uncertainty, especially in a market the Community verification procedure had 17 which is not oligopolistic, in regard to been completed were unconstitutional. determining the causal link between the 13 aid granted and the alleged damage );

More interesting, because it was more clearly based on the direct effect of Article 93(3), is a judgment of the English Court of (d) A certain reluctance on the part of the Appeal of 24 February 1986 (R. v Attorney competitors of the undertaking receiving General ex parte Imperial Chemical the aid to go to Court — even if there Industries), in which it was decided that the are no particular difficulties in so authorities are required 'not to implement doing — inasmuch as they consider it the aid or plan unless and until the preferable, for various reasons, to seek Commission [has] approved it'. 18

analogous or equivalent benefits for H themselves from the public authorities;

13 — See FIDE Reports, cited above in footnote 11, pp. 79 19 — Reference may be made, by way of example, to adminis­ and 299. trative legal proceedings in Italy concerning certain provisions of Law No 64 of 1 March 1986 (laying down 14 — See FIDE Reports, supra, p. 78. the basic rules on special intervention measures in the 15 — See FIDE Repons, supra, p. 183; see also the decision of Mezzogiorno), which has given rise to various preliminary 24 January 1989 of the Italian Council of State which references currently pending before the Court of Justice. expressly refuses to recognize the direct effect of a See also, in particular Lazio Tar , Sez. Ill, 22 January Commission decision under Article 93(2). 1985, in Foro amministrativo, 1985, p. 941.

I-986

BELGIUM v COMMISSION

There is no shortage of examples in that regard. Thus, in Case 171/83 Commission v 10. With regard to the consequences of an France, the Commission acted under Article infringement of Article 93(3) at Community 169 against France which had implemented level, it should be pointed out that the an aid scheme (which had been notified) problem has already been considered on notwithstanding the commencement of the several occasions both by the Court and by procedure under Article 93(2). In that case, the Commission. at the same time as it brought the action, the Commission also applied for interim measures under Article 186 of the Treaty intended to obtain an immediate cessation 23 of the contested intervention. The first point which should be clearly stated is that the system of preventive super­ vision, and in particular of the 'safeguard clause' represented by the standstill obli­ gation, implies that the implementation of proposed aid in breach of the procedural The cases in which the Commission, in rules laid down in Article 93(3) is unlawful. regard to aid granted in breach of Article Thus, the first question which arises is to 93(3), has considered it appropriate to determine the procedure in accordance with initiate immediately the procedure under which that unlawfulness is to be determined. Article 93(2) are varied. Examples of such cases include, in addition to the judgment in Case 173/73 Italy v Commission, cited above, the judgment in Case 234/84 Belgium v Commission, the order in Case In the judgment in Case 173/73 Italy v 310/85 Deufil, and the judgment in Case 20 Commission the Court stated clearly that, where a Member State has infringed its 21 — The Court pointed out in particular that 'the means of obligations under Article 93(3), the recourse open to the Commission are not restricted to the more complicated procedure under Article 169'. Commission may take two concurrent forms 22 — Sec A- Dashwood: 'Control of State aids in the EEC. of action: the procedure under Article 169 prevention and cure under Article 93', CMLR, Vol 12, 1975 23 — That application was granted by the Court by order of 20 20 — Judgment of 2 July 1974 in Case 173/73 Italy v September 1983, cued above (the Commission was Communi»! [1974] ECR 709 subsequently able to withdraw its main application).

