C-350/93

COMMISSION v ITALY

OPINION OF ADVOCATE GENERAL JACOBS delivered on 2 February 1995 *

1. This is one of three related cases in which Intesa, Confezioni di Filottrano, and Con­ the Commission has instituted proceedings fezioni Monti ('the four subsidiaries') con­ under Article 93(2) of the Treaty against Ita­ tinued to make heavy operating losses which, ly. 1 In the present case the Commission for a number of years, were made up by the seeks a declaration that, by failing to imple­ State. ment its Decision 89/43/EEC of 26 July 1988 on aids granted by the Italian Govern­ 2 ment to ENI-Lanerossi, Italy has failed to fulfil its obligations under the Treaty. The proceedings raise the same issue as that raised in Case C-348/93, namely whether, in a case where unlawful State aid has been paid indirectly through a public undertaking, the 3. By a letter of 20 May 1983 addressed to aid must be repaid to that undertaking or to the Italian Government ('the Government'), the State. I shall therefore refer where appro­ the Commission stated that it had not priate to my Opinion in Case C-348/93. objected to the grant of aid until the end of 1982 in view of the social and regional importance of the four subsidiaries. It doubted, however, whether financial assis­ tance from public funds could continue to be paid to them in the future without interfer­ ing with the orderly functioning of the com­ mon market. It invited the Government to notify it of any plans to grant aid in the future in accordance with Article 93(3) of the Treaty.

initiated the procedure provided for in Arti­ wear subsidiaries and amounting to cle 93(2) by a letter of 19 December 1984. LIT 260.4 billion are illegal as they were pro­ vided in violation of the provisions of Arti­ cle 93(3) of the EEC Treaty. Moreover, they are incompatible with the common market within the meaning of Article 92 of the Treaty. 5. On the basis of information submitted by the Government during that procedure, the Commission established that, between 1983 and 1987, ENI had received State aid in the form of capital injections in order to cover the operating losses of the four subsid­ iaries. The total amount of aid was Article 2 LIT 260.4 thousand million. In particular, ENI received aid of LIT 78 thousand million in 1983, LIT 56.8 thousand million in 1984, LIT 42.2 thousand million in 1985, LIT 45.9 thousand million in 1986 and LIT 37.5 thousand million in 1987. 3 The These aids shall be withdrawn by recovery. Commission took the view that the aid was incompatible with the common market.

Article 3 6. On 26 July 1988, the Commission adopted the decision in issue in these pro­ ceedings, Articles 1, 2 and 3 of which pro­ vide as follows:

The Italian Government shall inform the Commission within two months of the date of notification of this Decision of the mea­ 'Article 1 sures taken to comply herewith.'

The aids granted between 1983 and 1987 to ENI/Lanerossi in the form of capital injec­ 7. The decision was notified to the Govern­ tions in favour of the group's men's outer ment by letter of 10 August 1988. The Gov­ ernment did not take the measures necessary to recover the aid. It brought an action for the annulment of the decision which was dis­ 3 — See Commission Decision 89/43/EEC, cited in note 2, pp. 54-55 of the Official Journal. missed by the Court in its judgment in Case

C-3U3/88 Italy v Commission, 4 hereafter 9. By a letter of 26 September 1991 the referred to as 'Lanerossi I'. Among the sub­ Commission stated that the difficulties missions of the Government which were referred to by the Italian Government did rejected by the Court in 'Lanerossi I' were not exonerate it from the obligation to submissions to the effect that the Commis­ recover the aid and called on the Govern­ sion attributed unlawful effects to Italy's fail­ ment to notify it within fifteen days of the ure to notify the aid, that the order for measures taken to effect recovery. Since the recovery of the aid was insufficiently rea­ Italian authorities did not take any such soned, and that it was impossible to recover measures, the Commission again empha­ the aid. In response to the Government's sized, by a letter dated 10 March 1992, the argument that it was uncertain from whom urgent need to comply with the decision. the aid was to be recovered, the Court held that the aid was to be recovered from the undertakings which actually benefited from 5 it, namely the four subsidiaries. In 'Laner­ ossi I', however, the Court examined only the issue which entity is responsible for repaying the aid. It did not examine the issue to which entity the aid must be repaid in order to comply with the decision. 6 10. By a letter dated 25 March 1992 the Ital­ ian authorities informed the Commission of their intention to recover the aid by arrang­ ing for the repayment from Lanerossi (renamed SNAM SpA) to ENI of the sum of LIT 260.4 thousand million plus interest. They expressed the view that that method of recovery was sufficient to comply with the decision. It appears from a communication from the Italian Ministry responsible for 8. Following the judgment of the Court, the State holdings to the Ministry of Foreign Commission invited the Government to take Affairs annexed to the letter of 25 March the necessary measures to comply with the 1992 and bearing the same date that recovery decision. On 24 May 1991 the Italian author­ of aid would take place by entering as liabil­ ities informed the Commission that recovery ities in the accounts of SNAM SpA a sum of the aid was proving difficult. In particular, equal to the amount of the aid plus interest. although the Minister responsible for State holdings had asked ENI to take all necessary measures to recover the aid, plus interest, from the four subsidiaries, ENI had stated that it was legally and practically impossible to recover the aid since the four subsidiaries had been wound up and sold to the private sector. 11. On 26 June 1992 the member of the Commission responsible for competition wrote to the Government in relation to all 4 — [1991] ECR I-1433. three cases referred to in paragraph 1. With 5 — Paragraph 57 of the judgment. regard to the present case, he stated that in 6 — Sec also the Opinion of Advocate General Van Gervcn in 'Lanerossi I', cited in note 4, p. 1468. order to comply fully with the decision it

