C-324/90

GERMANY AND PLEUGER WORTHINGTON v COMMISSION

OPINION OF MR ADVOCATE GENERAL DARMON delivered on 6 October 1993 *

Mr President, justified by the risk that the undertaking in Members of the Court, question might relocate to a country in south-east Asia where labour costs were low.

1. The Federal Republic of Germany and Pleuger Worthington GmbH , a company, 4. On 15 April 1988, however, the Federal (hereinafter referred to as 'Pleuger') seek the Republic of Germany admitted that the sub­ annulment of a Commission decision sidy was designed to remedy the sharp com­ of 18 July 1990 ' declaring incompatible with petition to which Hamburg was exposed as a the common market a programme of aid result of the aid granted by the adjacent designed to prevent the exodus of undertak­ frontier areas of the former German Demo­ ings which was introduced by the city of cratic Republic. It also named three other Hamburg without prior notice to the Com­ undertakings which had received similar sub­ mission. sidies, yet without mentioning Pleuger.

2. I shall briefly summarize the facts and 5. On the basis of those data, the Commis­ would refer for further details to the Report sion considered that 2 for the Hearing.

'[i]n all probability the aforementioned aid 3. The Commission learned informally fulfils the requirements of Article 92(1) of in 1986 that the city of Hamburg had the EEC Treaty ...', granted a subsidy to Montblanc-Simplo GmbH. It therefore asked the Federal Republic of Germany for further informa­ tion. On 22 October 1987 the latter con­ firmed that that subsidy had in fact been and that granted and stated that, in its view, it was

6. At talks held on 7 November 1989 between representatives of the Federal Republic of Germany, the city of Hamburg and the Commission, 33 cases of aid granted 8. By letter dated 3 January 1990, the Fed­ between 1986 and 1988 by the Hamburger eral Republic of Germany sent certain infor­ Kreditkommission (Hamburg Credit Com­ mation to the Commission. Following that mission) came to the Commission's notice, letter, the Commission adopted the decision although the names of the recipient under­ under consideration on the ground that the takings were not revealed. The Commission subsidies constituted aid within the meaning asked for particulars of each of the aids of Article 92(1) which formed part of a granted, in particular the names of the recip­ regional programme designed to prevent the ient undertakings, the sums invested, the out-migration of undertakings, with the amount of the subsidies, the number of jobs result that there was no need to examine in in Hamburg, and turnover. depth each case in which aid was granted.

9. The Commission concluded that the pro­ 7. On 8 December 1989 the Commission gramme was unlawful because it had not published in the Official Journal of the Euro- been notified, and was incompatible with pean Communities a notice in which it stated Article 92(1), without any derogation being that possible under Article 92(3)(a) or (c).

3 — Letter of 3 May 1989, ref. SG(89) D/5660. Annex 7 to the defence in Case C-324/90. 4 — Notice C-11/89 (OJ 1989 C 309, p. 3).

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10. A preliminary observation on the unlaw­ — secondly, the pleas relating to the fulness of aid for want of notification is infringement of the principle audi called for, since the decision is partly based alteram partem specifically set out by thereon. Pleuger.

OPINION OF MR DARMON — JOINED CASES C-324/90 AND C-342/90

of the subsidy granted on the ground that it 'the decisions of Member States by which is not an aid in so far as the latter, in pursuit of their own economic and social objectives, give, by unilateral and autonomous decisions, undertakings or other persons resources or procure for them advantages intended to encourage the attain­ ment of the economic or social objectives 9 'it could also have obtained financial facili­ sought'. ties ... by grouping its production units in 6 the region around Hamburg' .

20. By granting subsidies to certain under­ takings, regardless, moreover, of the reasons 17. Such an approach is manifestly contrary invoked in support of such grant, the city of to the Court's case-law on the definition of Hamburg granted aid within the meaning of aid. Article 92(1).

18. The Court has held that 21. I therefore propose that this plea should be rejected.

'any State measure, in so far as it has the effect of according aid in any form whatso­ ever, may be assessed on the basis of Art­ icle 92 for its compatibility with the common B — The existence of a regional programme 7 market'.

19. Moreover, in the judgment in Denkav- 22. I would now turn to the key question 8 it, the Court categorized as aid: concerning the Commission's power to infer the existence of a programme of aid from the information at its disposal notified to it by the applicant State. 6 — Section 43 of the application. 7 — Judgment in Case 290/83 Commission v France [1985] ECR 439, paragraph 13. 8 — Judgment in Case 61/79 Amministrazione delle Finanze dello Stato v Denkavit Italiana [1980] ECR 1205. 9 — Paragraph 31.

'Es handelt sich hierbei höchstwahrschein­ lich um Beihilfen im Sinne von Artikel 92 Absatz 1 EWG-Vertrag, für die weder die 25. The procedure initiated under Art­ zugrundeliegende Regelung noch der Haus­ icle 93(2) against the aid granted by the haltstitel oder einzelne Anwendungsfälle der city of Hamburg referred, according to the Kommission gemeldet worden sind'. 14

wording of the aforementioned letter

12 — Third paragraph of Annex 7 to the defence in Case 10 — Application of the German Government, pp. 4 and 18 to 43. C-324/90. 11 — Judgment in Case 234/84 Belgium v Commission [1986] 13 — OJ 1989 C 309, p. 3. ECR 2263. paragraph 16. 14 — Section 2.

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34. To claim that the Commission had to 'put the Federal Republic of Germany on notice' that it had to communicate informa­ tion from which it could be concluded that a programme did not exist disregards not only 31. I would recall in this connection that, in the respective roles of the Commission and that setting, the Commission does not have means of investigation available to it compa­ rable to those which it has in competition cases. In this case, it merely checks the com­ 15 — Annex 2 to the Commission's defence in Case C-324/90.

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the Member States in the matter, but also the the applicable law, its publication date, its case-law of the Court. objectives and its duration, the conditions of grant, the definition of the recipients, the 1 budget, etc', 9and asked it to inform it of its position within one month.

35. As far as the first point is concerned, it is sufficient to recall that the Commission does not have a power of investigation. 38. In its letter of 3 January 1990, that is to say, seven months after the expiry of the pre­ scribed period, the German Government sent the Commission information about the recipient undertakings, all under the general 36. As for the case-law of the Court, and to heading of the 'prevention of an exodus of cite only the judgment in Case C-301/87 undertakings'. That letter contained no state­ 16 France v Commission, it appears that ment contesting the existence of a pro­ gramme and no data from which the fact that the existence of a programme was contested could be inferred.

41. I shall therefore appraise whether the 45. In this case, the definition of the expres­ Commission was justified, in the light of the sion 'aid programme' is a central part of the information available to it, to conclude that debate, as a result of which I should take a there was an aid programme. stand on the criteria of the regional pro­ gramme and determine its content.

42. The Court has already had occasion to define the concept of an aid programme, 46. In my view, such a programme is charac­ albeit indirectly, in the judgment in Germany terized simply by the objective assigned by 22 v Commission. In that case, the Commis­ one or more public authorities to the aid sion claimed that the regional aid was funda­ granted. mentally incompatible with the common market.

47. It is irrelevant whether a single authority is involved; if it were relevant, the assessment of the regional nature of the programme 43. However, the Court held that would differ depending on whether only one or several decentralized authorities were behind the various subsidies.

'Aid programmes may concern a whole sec­ tor of the economy or may have a regional objective and be intended to encourage 48. Likewise, the criterion of publicity can­ undertakings to invest in a particular not be involved in that concept. Transpar­ area.' 23 ency exists only where the aid has been the subject of prior notification to the Commis­ sion. Transparency is therefore bound to be lacking where the public authority has 22 — Judgment in Case 248/84 Germany v Commission [1987] decided not to effect notification. In such ECR 4013. 23 — Paragraph 18. case, the public authority can hardly be in

'[i]n the case of an aid programme the Com­ 51. In the event, suffice it to recall that it mission may confine itself to examining the should be considered that the various cases characteristics of the programme in question in which subsidies were granted were moti­ in order to determine whether, by reason of vated by the aim of preventing the exodus of the high amounts or percentages of aid, the 24 undertakings. nature of the investments for which aid is granted or other terms of the programme, it gives an appreciable advantage to recipients in relation to their competitors and is likely to benefit in particular undertakings engaged 26 52. However, if the Court should consider in trade between Member States'. that the aim alone is per se insufficient to define a regional programme, the facts men­ tioned by the Commission in the contested decision plainly confirm that there was such a programme. 55. In such a case, it is for the Commission to assess the impact of the programme alone from the point of view of its effects on trade 24 — Moreover, the fact that all the contracts contain a clause to between Member States and its effects on the effect that the amount of the subsidy should be repaid in the event that the headquarters or activities of the under­ taking arc transferred or that staff is cut by more than 20% for reasons other than cyclical ones, supports the Commis­ sion's arguments. Such a condition shows that the aid is granted for individual reasons and not on account of a 25 — Decision 91/389/EEC, cited above, p. 5. higher general interest. 26 — Paragraph 18.

57. In a context which, albeit different from the one at issue here — individual aids were involved —, can certainly be likened to it, the Court held in Case C-301/87 France v 27 60. For my part, I cannot see that there is Commission that, where unnotified aid any contradiction, since in that case the was concerned, Commission authorized in principle the establishment of such a scheme, but required prior notification of 'significant individual cases' in which the granting of aid was likely to affect intra-Community trade to an extent 30 contrary to the common interest. '[i]f the Commission were required in its decision to demonstrate the real effects of aid which had already been granted, that would ultimately favour those Member States which grant aid in breach of the duty to notify aid laid down in Article 93(3) of the 61. Consequently, I consider that that plea Treaty, to the detriment of those which do 28 should be rejected. notify aid at the planning stage'.

29 — Judgment in Case 102/87 France v Commission [1988] 27 — Cited above. ECR 4067. 28 — Paragraph 33. 30 — Paragraph 6.

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C — Infringement of Article 92(1) of the 64. The Commission observes in the deci­ Treaty sion at issue that, as a result of the average intensity of the aid granted, 'the recipient undertakings gain a substantial advantage over their non-assisted competitors'.

62. The applicants maintain that Art­ icle 92(1) is inapplicable on the ground that the aid at issue was not likely to distort com­ petition or affect trade between the Member States and should hence be considered com­ 65. The intensity of the aid was such as to patible with the common market. However, affect recipient undertakings' decisions on the appraisal of compatibility will be con­ their geographical location, since the city of fined to the programme alone, as has already Hamburg bore costs which they would nor­ been shown, in accordance with the standard mally have had to bear. The budget enabling laid down by the Court in Germany v Com- the grant of that aid amounted to the con­ mission, cited above. siderable sum of DM27.3 million over the 1986-88 period.

69. With regard to affecting trade between Member States, I would recall that 'the proposed aid would enable the under­ takings benefiting from it to reduce their investment costs, thereby strengthening their position as against that of other undertakings 36 competing with them in the Community'.

'[W]hen State financial aid strengthens the position of an undertaking compared with other undertakings competing in intra- Community trade the latter must be 39 regarded as affected by that aid .' 68. That condition may also be fulfilled where the aid enables undertakings situated in a Member State to maintain production, thus affecting the possibilities available to competing undertakings in other Member States for exporting their products to that State. It appears from the judgment in 70. The Court reaffirmed that principle in Case 102/87 France v Commission, cited 40 37 above, that the judgment in Belgium v Commission, where it stressed that

'aid to an undertaking may be such as to affect trade between the Member States and 'the relatively small amount of aid or the distort competition where that undertaking relatively small size of the undertaking competes with products coming from other which receives it does not as such exclude Member States, even if it does not itself the possibility that intra-Community trade 41 export its products. Such a situation may might be affected'.

35 — Judgment in Case 259/85 France v Commission [1987] 38 — Paragraph 19. ECR 4393. 39 — Judgment in Case 730/79 Philip Morris v Commission, cited 36 — Paragraph 24. above, paragraph 11. 37 — See also the judgment in Case C-303/88 Italy v Commission 40 — Judgment in Case C-142/87, cited above. [1991] ECRI-1433,paragraph 27. 41 — Paragraph 43.

74. As for the plea alleging lack of a state­ ment of reasons, it is sufficient in order to 'In principle the Commission will not object reject it to observe that, in the decision at to aid schemes of minor importance notified issue, the Commission listed at length the pursuant to Article 93(3) EEC' 45

relevant economic and social data designed to

which meet certain criteria.

'allow the Court to review its legality and to provide the undertaking concerned with the 43 — Judgment in Joined Cases 296/82 and 318/82 Kingdom of the Netherlands and Leeuwarder Papterwarenfabnek v Commission [1985] ECR 809, paragraph 19. 44 — Notification of an aid scheme of minor importance 42 — Judgment in Case 248/84 Gennany v Commission, cited (OJ 1990 C 40, p. 2). above, paragraph 18. 45 — Second paragraph, my emphasis.

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79. Consequently, that plea cannot succeed. 48 — Even where a region is regarded as less-favoured, it should be borne in mind, : is J. Biancarelli writes, that ' . if the region in question is recognized as being less-favoured, this does not entail any entitlement to the grant of aid. In addi­ tion, any aid must be of a structuring nature, which is tan­ 46 — Judgment in Case C-364/90 Italy v Commission [1993] tamount to ruling out rescue aid' (Actualité juridique, Droit ECR1-2097. administratif, 20 June 1993, No 6, p. 412 et seq., especially 47 — Paragraph 24. at p. 425.

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mits the development of certain areas with­ 84. As regards its actual application, the out being restricted by the economic condi­ Commission found, in accordance with the tions laid down in Article 92(3)(a), provided method for the application of Arti­ 51 such aid "does not adversely affect trading cle 92(3)(a), that the city of Hamburg conditions to an extent contrary to the com­ could not qualify for an exemption under mon interest". That provision gives the that provision, in so far as per capita GDP Commission power to authorize aid expressed in purchase power parities was not intended to further the economic develop­ less than 75% of the Community average. ment of areas of a Member State which are The per capita GDP index was in fact 187.7 disadvantaged in relation to the national (the Community average being, of course, 49 average.' 100).

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Community context in order to compare the 'According to the Commission's calcula­ levels of a given region in relation to the tions, the federal average of the regional rates national average. in 1986 was 10.0% and the employment sit­ uation in Hamburg was assessed on the basis of that figure. If the calculations of the Fed­ eral Government result in another figure, the Commission asks it to notify it.'

87. It appears from the first stage of analysis that both per capita GDP in 1983-87 (162.9) and the rate of unemployment (126.5) could There was no response to that request. not justify the grant of aid by the city of Hamburg (national average: 100).

'[has not] found any grounds establishing that the proposed aid' — here the aid pro­ gramme — 'meets the conditions laid down to enforce derogations pursuant to Art­ 56 icle 92(3) of the EEC Treaty'. 96. To grant it an exemption under that head would entail in the first place the annulment of the advantages gained by an undertaking because it set up in a less-privileged area, with the result that any regional policy on its behalf would be destined to fail, and sec­ 93. Consequently, that plea must also be ondly pressure for outbidding the aid on rejected. offer, with the regions near Hamburg endeavouring to offset the differential. As a result, there would be a danger of a trend, which would be difficult to control, for sub­ sidies undermining the drive to bring up to par the Community's less-privileged regions G — Infringement of the prohibition of dis- to proliferate in all the Member States of the crimination Community, particularly in those with a high budgetary capacity.

94. As regards the alleged infringement of the prohibition of discrimination, I would first dismiss the argument to the effect that the contested aid is justified by the keen competition faced by Hamburg as a result of 97. As for the second argument to the effect its proximity to the bordering regions of the that the Commission authorized the grant of former German Democratic Republic. aid by the Kingdom of Denmark to Soender- jylland, a region near the 'Zonenrandgebiet', 57 even though its decision was not based on socio-economic grounds, it is sufficient to observe that even if such an irregularity were proven it could not validate another aid 95. As the Commission points out in the granted contrary to the rules of the Treaty. contested decision, those regions benefit by

II — Audi alteram partem 'Article 93(2) does not require individual notice to be given to particular persons. Its sole purpose is to oblige the Commission to take steps to ensure that all persons who may be concerned are notified and given an opportunity of putting forward their argu­ 100. Since it has been found that the pro­ ments. Under those circumstances, the pub­ gramme existed and was incompatible with lication of a notice in the Official Journal is the rules of the Treaty, it is necessary to an appropriate means of informing all the parties concerned that a procedure has been 62 initiated'. 58 — Judgment in Case 134/84 Williams v Court of Auditors [1985] ECR 2225. See also to this effect the judgment in Case 246/83 De Angelis v Commission [1985] ECR 1253, paragraph 17. 59 — Paragraph 14. 61 — Judgment in Case 323/82 Intermills v Commission [1984] 60 — Judgment in Case 730/79 Philip Morns, cited above, para­ ECR 3809. graph 24. 62 — Paragraph 17.

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103. In view of the specific nature of requirement to provide a statement of rea­ regional aids, which concern disparate sec­ sons as set out in the Court's case-law, tors of activity and recipients, a notice in the in particular in two judgments delivered 64 Official Journal of the European Communi- on 21 March 1991, and hence that it ties is bound to be less precise than in the should be annulled. case of sectoral aids.

63 — As regards the repayment of the aid unlawfully granted, the decision in question is reasoned as follows: 'Since the aid in B — The requirement to state reasons for the question granted by the city of Hamburg docs not have any justification, it must, in so far as it has already been dis­ repayment of the aid granted bursed, be recovered from the recipient undertakings. As the demand for repayment is a logical consequence of the illegality and incompatibility of an aid and as especially the obligation provider/ for in Article 93(3) of the Treaty to notify a new aid is of a fundamental nature, any undertak­ ing benefiting from State aids must be aware that pnor notification of such an aid must be given to the Commis­ sion and that in the absence of notification repayment of the aid may be required.' (second paragraph of section IV, 14). 64 — Judgments in Case C-303/88 Italy v Commission [1991] 106. The applicant undertaking considers ECR I-1433 (and granted to ENI-Lancrossi) and in Case C-305/89 Italy v Commission [1991] ECR I-1603 (aid that the decision at issue does not satisfy the granted to Alfa Romeo).

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109. In the judgment in Case 70/72 Com- Mr Advocate General Van Gerven in his 65 68 mission v Germany, the Court held that Opinion in the two cases cited above. the Commission was empowered to require the repayment of aid granted in breach of the Treaty even though Article 93(2) refers only to the abolition and alteration of such aid. That approach was based on the effectiveness of that provision.

111. It might be inferred from the case-law that, where the decision that the aid was incompatible with the rules of the Treaty was 68 — In his Opinion in the case concerning aid granted to ENI- Lanerossi, Mr Van Gerven stated as follows: "... the Com­ reasoned, no additional formality was mission states in reply that it is immediately apparent from Article 93(2) of the Treaty — which provides tor the aboli­ required with regard to the recovery of aid tion (or alteration) of aid — that the order for recovery granted in breach of the Treaty rules. This does not need to be based on specific reasons. It can be inferred from the Court's judgment in Case 70/72 that the was, moreover, the argument put forward by reasons which the Commission must state in its decision relate to the incompatibility of the aid with the Treaty; if reasons are stated in that regard, the Commission can require the aid to be recovered at once. That is correct, in my view.' (second paragraph of section 23). In his Opinion in the case concerning aid granted to Alfa Romeo, he stated 65 — Judgment in Case 70/72 Commission v Germany [1973] that 'Recovery, the judgment in Case C-142/87 adds, is the ECR 813. "logical consequence" of a finding of invalidity, which, it may be inferred, thus requires no specific reasoning' (sec­ 66 — Judgment in Case C-142/87 Belgium v Commission [1990] tion 21). ECR 1-959. 67 — Paragraph 66. 69 — Judgment in Case C-305/89, cited above.

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complaint, the Court referred to its case-law 'the recovery of the total amount of aid was according to which ordered because of "the seriousness and scale of the breach". Although such a justification, viewed in isolation, may seem excessively laconic, it should be borne in mind that it is put forward in the context of a decision which explains in detail the impact of the aid 'recovery of unlawful aid is the logical con­ 73 70 in question on a sector in crisis ...'. sequence of the finding that it is unlawful'.

70 — Paragraph 41. 71 — Judgment in Case C-303/88, cited above. 72 — Paragraph 52. 73 — Paragraph 54.

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ment of the aid where the Commission finds parties, it should be observed that when the it to be incompatible since, ex bypothesi, it procedure was initiated the Commission has not yet been granted. informed the German Government that any aid granted before the procedure was termi­ nated might result in a demand for the aid to be repaid, and this was moreover reiterated in the Commission's notice in the Official 120. Since the Commission has found that Journal of the European Communities. the aid programme is incompatible with the Treaty and stated reasons for that incompat­ ibility, the Commission's decision appears to me to comply with the requirements of Art­ icle 190 of the Treaty. 122. In addition, the decision that the aid should be repaid is properly justified having regard to the decision that the aid was incompatible with the Treaty, which evi­ denced the risk that a harmonious regional 121. In the event, however, that the Court policy would be impaired on account of the should consider that such a formula does not impact and magnitude of the amounts of aid sufficiently safeguard the rights of interested granted.

123. I therefore propose that the applications should be dismissed and that the Court should order the costs to be paid by the Federal Republic of Germany in Case C-324/90 and by Pleuger Worthington GmbH in Case C-342/90.

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