'Henceforth, any evidence of a tendency to systematic or flagrant violation of Member States' obligations will be systematically It should be noted that repayment, pursued by virtue of Article 169 of the Treaty inasmuch as it serves the purpose of or other measures envisaged therein.' restoring Community legality infringed by the unlawful payment of aid, may be ordered irrespective of whether the aid in question has been declared compatible or incompatible with the common market on The Commission later returned to this its merits. That is the conclusion to be matter in the communication of 24 drawn from the judgment in Case 173/73 November 1983 (Official Journal C 318, 25 p. 3). Moreover, in the Fifteenth Report 26 — See the communication of 24 November 1983, cited on Competition Policy, it emphasized that it above; 'The Commission therefore wishes to inform potential recipients of State aid of the risk attaching to any had instructed its services automatically to aid granted them illegally, in that any recipient of an aid open the Article 93(2) procedure in cases granted illegally, i.e. without the Commission having reached a final decision, may have to refund the aia where the Member State did not reply to a Whenever it becomes aware that aid measures have been request for notification within the prescribed adopted by a Member State without the obligations under Article 93(3) having been fulfilled, the Commission will period. publish a specific notice in the Official Journal warning potential aid recipients of the risk involved.' It was stated (see the Commission's answer to Written Question No 24 — Judgment of 10 July 1986 ¡n Case 234/84 Belgium v 181/88, Official Journal C 151, 19.6.1989, p. 9) that the total amount of aid illegally granted which the Commission Commission [1986] ECR 2263; order of 6 February 1986 ¡n required the Member States to recover was of the order of Case 310/85 R Deufil GmbH & Co. KG v Commission ECU 5 million in 1985, ECU 11 million in 1986 and [1986] ECR 537; judgment of 2 February 1989 ¡n Case ECU 747 million in 1987 (the latter figure includes the 94/87 Commission v Federal Republic of Germany [19891 recovery of ECU 210 million which Tubemeuse was ECR 175. requested to repay). 25 — In both of those communications, the Commission speci­ fically referred to the judgment in Capolongo on the direct 27 — Judgment of 12 July 1973 in Case 70/72 Commission v effect of Article 93(3). Federal Republic oj' Germany [Ì97Ì] ECR 813.

Italy v Commission, cited above, in which it 13. It follows from those observations that was observed thar an infringement of Article 93(3) may be the subject of proceedings at Community level and that, as a result, aid unlawfully paid may have to be recovered. The Commission states however that the practical effect of 'The spirit and general scheme of Article 93 that 'sanction' is significantly reduced by the imply that the Commission, when it estab fact that the decision under Article 93(2), lishes that an aid has been granted or which may require recovery of the aid, is altered in disregard of paragraph (3), must adopted some considerable time after the be able, in particular when it considers that actual State intervention. Consequently, the this aid is not compatible with the common recovery of amounts unduly paid may prove market having regard to Article 92, to decide difficult. that the State concerned must abolish or alter it, without being bound to fix a period of time for this purpose and with the possi bility of referring the matter to the Court if the State in question does not comply with There is no doubt that the excessive the required speed' (paragraph 16). duration of the verification procedure is a real problem, not merely because, as has just been said, it makes the complete restoration of the status quo ante improbable, but above all, because the unlawful implementation of Thus, whatever may be the assessment of an aid programme subsequently declared its merits, aid implemented before the

Moreover, more specifically on this point, the Commission does not appear to be wholly 'unarmed'. However, there is no evidence that the Commission has ever sought recovery of aid subsequently declared compatible with the common market. That perhaps represents In the first place, any dilatory conduct on excessive prudence since a more vigorous the pan of the Member States, taking the approach might make clearer the precarious form of a tendency not to supply infor nature of aid granted in disregard of the mation requested in good time, is not suspensory effect of Article 93(3). It should entirely free of unfavourable consequences be noted that in such circumstances the Member States would be induced to give 28 — See, in that regard, the Repons to the FIDE congress notice and not to implement prematurely at mentioned above in footnote II, in which it 15 observed, at p. 559, that 'the longer the gap between grant and least those aid projects likely to be covered, recovery, the less effective recovery is', adding, however, perhaps with some agreed adjustments, by that 'the gap is further lengthened by the Commission's dilatonness in enforcing recovery orders when Member one of the exceptions in Article 92(3). States refuse to comply with them'