12. By a letter of 14 October 1992 the Italian 14. The Government contests the admissibil­ authorities requested an additional period of ity of the application on two grounds. It grace, stating that the abolition of the aid had claims that the alleged obligation of ENI to to be addressed within the general frame­ repay part of the aid to the Italian State is work of the programme for the privatization not provided for in the decision. It was first of public undertakings which the Govern­ invoked by the Commission in its letter of ment was proposing to implement. By a let­ 26 January 1992. According to the Govern­ ter dated 10 March 1993, the Commission ment, therefore, the application is inadmis­ once more invited the Government to take sible since the Commission seeks a declaration the necessary measures in order to comply that Italy has failed to fulfil an obligation with the decision. It stressed the urgent need which is not provided for in the decision. to eliminate the distortions of competition The Government also argues that the appli­ arising from the failure to implement it and cation infringes Article 38(1)(c) of the Rules fixed 31 March 1993 as the final date for its of Procedure, according to which the appli­ implementation. Since the Italian authorities cation must state the subject-matter of the did not take the requested measures, the proceedings and a summary of the pleas in Commission initiated the present proceed­ law on which it is based. ings.

13. In its application, the Commission argues that, in order to comply fully with the decision, it is not sufficient for the aid to be 15. The Government raised similar objec­ repaid by Lanerossi to ENI . ENI must repay tions to admissibility in Case C-348/93. It is to the Italian State the part of the aid which sufficient to state here that, for the reasons was financed by State funds specifically ear­ which I stated in my Opinion in that case, marked for the textile sector of the Lanerossi the objections to admissibility raised in this

16. I should first point out that even if it were accepted that ENI had no obligation to repay the sum of LIT 173.7 thousand million to the Italian State, Italy would still be in 19. As I stated in my Opinion in Case breach of its obligations under the Treaty. C-348/93, in enforcement proceedings under According to Article 3 of the decision, Italy Article 93(2) the Commission may only was under an obligation to inform the Com­ claim that the defendant Member State has mission of the measures taken to recover the failed to fulfil an obligation arising from the aid within two months of notification, which decision the alleged infringement of which is took place on 10 August 1988. As the Gov­ the subject-matter of the proceedings. It fol­ ernment concedes, SNAM SpA repaid the lows that the issue which entity is respon­ aid to ENI after the end of the prescribed sible for recovering the unlawfully paid aid period. It follows that Italy failed to take the should be determined by reference to the measures necessary to implement the deci­ decision, account being taken of the pur­ sion in time. The Government states that, poses of the obligation to recover. It is nec­ although the aid was repaid after the expiiy essary therefore to determine whether, of the prescribed period, interest was paid. It according to the decision, the aid must be is clear, however, that payment of interest repaid to the Italian State. does not absolve a Member State from the obligation to recover aid within the period prescribed by the Commission in its deci­ sion. Otherwise, a Member State would be free to delay the implementation of a deci­ sion ordering recovery of unlawful State aid and to maintain the distortions of competi­ tion caused as a result of the granting of aid. 20. The decision does not specify to which That would render the provisions of the entity the aid must be repaid. Arti­ Treaty on State aid nugatory. cle 2 merely states that 'these aids shall be withdrawn by recovery'. The Italian lan­ guage version of the decision, which is the 7 only authentic version, is to the same effect. It is clear from the decision, however, that the funds necessary to finance the aid were provided by the State and not by ENI itself.

