C-24/95

OPINION OF MR JACOBS — CASE C-24/95

OPINION OF ADVOCATE GENERAL JACOBS delivered on 12 November 1996 *

1. The Bundesverwaltungsgericht (Federal 3. After learning of the proposed aid from Administrative Court) seeks a ruling from reports in the press, the Commission, by a the Court on whether Community law telex of 8 March 1983 addressed to the Fed- requires the setting aside of certain rules of eral Government, requested prior notifica- national administrative law which would tion of the aid under Article 93(3) of the render unlawful a measure revoking the Treaty, adding that no aid should be paid grant of aid and demanding repayment. until the Commission had given its final decision. The telex was forwarded to the Land by letter of 14 March 1983. By decision of 9 June 1983 the Land neverthe- less granted Alean half of the proposed aid, namely DM 4 million.

The facts and the national court's questions

5. By a decision of 14 December 1985 8. Subsequently, by a decision of 26 Septem­ addressed to the Federal Republic of Ger­ ber 1989, the Land revoked the decisions many the Commission found the aid granted granting the aid and demanded repayment of to Alean to be unlawful, having been paid in the D M 8 million. Alean instituted proceed­ violation of Article 93(3) of the Treaty, and ings before the Verwaltungsgericht (Admin­ to be incompatible with the common market istrative Court), which annulled the Land's within the meaning of Article 92 of the decision revoking the aid on the ground that Treaty; it accordingly ordered its recovery. it infringed Paragraph 48(4) of the Verwal­ tungsverfahrensgesetz (Law on Administra­ tive Procedure) of the Land. 3 That provision imposes a time-limit for the revocation of administrative acts of one year from the moment when the authority became aware of the facts justifying such revocation.

3 — It may be noted that the Land of Rheinland-Pfalz applies the Bundesvcrwaltungsverfahrensgesetz also in matters falling 1 — OJ 1986 L 72, p. 30. within the competence of the Land: sec Ferdinand Kopp, 2 — Case 94/87 Commission v Germany [1989] ECR 175. Verwaltungsverfahrensgesetz, 6th edition, C. H. Beck, p. 17.

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OPINION OF MR JACOBS — CASE C-24/95

3. If the reply to questions 1 and 2 are in the affirmative:

'1. Is the competent authority obliged, by reason of the requirement to apply Is the competent authority obliged, by national law in such a way that "the reason of the abovementioned require- recovery required by Community law is ment, to demand, in accordance with a

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LAND RHEINLAND-PFALZ ν ALCAN DEUTSCHLAND

final, binding decision of the EC Com­ procedure laid down in Article 93(2) has mission ordering recovery, the repay­ been completed. Measures granting aid in ment of the aid which was granted even breach of the prohibition laid down by that if such demand is excluded by national provision are unlawful; moreover, the Com­ law because the gain no longer exists mission's final decision on the compatibility and in the absence of bad faith on the of aid with the common market does not part of the recipient of the aid?' have the effect of regularizing ex post facto such measures. 4

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OPINION OF MR JACOBS — CASE C-24/95

15. Recovery of unlawful State aid, whether 10 — See Belgium ν Commission, cited in note 5, paragraph 61 of at the instigation of the Commission or at the judgment and Case C-5/89 Commission ν Germany (the 'BUG-Alutechnik' case) [1990] ECR I-3437, paragraph 12. that of a competitor, takes place in accord­ 11 — See Case 33/76 Rewe ν Landwirtschaftskammer Saarland ance with the relevant procedural provisions [1976] ECR 1989, paragraph 5 of the judgment; Case 45/76 Comet ν Produktschap voor Siergewassen [1976] ECR 2043, of national law, subject to the proviso that paragraph 13; Case 199/82 Amministrazione delle Finanze such provisions are to be applied in such a dello Stato ν San Giorgio [1983] ECR 3595, paragraph 12; CaseC-208/90 Emmott [1991] ECR I-4269, paragraph 16; Joined Cases C-6/90 and C-9/90 Francovich and Others [1991] ECR 1-5357, paragraph 43; Case C-338/91 Steenhorst-Neerings ν Bestuur van de Bedrijfsvereniging voor Detailhandel, Ambachten en Huisvrouwen [1993] 8 — See Case C-301/87 France ν Commission [1990] ECR I-307 ECR I-5475, paragraph 15; Case C-410/92 Johnson [1994] (the 'Boussac' case), paragraphs 19 to 22 of the judgment. See ECR I-5483, paragraph 21; CaseC-312/93 Peterbroeck ν however my Opinion in Case C-42/93 Spain ν Commission Belgian State [1995] ECR I-4599, paragraph 12; and Joined [1994] ECR 1-4175, paragraphs 37 to 39. Cases C-430/93 and C-431/93 Van Schijndel and Van Veen ν SPF [1995] ECR I-4705, paragraph 17. 9 — See most recently the judgment of 11 July 1996 in Case C-39/94 SFEI and Others ν La Poste and Others, [1996] 12 — Joined Cases 205/82 to 215/82 Deutsche Milchkontor ν ECR I-3547, paragraph 67. Germany [1983] ECR 2633, paragraph 30 of the judgment.

18. In the BUG-Alutechnik case 1 5 the Court, while holding that the principles laid 17. Significantly, however, Deutsche Milchk­ down in Deutsche Milchkontor also applied ontor was concerned not with State aid but to the recovery of unlawfully paid State aid, with sums unduly paid under the Commu­ added the following qualification: nity rules on aid for the processing of skimmed-milk powder. The Court showed signs of a stricter approach in relation to recovery of unlawful State aid in its judg­ ment in Alean I, where it emphasized that 'the relevant provisions of national law must be applied in such a way that ... the interests of the Community are taken fully into con­ sideration in the application of a provision which, like that relied upon by the German Government, requires the various interests 'However, it must be noted that, in view of involved to be weighed before a defective the mandatory nature of the supervision of 14 administrative measure is withdrawn'. The State aid by the Commission under provision in question was Paragraph 48(2) of Article 93 of the Treaty, undertakings to the Verwaltungsverfahrensgesetz, the first which an aid has been granted may not, in sentence of which precludes withdrawal of a principle, entertain a legitimate expectation decision conferring a financial advantage if that the aid is lawful unless it has been the recipient expected the decision to be granted in compliance with the procedure legally valid and his expectation merits pro­ laid down in that article. A diligent business­ tection when weighed against the public man should normally be able to determine whether that procedure has been followed.

In that regard, it must be pointed out that, Appraisal of the issues by a communication published in the Official Journal of the European Communi- ties, the Commission informed potential recipients of State aid of the risk attaching to any aid granted them illegally, in that they might have to refund the aid. 16 20. Alean has argued in these proceedings that in the Alean I and BUG-Alutechnik cases the Court was concerned with the obli- gations of the offending Member State — the judgments say nothing about the rights of the recipient of the aid. I do not share that view. In BUG-Alutechnik the Court made it clear that in proceedings for recovery brought in the national courts the recipient It is true that a recipient of illegally granted of aid could plead the principle of legitimate aid is not precluded from relying on excep- expectations only where he had legitimately tional circumstances on the basis of which it assumed the aid to be lawful; in principle had legitimately assumed the aid to be lawful such a plea was possible only where the pro- and thus declining to refund that aid. If such cedure laid down in the Treaty had been a case is brought before a national court, it is complied with. It is true that the Court for that court to assess the material circum- appeared to distinguish between the offend- stances, if necessary after obtaining a pre- ing Member State and the recipient of aid in liminary ruling on interpretation from the holding that Member States could not rely Court of Justice.' upon the legitimate expectations of recipients to justify a failure by a Member State 'to take the steps necessary to implement a Commission decision instructing it to recover the aid'; the Court noted that, if a Member State were able to do so, 'Articles 92 and 93 of the Treaty would be set at naught, since national authorities would thus be able to rely on their own unlawful conduct in order to deprive deci- 19. The Court observed further that 'a pro- sions taken by the Commission under provi- vision laying down a time-limit for the revo- sions of the Treaty of their effectiveness'. 18 cation of an administrative act must, like all However, it cannot be inferred from the the relevant provisions of national law, be judgment that, notwithstanding the obliga- applied in such a way that the recovery tion on Member States to recover unlawful required by Community law is not rendered aid, there is no restriction on the application practically impossible and the interests of the of national rules precluding recovery. It Community are fully taken into consider- would be pointless to impose on Member ation'. 17 States a strict obligation to recover unlawful aid while adopting a liberal approach to the

application of such rules. The obligation on a examination. However, where the Commis­ Member State to recover unlawful aid and sion does not make its position known fol­ the rights of the recipient are plainly two lowing notification, a Member State must sides of the same coin. give the Commission notice before imple­ 19 menting an aid plan. In the present case the Commission opened the consultative examination procedure and issued an interim decision prohibiting payment immediately upon receiving notice from the Federal Gov­ ernment of the Land's intention to pay the aid. Despite being informed of the Commis­ sion's interim decision by the Federal Gov­ ernment the Land proceeded to pay the remainder of the aid. Thus the measures 21. Before considering the specific issues granting the aid were clearly unlawful; more­ raised by the national court's questions I over, their illegality would not have been should make two preliminary points which cured even if the Commission had subse­ arise from the order for reference. First, the quently found the aid to be compatible with Bundesverwaltungsgericht seems to assume the common market. 2 0 that at the moment when the measures granting the aid were adopted their legality was merely questionable; their illegality became clear only when the Commission adopted its final decision or when the Land received notice of the letter of 27 June 1986 from the competent member of the Commis­ sion refusing to propose any modification of that decision. However, that analysis is based on a misunderstanding of the Community rules. It is true that until the Commission 22. Secondly, as I have already explained, the adopted its final decision it was uncertain Bundesverwaltungsgericht has not put any whether the Commission would find the aid question concerning the possible application to be incompatible with the common market of the principle of legitimate expectations. It and, if so, whether it might exceptionally is clear from the judgment in BUG- refrain from ordering its recovery. However, Alutechnik that, since the procedure laid it is clear that the aid was paid in breach of down in the Treaty was not observed, Alean the prohibition in the last sentence of could not in principle have any legitimate Article 93(3) of the Treaty. As set out above expectation that the aid was lawfully granted; (paragraphs 3 and 4), the first payment was a diligent businessman may be expected to made before the aid was notified to the verify whether the procedure laid down in Commission and the second shortly after the the Treaty has been followed. I shall consider Commission had issued an interim decision below whether the principle of legitimate requiring suspension of payment of the aid expectations may nevertheless apply as the and opened the consultative examination procedure under Article 93(2) Treaty. It is true that the Commission exceeded by two weeks the one-month period which it had set 19 — Case 120/73 Lorenz ν Germany [1973] ECR 1471, para­ graph 4 of the judgment. itself for completion of the preliminary 20 — See FNCE, cited in note 4.

25. Alean argues that there must be some limit on its liability to repay the aid; even the institution of proceedings for serious crimi- 23. The Bundesverwaltungsgericht's ques- nal offences is subject to time-limits under tions are concerned specifically with three many legal systems. German rules: (a) the one-year time-limit for revocation of administrative acts; (b) the principle of good faith which a public auth- ority must respect in exercising its discretion to revoke an unlawful decision; and (c) the rule precluding recovery where the recipient of a benefit has ceased to be enriched. Alean argues that such rules, which are to be found in many legal systems, serve interests such as 26. It seems to me, however, that time- legal certainty, substantive justice and pro- limits such as that laid down by Para- portionality. graph 48 of the Verwaltungsverfahrensgesetz pose inherent problems when applied in the sphere of State aid. Such a provision plainly presupposes that the interests of the auth- ority are opposed to those of the individual. Having discovered that a decision granting a financial benefit was unlawful, the authori- ty's interest is normally in recovering the sums paid as expeditiously as possible, whereas the individual's interest is in retain- 24. There is no doubting the truth of that ing the benefit. Where a State authority assertion. Indeed, as already noted, the knowingly commits a breach of Community Court has in general respected the limits law by granting aid, that assumption is not placed by Member States on the bringing of valid. The interests of the authority and the legal proceedings on such grounds. The individual coincide. The authority seeking Court has, however, also insisted that recovery is the same authority which know- national rules should not render the applica- ingly infringed Community law. Unless it tion of Community law virtually impossible has abruptly changed its policy, its interest or excessively difficult. As I shall now lies in ensuring that the recipient retains the explain, in the sphere of State aid it is neces- benefit in violation of Community law. It sary to scrutinize with particular care the will therefore normally have no interest in application of national rules restricting the observing the time-limit for instituting pro- recovery of aid. ceedings.

27. That does not however mean that there tion concerned a sector which had been in is an absence of legal certainty for recipients receipt of aid from the Netherlands authori­ of State aid. A further distinctive feature of ties for a number of years and was intended proceedings in matters of State aid is that it to meet additional costs of an operation for is the Commission which under the Treaty which aid had previously been authorized by has responsibility for examining whether aid the Commission. The Commission had no is compatible with the common market and, excuse for the delay since it was well aware if not, for ordering recovery. The role of the of the situation and the reasons which caused national authorities is merely to give effect to the costs covered by the earlier aid to be the Commission's decision. As the Commis­ exceeded did not call for deep research. sion observes, the legal situation becomes certain from the moment when it adopts its final decision, or at the latest when that decision becomes definitive owing to the expiry of the period for challenge to the decision under Article 173 of the Treaty. 30. There do not appear to be any such cir­ cumstances in the present case. N o r has it been suggested that the Commission's final decision, adopted a little over two years fol­ lowing the commencement of the prelimi­ nary inquiry, was taken with undue delay in 28. Certainly, there may be circumstances in the circumstances of the present case. which the recovery of aid paid in breach of the last sentence of Article 93(3) is precluded by undue delay on the part of the Commis­ sion in adopting its final decision. In RSV v Commission 2 1 the Court held that in the cir­ cumstances of the case a delay of 26 months on the part of the Commission in adopting 31. For the reasons given in paragraph 26 its final decision gave rise to a legitimate above, I do not think recovery can be pre­ expectation on the part of the recipient of cluded by the principle of legitimate expecta­ unnotified aid precluding the Commission tions or legal certainty on account of delay from requiring the Netherlands authorities on the part of the national authorities in to order the refund of aid. complying with the Commission's final decision; if that were so the Community rules would be deprived of their effective­ ness.

time-limit laid down in Paragraph 48(4) of faith could not apply. By granting aid with- the Verwaltungsverfahrensgesetz for the out observing the procedure laid down in the revocation of administrative measures. Treaty the Land, as already noted, infringed the last sentence of Article 93(3). The deci- sions granting aid were not therefore, as the Bundesverwaltungsgericht suggests, merely of questionable legality — they were mani- festly unlawful ab initio. If it were accepted that good faith is required before a decision can be revoked, it is hard to see how a public authority could ever revoke a decision which The principle of good faith it knew — or can be presumed to have known — was unlawful when adopted. Moreover, even on the Bundesverwaltungs- gericht's understanding of how the principle of good faith would apply in the present case, it would be a simple matter for a public authority to ensure that any aid decisions 33. There seems to be equally little scope for were immune from challenge on account of applying the principle of good faith in cases the principle of good faith — it would suffice such as the present. Under Paragraph 48(1) to keep the recipient of the aid in the dark of the Verwaltungsverfahrensgesetz the Land about the aid's illegality. Either way, the had a discretion in deciding whether to principle would frustrate the application of revoke the unlawful aid decisions. The the Community rules on State aid. Bundesverwaltungsgericht concludes that, in exercising that discretion, the Land infringed the principle of good faith by revoking the decision when it had not informed the recipient of the aid of its questionable legal- ity. However, as already noted, under the Treaty it is the Commission which decides upon the recovery of unlawful State aid. The national authorities are obliged to give effect to that decision and enjoy no discretion in Disappearance of the enrichment revoking aid decisions. The exercise by the Commission of its discretion to order recov- ery may of course be challenged by the recipient of the aid before the Court of First Instance within the time-limit laid down by the Treaty. 35. Finally I turn to the rule laid down in Paragraph 818(3) of the Bürgerliches Gesetzbuch according to which recovery is no longer possible where the gain has ceased to exist ("Wegfall der Bereicherung). In order to determine whether that is the case it is 34. Even on the assumption that the Land necessary to determine 'whether ... the total had such discretion, the principle of good assets of the debtor in the light of all relevant

37. I have however more fundamental objec- tions to the application of a rule such as that in Paragraph 818(3) of the Bürgerliches Gesetzbuch in proceedings for the recovery 39. The above view is consistent with the of State aid. It seems to me that — even if principles laid down by the Court with applied uniformly as a principle of Commu- respect to recovery of aid. Recovery of an nity law — such a rule would be inconsistent amount equal to the aid granted, together with the objective of the Community rules where appropriate with interest, is deemed to on State aid of preventing distortion of com- eliminate the competitive advantage obtained petition in the common market. Clearly the by the recipient of the aid and restore the grant of aid to an undertaking which contin- previously existing position. Any other rule would be difficult to apply and, in so far as it entailed recovery of a lesser amount, would jeopardize attainment of the objectives of the 22 — See Lieb in Münchener Kommentar zum Bürgerlichen Gesetzbuch, 2nd edition, 1986, Paragraph 818, RdNr. 70. Treaty provisions.

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C o m m u n i t y law requires a national a u t h o r i t y t o revoke, in accordance w i t h a final C o m m i s s i o n decision ordering recovery of State aid, its decision granting the aid, even w h e r e u n d e r national rules such revocation is precluded because t h e a u t h o r i t y has allowed the time-limit laid d o w n b y national law to elapse o r the a u t h o r i t y was responsible for the illegality of the decision to such a degree that revocation appears to be a breach of g o o d faith t o w a r d s the recipient o r the gain is considered b y national law n o longer t o exist.

23 — BVerWG NJW 1992, p. 703, at p. 704.

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