30 Thus, in Case 234/84, the Court decided that the lawfulness of a Commission That aspect seems to me particularly decision (under Article 93(2)) declaring, important with regard to the real problems inter alia, that a subscription of capital by with which the Commission must contend. the Belgian State constituted aid, Moreover, the Court has the opportunity to confirm and reinforce that duty of cooperation of the Member States and to state the consequences which follow from it with regard to the obligation on the 'is to be assessed in the light of the infor­ Commission to state the reasons for its mation available to the Commission when 31 decision. Let me make it clear that in my the decision was adopted' (paragraph 16). view there is incumbent on the Member States a genuine burden of proof with regard to the information to be supplied to the Commission in accordance with the In the same judgment, the Court decided required application of Article 92(3), that the statement of reasons on which the which — it should not be forgot­ contested decision was based was adequate ten — contains exceptions from the general prohibition on aid laid down by Article 92(1). Consequently, the Member States must supply the Commission, as soon as the aid is notified or at the latest within the 'despite its concise nature — which is due in specified period, with all the information part to lack of cooperation by the Belgian supporting a derogation from the pro­ Government' (paragraph 22). hibition. It clearly follows that the extent of the reasoning required of the Commission 29 — The existence of a specific duty of cooperation in that can only be proportional to the information regard, which is a particular expression of the general duty under Article 5 of the Treaty, is emphasized by Smit and received from the Member States. Herzog: The Law of the EEC, 1982, Vol. 3, p. 414 el ¡eg., which states the following: 'Article 93(1) obligates the Member States to cooperate with the Commission in its investigation and to supply it with ali necessary data. This obligation receives furtner support from Article 5, paragraph 1'. 14. In the second place — and this is an 30 — Judgment of 10 July 1986 in Case 234/84 Kingdom of aspect which seems to me to be of particular Belgium v Commission [1986] ECR 2263. 31 — With regard to the scope of the duty of cooperation in the importance — there is a specific remedy procedure provided for in Article 93(2) see, in particular, permitting action to be taken in good time Smit and Herzog, cited above in footnote 29, p. 415: 'Although the Member State wishing to grant an aid does against the unlawful implementation of an not have the burden of proof in the technical sense, it must aid project independently of the duration of supply the Commission with those facts and data which the Commission cannot conveniently obtain itself'. the substantive verification procedure. As

has already been stated, the Commission decision, since it is directly applicable, could may act under Article 169 against a Member be relied on before the national courts. State which has not complied with the Finally, such measures could be adopted prohibition of implementation asking the within a few days of receiving notice that Court at the same time (under Article 186) the proposed aid has been implemented to order the necessary interim measures. It since all that is required is to determine should be emphasized that, in Case 171/83, whether or not the Member State has the order of the Court granting the interim intervened in favour of an undertaking measures applied for was made only three without the necessary verification having months after the date of the Commission's been carried out. The rapidity of that form letter giving formal notice to the Member of response would therefore make it State concerned. For that reason, it seems to possible to reduce to a minimum — and me to be an effective (having regard also to perhaps totally eliminate — the risk that the the importance of an order of the Court in aid which has been paid would create either a situation which could not later be altered possible national legal proceedings dealing or create distortions of competition which with the same subject-matter) and, most could not subsequently be undone. importantly, rapid instrument, since it may be adopted relatively quickly after the receipt by the Commission of the first infor­ mation concerning the implementation of the aid. Interim measures, independently of whether they are adopted by the Court or the Commission, are a particularly appropriate remedy also by reason of the flexibility of their content. They can be used either to However, that is not all. The Commission prevent State intervention taking place, to has in fact the power — which it has never suspend the operation of such intervention exercised, but which none the less has been or to order the recovery of aid already paid. expressly recognized by the Court — itself They may therefore be regarded as the most to adopt immediate interim measures. In the appropriate remedy for obtaining an aforesaid judgment of 12 July 1973 in Case immediate return to the status quo ante 70/72, the Court observed, although obiter, whenever that is necessary to prevent the that Article 93(3) implementation of aid depriving the subsequent decision of useful effect.

Consequently, in the second place, and this In the first place, some doubt could arise as is the principal aspect, such notification to the basis of the decision-making power and / or recovery is subject to an assessment claimed by the Commission. As has been within the context of the procedure under observed, the infringement of the obli­ Article 93(2) of whether it is possible to gations contained in Article 93(3) may be apply the exceptions provided for in Article determined either, generally, by the Court 92(3). in the context of an application under Article 169 or, in exceptional cases, by the Commission, in the context of a decision Such a decision would therefore be totally under Article 93(2), the essential purpose of independent of the procedure under Article which is to determine whether or not aid is 93(2), inasmuch as it would exclude and in compatible with the common market. On fact render unnecessary the assessment of the other hand, the power to adopt compatibility with the common market, definitive decisions as to the unlawfulness of under Article 92(3). Moreover, unlike the aid without considering compatibility and interim measures which have already been following the procedure laid down for that considered, such a decision would be purpose is clearly outside the scope of either definitive in nature, permitting the of those forms of procedure. Commission to dispense with initiating or pursuing the procedure under Article 93(2). 32 — Moreover, following the Commission's argument to its conclusion, the illegality stemming from the infringement of Article 93(3) would completely exclude the examination of compatibility under Article 92(3), since it is impossible to infer — on the basis of correct legal 16. The Commission's position is certainly construction — any discretionary power on the part of the Commission (or on the part of the Court, as the not illogical. There is also no doubt that Commission states itself in its pleading).