23. The Government also claims that the obligation to recover only concerns unlaw­ fully paid aid. The Italian State would be under an obligation to recover the aid from Thus, the decision is readily understood as ENI only if the transfer of funds from the meaning that ENI granted financial assis­ Italian State to ENI had been characterized tance to the four subsidiaries on the basis of as aid in the decision. However, the decision the funds given to it by the Italian State and does not state that that transfer of funds is that ENI acted as intermediary. State aid. In support of its views, the Gov­ ernment refers to the judgment of the Court in 'Lanerossi I' where the Court held that, in order to establish the existence of State aid, it was not necessary to establish that the capital funds received by ENI from the Italian State were specifically and expressly intended to make up the losses of the four subsidiaries. It 21. The Government claims that, in order to was sufficient that the receipt of the capital comply with the decision, it is sufficient for funds enabled ENI to release other resources the aid to be repaid to ENI. It is not neces­ to make up the losses of the four subsidiar­ sary for the aid to be repaid to the Italian 9 ies. The Government concludes that the

8 — Decision 89/43/EEC, cited in note 2, p. 55 of the Official Journal. 9 — Paragraph 14 of the judgment.

I-706

COMMISSION v ITALY

issue which entity provided the funds for the tion of the Commission, which lies at the payment of the aid is not relevant in deter­ heart of the system of preventive control of mining the issue to which entity the aid must new State aid provided for by Article 93. If be repaid. that system is to be effective, it is necessary for the relations between the State and public undertakings to be transparent and for the Commission to be able to ascertain that unlawful aid has been recovered.

I-707

OPINION OF MR JACOBS — CASE C-350/93

were not specifically earmarked for the 30. In support of its claim that ENI must undertaking which was the recipient of the repay to the Italian State the amount of aid. It is sufficient that the State holding LIT 173.7 thousand million, the Commission company would not be able to provide the refers to a letter of 22 July 1988 sent by the aid unless it had received funds from the Italian Ministry of Foreign Affairs to the State. In the present case, as already stated, Commission. That letter was sent before the the decision makes it clear that the aid was adoption of the decision with a view to paid to the four subsidiaries by the Italian showing that the financial assistance granted State via ENI . It follows that, in order to by ENI to the four subsidiaries was compat­ comply with the decision, the aid must be ible with the Treaty. It appears from the let­ repaid to the Italian State. ter that the funds granted by the State to ENI and earmarked for its textile sector were as follows: LIT 46 thousand million in 1983, LIT 76 thousand million in 1985 and LIT 51.7 thousand million in 1986, namely LIT 173.7 thousand million in total. Although the preamble to the decision refers 1 in passing to a letter of 22 July 1988, 1it does not do so for the purpose of distin­ guishing between funds granted by the State 28. The Commission says, however, that to ENI earmarked for its textile sector and only part of the aid (LIT 173.7 thousand mil­ funds granted by ENI's own resources. lion) must be repaid to the State on the ground that only that part was financed by State resources. ENI may retain the remain­ ing part of the aid (LIT 86.7 thousand mil­ lion) since it was financed by ENI's own 31. The Government argues that since the resources. letter of 22 July 1988 was not taken into account in the decision, the Commission may not refer to it at this stage in order to argue that ENI is under an obligation to pay the sum of LIT 173.7 thousand million to the Italian State.

in the decision. In this case, however, the effects that the payment of the aid has Commission is not seeking to use the letter already caused to other undertakings in the of 22 July 1988 to impose any new obliga­ textile sector. It refers to the case-law of the tions on Italy. Nor does the letter affect Court according to which a declaration in adversely the interests of the Government. proceedings under Article 169 that a Member On the contrary, on the basis of the letter the State has failed to fulfil its obligations under Commission argues that it is not necessary the Treaty may establish the basis of liability for ENI to repay all the aid to the Italian which that Member State may incur as a State but it is sufficient to repay only result of its default towards other Member 13 LIT 173.7 thousand million. It would be States, the Community or private parties. otherwise if the letter had an adverse effect It claims that similar principles apply to pro­ 12 on the interests of the Government. ceedings under Article 93(2) and asks the Court to make an express statement to that effect in its judgment in the present case. The Commission has made similar requests in Case C-348/93 and C-349/93. For the rea­ 33. A final point: in its application, the sons stated in my Opinions in those cases, I Commission states that the obligation of do not think that it is necessary for the SNAM SpA to repay the unlawful aid, plus Court to make the statement sought by the 4 interest, does not eliminate the harmful Commission. 1

Conclusion

34. Accordingly, I am of the opinion that the Court should: