C-278/95

SIEMENS v COMMISSION

OPINION OF ADVOCATE GENERAL ELMER delivered on 12 December 1996 *

1. By the present appeal Siemens SA asks the those undertakings themselves or by other Court to set aside the judgment of the Court natural or legal persons under private or of First Instance of 8 June 1995 in Case public law, provided that they are in the gen­ 1 T-459/93 Siemens SA v Commission, in eral economic interest'. which the Court of First Instance upheld Commission Decision 92/483/EEC of 24 June 1992 concerning aid provided by the Brussels Regional Authorities (Belgium) in favour of the activities of Siemens SA in the data-processing and telecommunications sec­ 2 tors (hereinafter 'Decision 92/483') order­ ing the regional authorities to refrain from making a payment of BFR 28 694 000 and to recover from Siemens BFR 227 751 000 plus Article 3(a) provides that subsidies may be interest. granted to credit institutions approved for that purpose in order to enable them to grant loans at a reduced rate of interest for the operations referred to in Article 1, on con­ dition that those loans are used for one of the purposes therein set out, which include, Relevant legal rules and the decisions of the in particular, the 'direct financing of invest­ Commission ments in immovable property, whether con­ structed or not, and in plant or machinery needed to carry out those operations' and the 'direct financing of intangible invest­ ments, such as organization studies and research or development of prototypes, new products and new manufacturing processes'. 2. Article 1(a) of the Law of 17 July 1959 introducing and coordinating measures to encourage economic expansion and the cre­ ation of new industries (hereinafter 'the 1959 Law') established a system of general aid for operations 'contributing directly to the cre­ ation, extension, conversion or moderniza­ tion of industrial or craft undertakings, whether the said activities are carried on by 3. By Decision 75/397/EEC of 17 June 1975 on the aids granted by the Belgian Govern­ ment pursuant to the Law of 17 July 1959 * Original language: Danish. 1 — [1995] ECR II-1675. introducing and coordinating measures to 2 — OJ 1992 L 288, p. 25. encourage economic expansion and the

'Whereas the Belgian Law of 17 July 1959 introduces measures to encourage economic It is apparent from Recital II that the Com­ expansion and the creation of new industries mission is of the view that the general aid and, for this purpose, provides for a number scheme is incompatible with the common of aids to be granted to activities which help market. In that regard, the Commission "to create, extend, convert or modernize refers to the extremely general nature of the large and small Belgian undertakings" in the scheme, which enables any industrial enter­ general economic interest; whereas the Royal prise, wherever it may be and in whatever Order of 17 August 1959 implementing that industry it may be operating, to come within Law treats the following, "inter alia", as its scope. being in the general interest: "the creation of jobs in connection with employment poli­ cies; the establishment of new industries and the manufacture of new products; the deve­ lopment of existing undertakings which adjust to the changed situation on the mar­ ket; the improvement of the situation of depressed industries; the more rational utili­ zation of the country's economic resources; The Commission considered, however (see, the improvement of working conditions, of in particular, the second indent of Article 1 the conditions in which undertakings operate and Article 2 of the Decision), that aids (by increasing productivity or profitability) granted under the 1959 Law to an individual and of the quality of production; the estab- undertaking or to a restricted number of lishment or development of research facilities undertakings, provided that they were not in enterprises;" 'significant' as defined in the Decision, were compatible with the common market and therefore did not need to be notified to the 3 — OJ 1975 L 177, p. 13. Commission pursuant to Article 93(3) of the

That communication was not notified to the Commission. 7. In its communication of 1979 on regional 6 aid systems ('the 1979 communication') the Commission published the principles which, 4 — Under Article 93(3) of the Treaty, the Commission is to be informed, in sufficient time to enable it to submit its com- in accordance with the powers vested in it by ments, of any plans to grant or alter aid. 5 — Sec letter SG(79) D 10478, published in Competition Law in the European Communities, Vol. II, p. 150, Office for Offi- cial Publications of the European Communities, 1990. The thresholds are set out on p. 27 of Decision 92/483. 6 — OJ 1979 C 31, p. 9.

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9. The Commission considered that the expenditure on equipment leased to clients did not meet the criteria laid down by Articles 1 and 3(a) of the 1959 Law and approved by the Commission because it did not contribute to the creation, extension, In paragraph 18(ii) of the annex to that com­ conversion or modernization of the structure munication, the concept of initial investment of Siemens. Neither, in the Commission's is defined as 'investment in fixed assets in the view, did the grant of aid for the financing of creation of a new establishment, the exten­ those operations constitute aid to client sion of an existing establishment or in engag­ undertakings, since those clients paid the full ing in an activity involving a fundamental rental charges set by Siemens at its discre­ change in the product or production process tion. Consequently, that aid was in the of an existing establishment (by means of nature of permanent operating aid granted to rationalization, restructuring or moderniza­ Siemens. The Commission further stated that tion) ...'. even if the 1959 Law had covered the latter subsidies, they should have been notified pursuant to Article 93(3) of the Treaty, as 7 — Article 92 of the Treaty includes the following provisions: they exceeded the thresholds established in '1. Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form the letter to the Member States. In that whatsoever which distorts or threatens to distort compe- tition by favouring certain undertakings or the production of regard, the Commission observed that the certain goods shall, in so far as it affects trade between Mem- expenditure programmes in question had ber States, be incompatible with the common market. been split into several applications for aid 3. The following may be considered to be compatible with which related to a homogenous body of the common market: (a) aid to promote the economic development of areas where expenditure to be made at the same time and the standard of living is abnormally low or where there is serious underemployment; should therefore have been dealt with jointly as a single expenditure programme. Further­ (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid more, without providing any logical explana­ docs not adversely affect trading conditions to an extent contrary to the common interest ...'. tion the regional authorities had taken into

12. Consequently, the Commission found (Article 1(c) of the Decision) that the aid of BFR 256 445 000 towards expenditure on equipment to be leased to clients, advertising campaigns and market surveys had been ille­ (2) the Court of First Instance erred in law gally awarded in breach of Article 93(3) of when it considered that if the aid granted the Treaty and did not come within the by the Belgian authorities under the gen­ exceptions provided for in Article 92 of the eral scheme provided for by the 1959 Treaty. Accordingly, it stated in Article 2 of Law was not intended for investment the Decision that the regional authorities purposes within the meaning of Com­ should refrain from making payment of the munity law it could not be regarded as unpaid amount of BFR 28 694 000 and having been authorized by the contested ordered it to recover the amount of BFR decision and therefore had to be notified 227 751 000 already paid. pursuant to Article 93(3) of the Treaty;

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15. The Commission contends that the appeal should be dismissed and the appellant ordered to pay the costs.

First plea in law — inadequate statement of In the present case, the Court notes, with reasons regard to the nature of the advertising cam­ paigns and the market surveys, that the Commission stated in Part IV of the state­ ment of reasons for the Decision (p. 29) that they "are not listed as items eligible for aid 16. The Court of First Instance stated in under the EEL". It goes on to explain (on paragraphs 31 to 34 of its judgment: p. 31 of the Decision) that they fall "under the category of operating aid as this expendi­ ture is a typical general operating cost that a company must bear in its normal activities".

'... as is apparent from the relevant case-law, the obligation laid down in Article 190 of the 8 — This footnote concerns only the Danish original text. Treaty, requiring the acts referred to in 9 — [1992] ECR II-1, paragraph 41.

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18. The Commission contends that the decision of the Court of First Instance is compatible with Community law. The obli­ It follows from the foregoing that, as regards gation to state reasons is a procedural the two points referred to by the applicant, requirement. The material soundness of the the Commission has set out the facts and the statement of reasons is therefore irrelevant. legal considerations which are of decisive Furthermore, the extent to which a decision importance in the context of the Decision.' meets the requirement to state the reasons on which it is based laid down in Article 190 of the Treaty must be assessed in the light of the decision in its entirety. It is quite appar­ ent from Decision 92/483 that the aid for Procedure before the Court of Justice market studies and advertising campaigns was regarded as operating aid and that Siemens' expenditure in respect of those activities was not regarded as eligible for the aid provided for by the 1959 Law. It is also apparent that the Commission considered, first, that the expenditure programmes were 17. Siemens claims that Decision 92/483 did artificially split up into separate applications not meet the requirements of Community and, secondly, that the regional authorities, law according to which the statement of rea­ for no reason, took into consideration only sons must be clear and relevant in order to 75% of the expenditure budget and that in ensure that the trader concerned is in no the light of these factors the Commission doubt as to the basis of the legal measure in considered that the thresholds which it had question. The Commission failed to explain, fixed had been exceeded.

Evaluation 21. As stated in paragraph 32 of the judg­ ment of the Court of First Instance, Decision 92/483 indicates that the Commission con­ sidered that the aid for the market surveys and the advertising campaigns was operating 19. In its judgment in Remia v Commis- aid and that the expenditure associated with 10 sion the Court stated that 'although under such operations could not be regarded as Article 190 of the EEC Treaty the Commis­ covered by the 1959 Law. That, in my view, sion is required to state the factual matters was sufficient to allow Siemens to determine justifying the adoption of a decision, whether there were grounds to seek review together with the legal considerations which of Decision 92/483 by the Community judi­ have led to its adopting it, the article does cature. Moreover, the Commission had not require the Commission to discuss all already expressly stated in its communi­ the matters of fact and of law which may cation of 1979 that in principle operating aid have been dealt with during the administra­ was not compatible with the common mar­ tive proceedings. The statement of the rea­ ket and the Court had expressed the same 12 sons on which a decision adversely affecting view in Case C-86/89 Italy v Commission. a person is based must allow the Court to exercise its power of review as to the legality of the decision and must provide the person concerned with the information necessary to enable him to decide whether or not the decision is well founded.' Paragraph 40 of the judgment indicates that the statement of reasons must be considered in the whole context of the contested decision. The Court has also stated, inter alia in Case C-122/94 11 Commission v Council, that the question of the extent to which a statement of reasons for a decision satisfies the requirements of 22. Nor do I see any reason to find that the Article 190 of the Treaty must also be Court of First Instance infringed the Com­ assessed with reference to the context of the munity rules by concluding that the Com­ decision and to the whole body of legal rules mission had provided sufficient reasons for governing the matter in question. its opinion that the aid towards the purchase of equipment to be leased exceeded the thresholds fixed by the Commission. As the Commission contended, the requirement to state reasons is designed to ensure that the 20. Those principles are the same as the trader concerned is fully aware of the ratio­ principles set out by the Court of First nale of the decision. It is clearly stated in the Instance in paragraph 31 of the judgment contested decision that the Commission con­ under appeal and to my mind there is no siders, first, that the expenditure pro­ ground for finding that it erred in law in its grammes were illegally split into separate application of those principles. applications and, secondly, that the expendi­ ture budget was reduced for no reason. To

The Court observes that in Article 1(a) the 1959 Law provides for "general aid for operations contributing directly to the cre­ Second plea in law — the forms of aid cov- ation, extension, conversion or moderniza­ ered by the authorized aid scheme tion of industrial or craft undertakings ... provided that they are in the general econ­ omic interest" and in Article 3(a) for such aid to be granted in the form of interest-rate subsidies on loans contracted with approved credit institutions and to be restricted to the financing of investment operations. The Commission considered in Decision 75/397 24. In paragraphs 45 to 48 of the judgment, that the scheme established by the 1959 Law the Court of First Instance stated that: was a system for granting "aid in favour of investments which the undertakings carry out for ... various purposes" (p. 13 of Decision 75/397). ... By its letter of 25 May 1978 concerning the 1978 Royal Decree, the Commission authorized the grant of such aid for "investment operations", subject to com­ pliance with the "verification procedure" 'It is necessary to examine whether the pro­ provided for in Decision 75/397 (p. 2 of the visions in question allowed the grant of aid letter).

