C-294/90

2. By Decision 89/58/EEC of 13 July 1988 2 the Commission approved aid granted by the United Kingdom Government consisting of a capital contri- (ii) British Aerospace would bear all future bution of £469 million in connection with restructuring costs; the writing off of debts of the (at that time heavily loss-making) Rover Group (here- inafter referred to as 'Rover'). The capital contribution was made with a view to the acquisition of Rover by British Aerospace. The United Kingdom Government had notified a proposed capital contribution of (iii) Rover would not use more than £500 £800 million but the Commission million of its current £1 600 million trading tax losses and those trading tax * Original language: Dutch. losses would remain within Rover; 1 — See OJ 1991 C 21, p. 2, where the 'Commission communication pursuant to Article 93(2) of the EEC Treaty to other Member States and interested parties regarding aid which the United Kingdom Government provided to the Rover Group, an undertaking producing motor vehicles' was published. 2 — Commission Decision concerning aid provided by the United Kingdom Government to the Rover Group, an (iv) British Aerospace could not sell the undertaking producing motor vehicles (OJ 1989 L 25, p. 92). core business of Rover within five years

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million. 3 million. At the request of the Commission the United Kingdom authorities forwarded to it the report of the NAO, the secret memorandum and later also the sale Secondly, approval was granted subject to contract and related documents. the condition that the United Kingdom would refrain until 1992 from granting further aid to Rover in the form of capital contributions and any other form of discre- From an examination of those documents tionary aid, with the exception of a regional and from the discussions which it had with grant not exceeding £78 million in support the Department of Trade and Industry (the of the future investment plan of Rover. 4 DTI) the Commission concluded that the DTI and British Aerospace had agreed as a result of Decision of 89/58/EEC that the United Kingdom Government would grant The Commission concluded in Decision further financial concessions to British 89/58/EEC that the remaining part of the Aerospace in connection with the proposed capital contribution notified by the acquisition of Rover. Again I mention only United Kingdom Government (namely £331 those findings which are relevant to the million) constituted aid which was incom- present case: patible with the common market within the meaning of Article 92 of the EEC Treaty and therefore should not be awarded. 5 First, it appeared from the documents forwarded to the Commission that the United Kingdom authorities had paid British Aerospace £9.5 million to cover part

According to British Aerospace and Rover that inflated price and the 3 — See Article 1 of Decision 89/58/EEC. contribution of the United Kingdom Government were 4 — Ibid. justified on the grounds of social justice and (more speci- 5 — See Article 2 of Decision 89/58/EEC. fically in the case of British Aerospace) public relations.

amount was fixed at £9.5 million in order to 4. After examining the abovementioned remain under the £10 million threshold for documents and information and following parliamentary approval required by the 1982 further discussions with the United Industrial Development Act. Kingdom Government the Commission sent it the disputed letter of 17 July 1990, which was published as a communication in the Official Journal 7 and in which the Commission 'informed the United Kingdom Government of its decision concerning the incorrect execution of Commission Decision 89/58/EEC of 13 July 1988'. 8 Part I of the letter sets out the conditions for approval of the aid laid down in Decision 89/58/EEC, Secondly, it appeared from the documents refers to the documents and additional that the United Kingdom Government had information which the Commission received paid Rover £1.5 million to cover costs of from 21 November 1989 onwards and legal and economic advice incurred by it summarizes the additional financial and connected with the sale. other concessions made to British

1990. The United Kingdom authorities letter states as follows: admitted this and calculated that this deferment represented a net benefit of £22 million for British Aerospace. That figure was calculated by deducting from the gross benefit of £33.4 million saved in interest payments £11.4 million to take account of the fact that the financial costs attaching to a loan of £150 million would have reduced British Aerospace's profits by £33.4 million 7 — The reference to the communication is given in footnote 1 and consequently reduced its tax liability (at above. a corporation tax rate of 35%). The 8 — See the opening words of the communication. Commission does not however agree with 9 — The Commission also considered Decision 89/58/EEC to be infringed because the penalty to be paid by British that method of calculation, because it is the Aerospace in the event of an onward sale was relaxed and Commission's established practice to require . the United Kingdom authorities had given British Aerospace the assurance of 'sympathetic' consideration of repayments of illegal aid without taking aid applications by British Aerospace for non-Rover busi-

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'On the basis of the above considerations, the applicants at the hearing that the United the Commission has decided the following: Kingdom Government brought proceedings in the High Court in London for recovery of the abovementioned sums.

(a) The additional £44.4 million aid granted in the context of the sale of Rover to British Aerospace constitutes Pleas and arguments of the parties illegal aid which was paid in breach of Decision 89/58/EEC and that your authorities are required to recover it from the beneficiaries (ie the £9.5 million payment to cover the purchase cost of minority shares, the £33.4 5. British Aerospace and Rover seek a million benefit to British Aerospace declaration that the abovementioned letter is which occurred from the deferment of void. They consider that the letter the payment of the sales price, and £1.5 constitutes a decision for the purposes of million from Rover which it obtained to Article 189 of the EEC Treaty and that it is cover external advice costs linked to the void on grounds of infringement of essential sale). procedural requirements. In particular the applicants argue that the Commission wrongly failed to hear them before adopting the contested decision. Moreover, they claim that the conditions for recovery of the payments made to British Aerospace are not fulfilled and that the Commission wrongly characterized the payments as aid incom- patible with the common market.

of Decision 89/58/EEC implementing that concessions fall to be dealt with exclusively decision and producing no new legal in the context of the observance and effects. ' ' enforcement of Decision 89/58/EEC. The Commission concludes that the contested letter or decision merely constitutes a measure implementing or enforcing Decision 89/58/EEC and that it was not That the Commission was entitled in this therefore obliged to grant the applicants a case to adopt such an 'implementing further hearing. decision' follows, in its view, from the fact that it could have chosen to institute proceedings against the United Kingdom directly before the Court under Article 93(2) of the Treaty on account of its failure The power of the Commission to adopt to comply with Decision 89/58/EEC. 'implementing decisions' Instead the Commission chose to give the United Kingdom a last opportunity to comply with its obligations by stating in what way and to what extent the United 7. From the foregoing and from the Kingdom had failed in the Commission's arguments of the parties it appears that the view to comply with Decision 89/58/EEC. central issue in this case is to establish what Consequently, according to the legal means the Commission has at its Commission, the letter or decision identified disposal where a Member State does not and quantified the aid which had been comply with the conditions which the granted by the United Kingdom Commission lays down in an earlier decision Government in breach of Decision addressed to the Member State approving 89/58/EEC and ordered its recovery from the grant of aid. More particularly, the the parties concerned. 12 question arises whether, where those conditions are infringed as a result of the grant of additional financial concessions, the Commission is empowered, without hearing the interested parties, to adopt an In the light of that analysis of the contested 'implementing decision' on the basis of its letter or decision the Commission was not earlier decision in which it establishes that obliged to hear the applicants before the conditions have not been met and in adopting a decision. The right to be heard which it concludes, without any further was applicable previously (and was properly investigation, that the additional financial observed) in the context of the procedure concessions constitute aid incompatible with which led to Decision 89/58/EEC. The the common market and orders the recovery additional financial concessions dealt with thereof. For the applicants the right to be in the letter or decision were (i) contem- heard in that connection is therefore the plated and negotiated between the United real issue in this case. Kingdom Government, on the one hand, and British Aerospace and Rover, on the other, before the Commission adopted Decision 89/58/EEC and were not notified to the Commission and (ii) were indisso- 8. Under the system provided for by ciably linked to the terms of sale of Rover Articles 92 and 93 of the Treaty there are in to British Aerospace. Consequently, the my view four Dossible courses of action open to the Commission in the event of an 11 — See pages 8 and 10 of the rejoinder. infringement of an earlier (conditional or 12 — See pages 6 and 8 of the rejoinder. negative) decision concerning State aid.

The last paragraph of the contested letter or That the contested letter does in fact decision (set out in section 4 above) and the constitute a decision which produces legal fact that the letter was included in the C effects and is binding on the United series of the Official Journal as a 'communi- Kingdom Government is apparent finally cation' appear to suggest that the letter from the fact that the Commission did not should be regarded as such a warning and plead that the applicants' action was inad- not as a decision which may be the subject missible but on the contrary stated that it of a legal challenge. On the other hand, had 'no comment to make' concerning the terms used elsewhere in the contested letter applicants' argument that they were directly or decision leave no doubt about the and individually concerned by the obli- gations placed upon the United Kingdom 13 — For such a situation see OJ 1991 C 11, p. 7, where the Commission expressed its view that France had not Government. 15 For the remainder of my observed the conditions of an earlier aid decision. Opinion I shall therefore assume that the 14 — See the judgment in Case 60/81 IBM v Commission [1981] letter is to be regarded as binding on the ECR 2639, in which an action brought against a statement of objections in the context of competition proceedings was Member State to which it is addressed and dismissed on the ground that such a statement was merely a preparatory act and did not oblige the undertaking concerned to alter its trading practices. 15 — See the Commission's defence, p. 1, point 2.

9. The second possibility open to the Commission is to adopt provisional measures such as those described in the 10. The third possibility is that the 'Boussac' judgment. 16 Where as in this case Commission institutes a new procedure a Member State infringes a decision which under the first paragraph of Article 93(2) in approved aid on condition that further respect of the newly discovered payments financial concessions were not granted, the and, if appropriate, finds in a new decision Commission may, if subsequently financial that the payments constitute aid incom- concessions are in fact granted, adopt a patible with the common market. This decision requiring immediate suspension of assessment can and may be made in the the payments and the submission of all the light of the earlier decision. 19 Indeed in its information needed to assess the lawfulness recent judgment in Case C-261/89 2 0 the of the payments. The suspension of the Court accepted that the Commission may payments should give the Commission the declare aid incompatible with the common opportunity to examine whether the market on the ground that it infringes an payments are compatible with the common earlier decision which approved aid on market. , 7 If the Member State does not condition that no further aid would be comply with the order to suspend payment granted for a certain period. That finding and supply the necessary information, the was justified in the judgment on the ground Commission is entitled to assess the compat- that (i) the Commission was bound under ibility of the additional concessions with the procedure laid down by Article 93(2) to Article 92 of the EEC Treaty on the basis of take account of all relevant information, the information at its disposal (that is to say including the legal and economic context the third possibility mentioned below) or to which it assessed in an earlier decision, and refer the matter direct to the Court (that is (ii) that the investigation procedure under to say the first possibility referred to Article 93(2) provides an opportunity to above). 18 take account of all new information which is of such a nature as to alter the assessment made in the earlier decision. 21 It seems to me that the significant point in that judgment is that the 're-use' of the assessment made in the earlier decision is In the present case the Commission did not permissible only in the context of a new adopt this course of action and moreover procedure under Article 93(2), which requires the Commission to give 'notice to the 16 — Judgment in Case C-301/87 France v Commission [1990] ECR 307, in particular paras 9 to 24. 17 — See para. 21 of the 'Boussac' judgment. I shall shortly 19 — I am assuming that the earlier decision was not challenged consider the question whether that assessment may be within the prescribed period and hence became definitive. made on the basis of the earlier Commission decision that 20 — Judgment of 3 October 1991 Italy v Commission [1991] has been infringed (see section 10). ECR 1-4437. 18 — See paras 22 and 23 of the 'Boussac' judgment. 21 — See paras 20 to 23 of the judgment.

11. The Commission also has, in my view, a fourth possibility. Where, as appears to be the case here, the Commission concludes that in adopting its earlier decision it did not-have all the relevant facts at its disposal because it was unaware that the Member State concerned, in addition to the notified In this case, however, the Commission did aid, paid a certain amount of unnotified aid not use this fourth possibility either. (for example in order to overcome the effect Nowhere in the contested letter or decision of a decision finding part of the aid to be or in its submissions before the Court does incompatible with the common market), it it refer to the withdrawal of its earlier may withdraw the partial and conditional approval and the opening of a new approval which it gave earlier to the notified procedure under Article 93(2). On the aid on the basis of the principle /raus omnia contrary, in Part II, point B, of the corrumpit. The early approval was given on contested letter or decision, the Commission concludes that, in assessing the price paid by 22 — See the fira subparagraph of Article 93(2). The Commission ahvays announces the opening of a new British Aerospace for Rover at the time in procedure in the Official Journal. In its Fifteenth Report the light of the additional information on Competition Policy (No 171) it stated moreover that such announcements would in future be accompanied by which it subsequently received, it would not considerably more information with the aim of have come to any other conclusion than that encouraging the intervention of interested third parties in any procedure opened by ¡L to which it came in Decision 89/58/EEC

That does not mean, however, that the Commission may not adopt a new decision with regard to the additional financial concessions granted in breach of an earlier decision in which it makes a finding 12. In my view the possible courses of concerning the compatibility of the action outlined above, taken individually or additional concessions with the common together, provide the Commission with market. Nor does it prevent (see the effective powers to ensure that its decisions judgment in Case C-261/89 mentioned in on aid are observed. By the letter or section 10 above) that new decision from decision in question the Commission none assessing the compatibility of the additional the less chose a different method. As already financial concessions with the common stated, it adopted an 'implementing market in the light of the earlier decision. decision' on the basis of Decision However, where such a new decision is 89/58/EEC in which it found that the taken the Commission's assessment United Kingdom Government had infringed should — even in the lastmentioned case, as Decision 89/58/EEC by granting a number the Court made clear in the judgment in of additional financial concessions and Case C-261/89 mentioned in section 10 required that government to remedy the above — be carried out in accordance with infringement by recovering the concessions the procedure laid down by Article 93(2), from the undertakings which had received that is to say after advising and consulting them. In my view, however, the system laid the interested parties. It is common ground down by Article 92 and 93 of the EEC that in this case that did not occur. Treaty does not confer upon the Commission the power to adopt such a decision. The Commission's power to adopt decisions under Article 93 is intended to allow it to assess whether national aid is compatible with the common market. It cannot, on the other hand, be used solely to I therefore reject completely the establish non-observance of an earlier Commission's view that the application of decision. In particular, the Commission does the abovementioned procedure may be not have the power, once it has adopted a dismissed as an unnecessary formal decision concerning the compatibility of aid requirement. The new investigation with the common market, to adopt a new procedure and above all consultation of all decision in which it finds that that decision has not been observed (in this case because 24 — See also para. 3 of the 'Boussac' judgment (cited above in the Member State granted additional section 9), in which the Court held that, if a Member Sute continues to pay unnotified aid notwithstanding a financial concessions). It appears from Commission decision, the Commission may bring that Member Sute before the Court direct — but not, I would add, esublish the infringement of the decision of its own 23 — OJ 1989 L 25, p. 95. motion.

the interested parties should allow the the recipients payments made in breach of Commission to take account of all the the earlier decision, infringed the principle relevant changes in the factual circum- laid down in Article 4 of the Treaty that stances which have taken place since the each institution must act within the limits of adoption of the earlier decision. That is the powers conferred upon it by the Treaty. moreover illustrated by the present case. The applicants have raised four points which were not covered by Decision 89/58/EEC and which were dealt with by the Commission in the contested decision without giving the applicants the oppor- In the alternative: the applicants' remaining tunity to submit their comments.

Moreover, I value of the minority shares in Rover assume, just as I did in my main discussion, subsequently acquired by British Aerospace. that the Commission may in its later As is apparent from my discussion — which decision assess the compatibility of I undertake only by way of alternative — of subsequently granted aid with the common the arguments put forward by the parties in market on the basis of its earlier decision. connection with those points, examination of the second point in particular is made difficult by the fact that the applicants were not heard before the Commission adopted

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17. The third and last question is whether the Commission in the contested decision may require the recovery of the aid which it has found to be incompatible with the As already stated, the Commission may common market on the basis of Decision assess the compatibility of subsequently 89/58/EEC. In principle this question must be given an affirmative answer if it is 25 — See the tenns of sale set out in Pan II of Decision 89/58/EEC. The applicants cannot rely on the assumed, as I do in this part of my Opinion, argument — put forward at the hearing — that the that the Commission has the power to adopt operative pan of the decision does not expressly mention • that the price must be paid immediately, since the an 'implementing decision' in which it estab- statement of reasons makes clear chat that is the case; lishes the infringement of an earlier decision moreover, in the absence of a contractual clause to the contrary, immediate payment is the normal rule. and specifies the consequences of that

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First, the applicants argue that the The Commission replies that it accepted the Commission should have taken account of calculation put forward by the United the fact that a large part of British Kingdom Government (which was based on Aerospace's turnover derives from trading the average interest rate on the market for a activities carried on outside the common loan for 20 months). The lower interest rate market or on markets which are uncon- which British Aerospace suggests it could nected with the market on which Rover is have obtained if it had made long-term active and thus cannot disrupt competition borrowings in July 1988 is not suitable on that market. In other words, the because payment was deferred only for 20 Commission should have regarded only part months, and therefore a comparison with of the benefit as falsifying competition. long-term borrowing is inappropriate.

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Conclusion

21. O n the basis of the foregoing I propose that the C o u r t declare void the Commission decision contained in the letter of 27 J u n e 1991 on the g r o u n d of lack of powers or infringement of essential procedural requirements, in so far as that decision requires the United Kingdom to recover an a m o u n t of £44.4 million from the applicants; in addition the Commission should be ordered to pay the costs.

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