In practice, however, it may be more expedient to adopt, at the end of the procedure under Article 93(2), a single decision ruling at the same time on both 17. In any event, as I have repeatedly aspects. That is true firstly for reasons of emphasized, that is not the decisive aspect. simplicity, since it is possible, in a single The principal novelty in the Commission's measure, to deal fully with the validity and argument is the possibility that the unlawful temporal effects of the aid, deciding the implementation of the aid, however position in regard to the past (having regard determined, could permit the Commission to the possibility that it may have been not to initiate or pursue its verification of compatibility with the common market. 33 — The basis of the power to declare aid unlawful could at first sight also be found in the provisions of Article 93(2) on the basis of which the Commission may decide that aid should be abolished if it is 'being misused' However, it seems preferable to consider that mat expression refers not to aid granted in breach of Article 93(3) but to aid which has proved to be incompatible with tlie common market only at the implementation stage. In such cases, therefore, It is in regard to that point that most of the the Commission will adopt a decision on the substantive compatibility of the aid and not a decision on unlawfulness. doubts are concentrated.

I-993

OPINION OF MR TESAURO —CASE C-142/87

There is no doubt that the failure to notify no longer relevant. From the moment at and, above all, the premature implemen­ which the decision on compatibility is tation of an aid project, is unlawful. Such adopted, it alone determines ex nunc the conduct constitutes a clear infringement of position regarding the aid, without the obligations under Article 93(3). prejudice, of course, to the possibility that previously adopted implementing measures might be unlawful.

Having regard to their purpose and nature, such obligations are relevant only at the Thus, the assessment of compatibility can verification stage. An infringement of them, always be made unless the legislature as has been said, will entail the unlawfulness intended compliance with the procedural of the measure granting the aid and the conditions to be regarded as a condition measures implementing it adopted during precedent of that assessment. the verification procedure. However, once a decision on compatibility, whether positive or negative, has been adopted, and with However, that that is not so is shown first effect from that point, the earlier of all by the established practice of the infringement of the procedural obligations is Commission, which has never until now

I-994

BELGIUM v COMMISSION

regarded an infringement of Article 93(3) as the interest of the Member State granting a circumstance precluding consideration of the aid but in the general interest of the the compatibility of the aid with the Community. common market.

On the contrary, as can also be seen from To that end, the procedure provided for in the contested decision, an infringement of Article 93(2) is intended to provide the Article 93(3) is given the significance due to Commission with all the relevant infor­ it, that is to say, it constitutes the basis for mation needed to decide in the shortest the recovery of aid unlawfully granted possible time whether certain State measures without precluding a substantive assessment are compatible with the requirements of the of the substantive aspects of the aid. common market. In both cases, there is a Furthermore, even in cases in which the need to ensure that a general requirement of Commission has applied to the Court for a 35 certainty is fulfilled. declaration that Article 93(3) has been infringed, that has neither suspended nor prevented the pursuit of the verification 34 procedure.

I-995

OPINION OF MR TESAURO —CASE C-142/87

If the aid is compatible, at least under carry out a complete examination of certain conditions, it is even more important compatibility, that is to say, in regard to all that its compatibility should be determined the criteria laid down in Article 92, 36 erga omîtes and that the aid itself may including those in Article 92(3). rapidly and lawfully be paid out.

I-996

BELGIUM v COMMISSION

procedure under Article 93(2) until a final 22. The conclusions I draw from the decision on compatibility has been adopted. foregoing analysis are thus as follows:

(i) the question of admissibility raised by 21. Naturally, if it appeared essential to the Commission should be reformulated ensure the effective functioning of the as indicated above; system of preventive supervision to subor­ dinate the application of Article 92(3) to compliance with the obligations under Article 93(3), the Community legislature (ii) the content and purpose of the obli­ could intervene on the basis of Article 94. gations under Article 93(3) imply that However, until such time as such inter­ any aid implemented in breach of those vention takes place, it seems to me that it obligations is unlawful; must be accepted that the procedural obli­ gations under Article 93(3) and the verifi­ cation of compatibility are quite distinct and, therefore, the infringement of the (iii) that unlawfulness gives rise to precise former does not affect the requirement to consequences in respect of which carry out the latter in a proper and timely proceedings may be brought both at manner. national level and at Community level;

I-997

OPINION OF MR TESAURO — CASE C-142/87

Substance of the case holding in the capital of an undertaking may be regarded as State aid if the conditions laid down in Article 92 are fulfilled. * A — The application of Article 92(1)

The nature of the contribution to capital made The Court also pointed out in Intermills by the Belgian Government that:

23. The Belgian Government denies that ' ... the granting of aid, especially in the the financial intervention carried out in form of capital holdings acquired by the regard to Tubemeuse constitutes aid within State or by public authorities, cannot be the meaning of Article 92(1). On the regarded as being automatically contrary to contrary, it represents a perfectly normal the provisions of the Treaty. Thus, irres­ addition to capital in accordance with pective of the form in which aid is granted, current business practice in a market be it as a loan or as a capital holding, it is economy. In particular, the Belgian the Commission's task to examine whether Government behaved like any shareholder it is contrary to Article 92(1) and, if so, to which, having already made a substantial assess whether there is any possibility of its investment, found itself confronted with a being exempt under Article 92(3), giving the difficult situation and felt obliged to make grounds on which its decision is based further contributions in order to ensure the accordingly' (paragraph 32). continuation of the undertaking's activities and, therefore, the possibility of obtaining a return, however limited.

holder, having regard to the foreseeability In particular, it should be noted with regard of obtaining a return and leaving aside all to the conduct of shareholders in competing social, regional-policy and sectoral undertakings that no comparison may be considerations, would have subscribed the drawn with the conduct of the Belgian capital in question' (paragraph 14). Government as an investor in Tubemeuse since such undertakings, as well as having undertaken effective restructuring measures, had a substantially positive financial position and economic prospects. 25. In the contested decision, the Commission stated that Tubemeuse could not have obtained the finance in question on the private capital market for a series of With regard to the finance which reasons. In particular, it was demonstrated Tubemeuse obtained from the banks, the in detail that the sector involved was decisive factor in my opinion is that such marked by a considerable structural excess investments were in fact covered by a of production capacity, that the demand for guarantee provided by the Belgian State, non-welded tubes for oil exploration, which which thereby assumed the risks inherent in represents the largest single source of such transactions. demand for that product, was slowly contracting, that the financial situation of Tubemeuse has been marked for some time by substantial losses (in 1984, the loss was Finally, with regard to the fact that the greater than 14% of turnover, including Belgian Government acted in accordance financial costs of 8.4%), which led to a with the advice of an international gradual disengagement of the private share­ consultancy firm, it should be noted first holders. that, as the Commission has pointed out, the report drawn up in 1986 by that firm itself highlights the fact that the under­ taking's overall position had been extremely precarious since 1983 from several different In such circumstances — which are not points of view (operating results, insufficient contested — it must be concluded that the diversification, financial charges and Commission correctly applied Article 92(1) liquidity). Moreover, the Commission by concluding that the financial intervention produced a document drafted in 1985 by in question constituted State aid intended to the Comité national belge de planification et permit the survival of an undertaking which de contrôle de la sidérurgie (Belgian could not otherwise have obtained on the National Committee for Planning and financial markets the funds necessary to Supervision in the Steel Industry) which continue in business. stated that, even if the undertaking had succeeded in reducing its financial burdens by means of a financial restructuring, production costs would none the less have remained 3.9% higher than selling prices. 26. Furthermore, the Commission replied That report also revealed how Tubemeuse, convincingly to the arguments put forward confronted with the structural financial by the Belgian Government to show that the difficulties which appeared in 1979, turned financial contributions at issue could not be to the public authorities (both local and regarded as aid intended to save the under­ regional) to find a solution to those taking from collapse. problems.

In the second place, having regard to the quantity of the exports to non-member countries, it must be concluded that the aid In general, therefore, it does not appear that in question is not of such a nature as to the interpretation of Article 112 relied on by have any influence on intra-Community the Belgian Government can be upheld. In trade. In any event, the Commission has not any event, it must be emphasized that, in provided an adequate statement of the this particular case, the aid granted to reasons on which that part of the decision is Tubemeuse cannot be regarded as aid for based. exports to non-member countries. It is not in fact a benefit granted in connection with commercial transactions with non-member countries. On the contrary, it is intervention intended to support the undertaking's 27. With reference to Article 112, it should production and, as such, falls outside the be pointed out that it cannot be ruled out a scope of Article 112. priori that aid for exports to non-member countries might, at least in certain circum­ 38 -— See, for example, Smit and Herzog, cited above in stances, have an effect on intra-Community footnote 29, p. 397.

I- 1000

BELGIUM v COMMISSION

28. What must therefore be decided is constituted 17% of Community output and, merely whether the production aid offered as has been said, about 90 % of that by the Belgian Government, through the production was exported to the Soviet financial contributions in question, is of Union. such a nature as to affect trade within the Community.

Firstly, the products in question here are The latter observation is consistent with the traded between the Member States. In need to assess, in a dynamic perspective, particular, as can be seen from the contested whether the condition of hindrance to trade decision, approximately 50% of Community (and also that of distortion of competition) production is absorbed by internal demand. exists. 41 In this case, the Commission, in Furthermore, about 25 % of exports (in assessing the effect on trade of the aid in 1984) were to other Member States. At question, rightly took account of the fore­ the same time, Tubemeuse's production seeable development of the pattern of trade. In the contested decision, the Commission 39 — Those principles, laid down by the Court in the context of the interpretation of Articles 85 and 86 (see, in particular, in particular pointed out how, in a general the ludgment of 31 May 1979 in Case 22/78 Hugm v Communi»! [19791 ECR 1869) also concern Article 92, the condition concerning the effect on Community trade 40 — Sec the judgment of 10 July 1986 in Case 234/84 Belgium obviously having the same function in the context of all v Commitsion [ 19861 ECR 2263, paragraph 23 three provisions, which all form part of the chapter of the 41 — See, on that subject, J. Mcgret: Le droit de la Communauté Treaty concerned with 'rules on competition'. économique européenne. Vol 4, p. 384.

I- 1001

OPINION OF MR TESAURO —CASE C-142/87

I-1002

BELGIUM v COMMISSION

right to consider that the exception It should also be added that in this case, provided for in Article 92(3)(c) should not even after the adoption of the contested be applied. decision, Tubemeuse continued to carry on its activities. Full implementation of the Commission's decision was therefore C — The implementation of the contested essential in order to avoid a continuation of decision the distortions of competition brought about by the aid.

(ii) the composition proceedings made immediate implementation of the decision impossible; Finally, it should be emphasized that the Commission has not sought immediate recovery of the unlawful payments but has (iii) having regard to the fact that the merely called upon the Belgian Government company was subject to such to take the necessary steps, within the proceedings, the obligation to recover context of the means offered by the national the aid was disproportionate. legal system, to obtain such repayment. The Member State has fulfilled that obligation by recording the amounts in question in the 32. The arguments put forward by the debts forming part of the composition with Belgian Government, if correctly the company's creditors, a step which the understood, lead to a result which is likely Commission has stated to be adequate to to undermine the effectiveness of the rules ensure compliance with the obligation to on aid. It would be sufficient for an under­ recover stemming from the contested taking which has obtained massive financial decision. Having regard to that fact, there is support from the State to enter into compo­ no need to refer in this case to the settled sition proceedings to prevent the application case-law of the Court according to which to it of the provisions of Article 92 et seq. only absolute impossibility can justify the

I - 1003

OPINION OF MR TESAURO — CASE C-142/87

34. Having regard to all of the foregoing considerations , I conclude that the Court should :

(i) declare the application admissible in all respects;

(ii) dismiss it on its merits ;

(iii) order the Belgian Government to pay the costs.

42 — See, most recently, the judgment of 2 February 1989 in Case 94/87 Commission v Federai Republic of Germany [1989] ECR 175, in particular paragraphs 8 and 9 (footnote 24 above).

I - 1004