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25. Relying on the judgment of the Court of Justice in Italy v Commission (the Italgrani 13 — Case C-47/91 [1994] ECR 1-4635.

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on this basis that the Court of First Instance the light of Article 92 of the Treaty. This found that the approved aid scheme applied would jeopardize the principles of the pro­ to investment aid and not to operating aid. tection of legitimate expectations and legal certainty from the point of view of both the Member States and traders since individual aid in strict conformity with the decision approving the aid scheme could at any time be called in question by the Commission.

Evaluation

If following the examination thus circum­ scribed the Commission finds that the indi­ vidual aid is in conformity with its decision approving the scheme it must be regarded as authorized aid, and thus as existing aid ...'

'... when the Commission has before it a spe­ cific grant of an aid alleged to be made in pursuance of a previously authorized scheme, it cannot at the outset examine it 29. The Commission's approval constitutes directly in relation to the Treaty. Prior to the the basis of authorization for the general aid initiation of any procedure, it must first scheme in the 1959 Law. The criteria for examine whether the aid is covered by the granting the aid fixed in the Law therefore general scheme and satisfies the conditions form an integral part of the conditions and laid down in the decision approving it. If it did not do so, the Commission could, when­ ever it examined an individual aid, go back on its decision approving the aid scheme 14 — According to Article 93(2) an existing aid scheme which the Commission considers to be incompatible with the com- which already involved an examination in mon market can only be abolished or altered for the future.

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anything other than investment aid within It follows from the foregoing that the aid in the meaning of Community law. question was intended for use in the market­ ing of Siemens' products, constituting one of its day-to-day activities. Consequently, it cannot be regarded as investment aid and qualify under the decision of the Commis­ sion of 25 May 1978 authorizing the grant of capital premiums for investment aid.' 32. For all those reasons, I consider that this plea should not be upheld.

34. As regards the aid towards the purchase Third plea in law — classification of the aid of equipment to be leased, the Court of First for advertising campaigns and market sur- Instance stated the following in paragraphs veys and towards the purchase of equip- 57 and 58: ment to be leased

33. As regards the classification of the aid 'The Court finds that that operation is not for advertising campaigns and market sur­ such as to involve any technical or structural veys, the Court of First Instance stated in change or to promote Siemens' development paragraphs 53 and 55 of the judgment: otherwise than in an exclusively commercial way. As the defendant has stated, the aid in question enabled it over a given period to offer its clients artificially favourable terms and to increase its profit margin without any justification.

36. The Commission contends that the pleas in question cannot be examined as to their substance because this would involve an appraisal of facts, which cannot form the subject-matter of an appeal. The Commis­ 35. Siemens claims that the aid for advertis­ sion also states that the Belgian Govern­ ing campaigns and market surveys falls ment's communication of 2 February 1977 within the scope of the 1959 Law, since it was not notified to it and that the interpreta­ constitutes investments in intangible assets as tion of the concept of 'intangible invest­ referred to in Article 3(a) of the Law. That ments' in the communication goes further also follows from a communication of 2 Feb­ than what is indicated in Article 3(a) of the ruary 1977 from the Ministry of Economic 1959 Law. Affairs, where it is stated that the provisions referred to allow aid to be granted for 'mar­ ket studies, studies designed to improve advertising, studies prior to launching prod­ ucts, opening points of sale, etc. ... surveys and exploratory studies'. Evaluation

37. As I have stated above, I consider it proper to interpret the 1959 Law in the light of the relevant Community rules and that it As regards the aid towards the purchase of is correct to conclude that operating aid equipment to be leased, Siemens claims that within the meaning of Community law is this was also covered by Article 3(a) of the not covered by the authorized aid scheme. Law, which refers to 'the direct financing of The Belgian Government's communication investments ... in plant or machinery needed of 2 February 1977 is a good example of the to carry out those operations'. Furthermore, adverse consequences which would follow if it also constitutes aid to the undertakings to an aid scheme authorized by the Commis­ which the equipment is leased, which is also sion were interpreted with reference to covered by the 1959 Law. national law. To my mind the interpretation

'As regards the aid for the advertising cam­ paigns and the market surveys, the applica­ 39. As the Court of Justice declared in Hilti 18 tion made by the applicant to the Belgian v Commission, an appeal may rely only on authorities on 30 September 1985, entitled grounds relating to the infringement of rules "Investment programme for Siemens, Brus­ of law, to the exclusion of any appraisal of sels, in the sum of BFR 113 600 000", states the facts. It follows, in my view, that the that "intangible investments" are planned in classification by the Court of First Instance the sum of BFR 37 600 000 for the marketing of the measures which benefited from aid and promotion of new products, two must be regarded as established. That does examples of which are personal computers not mean, however, that the Court is pre­ and the " HICOM " office communications vented from making a legal appraisal of those system. Similarly, it appears from the com­ facts, that is to say, that the Court cannot mentary on the investment programme rule on whether those facts must be linked annexed to the aid application of 29 Septem­ with one or other of the Community-law ber 1986 that "the Belgian market in office concepts of 'investment aid' or 'operating technology, data processing and the automa­ aid' and, where appropriate, find that the tion of manufacturing processes is growing Court of First Instance failed to apply the at a spectacular rate" and that "in order to rules correctly. maintain, and even increase, (its) market share in those sectors, (it planned to) inten­ sify (its) marketing activities during the com­ 18 — Case C-53/92 P Hilti v Commission [1994] ECR I-667, ing years". paragraph 10.

43. Furthermore, if the regional authorities had wished to contribute to the renewal of the data-processing equipment of certain 41. On the other hand, the question of the specific undertakings they could have extent to which aid towards the purchase of granted those undertakings direct aid, within products to be leased constitutes aid to the the framework of Decision 75/397 and the person to whom the equipment purchased is 1978 letter, for the purchase of such equip­ leased is in my opinion a question which ment from a supplier of their choice. Where relates to the facts and not to the law and the aid is granted to a given supplier, in this therefore is not within the jurisdiction of the case Siemens, this leads, as the Court of First Court of Justice. Thus in paragraph 50 the Instance observed in paragraph 58 of the Court of First Instance sought to establish judgment, to distortion of competition precisely who was the actual beneficiary of between suppliers. Thus the aid produces the aid. manifestly negative effects at a marketing level distinct from that of the undertakings which allegedly benefit from it, that is to say, those to which the equipment is leased. The existence of that unnecessary distortion of competition reinforces the presumption that the aid does not fall within the scope of the 42. In any event, I find it hard to imagine authorized scheme. The scheme must be that such indirect aid is covered by the interpreted in accordance with the authorized aid scheme, which refers to Community-law principle of proportional­ Operations contributing directly to the ... ity, according to which the distortion of modernization of large ... undertakings' (see competition must be limited to what is

45. In paragraph 62 of its judgment, the Court of First Instance held that '[s]ince the Costs Court has held that the aid in issue was not covered by authorization [of] the general scheme approved by Decision 75/397 and the letter of 25 May 1978, by reason of its being in the nature of operating aid for the undertaking, there is no need to examine

48. The Commission submitted that Siemens 19 — On this point, see Philip Morris Holland v Commission, should be ordered to pay the costs. Under cited above, paragraph 17, and the Twelfth Report of the Commission on Competition Policy, paragraph 160. Article 69(2) of the Rules of Procedure, the 20 — See Case C-21/88 Du Pont de Nemours Italiana [1990] unsuccessful party must be ordered to pay ECR I-889 and Case 18/84 Commission v France [1985] ECR 1339. the costs if they have been asked for.

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Conclusion

49. Accordingly, I propose that the Court should: