C-292/95

SPAIN v C O M M I S S I O N

OPINION OF ADVOCATE GENERAL LENZ delivered on 7 January 1997 *

A — Facts upon by the Commission following consul- tation with the Member States.' 3

After a meeting of the Member States in December 1992 the Commission resolved to 1. In instituting these proceedings, Spain is make no modifications to the Community challenging a decision of the Commission framework. The second extension which was concerning the 1988 Community framework decided upon as a result provided that in on state aid to the motor vehicle industry. ] future the rule would be that the Commu- This provides, amongst other things, for the nity framework would remain valid until a prior notification of all significant aid irre- next review to be organized by the Commis- spective of its objective. The Community sion. 4 framework introduced by the Commission has already been the subject of an action brought against the Commission by Spain. 2 In that action Spain contested an extension of the Community framework for an inde- terminate period. The original 1988 Commu- 2. According to Spain, the Commission had nity framework provided for a period of thereby extended the Community frame- validity of two years. The first extension work for an indeterminate period. As a decided upon after that period was instead result, it instituted proceedings against that formulated in the following terms: decision on the grounds that the Commis- sion was not entitled to extend the Commu- nity framework for an indeterminate period.

'After two years the framework shall be 3. According to the Court, the contested reviewed by the Commission. If modifica- formulation in the last decision to extend the tions appear necessary (or the possible repeal Community framework was open to more of the framework) these shall be decided than one interpretation. The Court therefore

referred to settled case-law according to At midday on the same day the Permanent which, where in such a case a provision of Representative received the English version secondary Community law is open to more of a communication which was to be the than one interpretation, preference should be subject of the discussions on the following given to the interpretation which renders the day, at the multilateral meeting. The Spanish provision consistent with the Treaty rather translation of that communication was only than the interpretation which leads to its handed out at the beginning of the meeting, being found incompatible with the Treaty. on the following day. The Court went on, in its judgment, to explain that the obligation of regular peri- odic cooperation under Article 93(1) of the Treaty precludes existing systems of aid from being examined according to rules estab- lished or agreed for an indefinite period 5. In the first part of that communication depending on the unilateral will of either the the Commission discussed the judgment and Commission or the Member States. For that its serious consequences, both political and reason, the Court concluded that the Com- legal. It therefore proposed to reintroduce mission's decision.of December 1992 must the Community framework. be interpreted as having extended the Com- munity framework only until its next review which, like the previous ones, had to take place at the end of a further period of appli- cation of two years. That means that the decision of December 1992 merely extended the Community framework for a further 6. But it is the Commission's second pro- period of two years. In its judgment of 29 posal which is crucial to this action, namely June 1995 the Court accordingly held that the adoption of temporary measures since 1 January 1995 the Community frame- designed to assure the effective and uninter- work had ceased to be in force. 5 rupted application of the controls introduced by the Community framework. According to the Commission's proposal, these transi- tional arrangements consist in extending the Community framework with retroactive 4. Just one day after the judgment, namely effect from 1 January 1995. The arrange- on 30 June 1995, the Commission sent a let- ments were only to remain in force until the ter in French to the Member States in which Community framework was reintroduced, it declared its intention to introduce a set of by 31 December 1995 at the latest. measures at the multilateral meeting sched- uled for 4 July, first of all, to provide once again a framework on future aid to the motor vehicle industry, and secondly, to resolve temporarily the situation prevailing since the Court's judgment. The Spanish 7. The Commission's justification for this translation of that letter was received by the measure was the protection of fundamental Spanish Permanent Representation on 3 July. Community interests. It was, according to the Commission, a question of maintaining undistorted competition in the motor indus- 5 — Case C-135/93 Spain v Commission [1995] ECR 1-1651. try, which would be threatened if the

8. Such retroactive application did, the Commission admitted, contravene the prin- ciple of legal certainty but was justified in 11. Furthermore, according to the Commis- this case by the concurrence of exceptional sion, the Member States had already been circumstances. According to the Commis- informed, by letter dated 30 June 1995, that sion, these are the fact that the judgment was the agenda for the meeting on 4 July was to not delivered until after the date on which be expanded to include an item relating to the Community framework should have the Community framework. been reviewed and possibly extended as well as the impossibility of maintaining undis- torted competition and the irreversible effects which could result from such distor- tions in competition. Finally, the Commis- sion refers to the fact that it assumed that its decision of December 1992 was valid and had extended the Community framework for 12. On 6 July 1995 the Commission finally an indefinite period. decided to extend its decision of December 1992 with retroactive effect from 1 January 1995. The grounds it gives do not diverge from the arguments put forward in its com- munication of 3 July. The measure is to be 9. According to the applicant, several dele- based on fundamental Community interests gations pointed out during the multilateral and in particular on the necessity of main- meeting that, right up to the beginning of the taining undistorted competition in the motor meeting, they had not been aware either of vehicle industry. Only in this way could irre- the judgment or of the Commission's com- versible damage be avoided. munication relating to it. As the applicant further points out, eight delegations expressed themselves to be opposed to the Commission's proposal; four others reserved their decision.

(1) dismiss the action for annulment 18. Consequently, in the Commission's brought by the Kingdom of Spain; view, the question arises, irrespective of how the its decision is characterized in law, as to whether the Commission was entitled, under such exceptional circumstances, to depart from the procedure laid down in Article 93(1), in other words, to take a decision (2) order the Kingdom of Spain to pay the without the formal agreement of the Mem- costs. ber States.

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19. The exceptional circumstances, accord- already stated, it did not act contrary to the ing to the Commission, are to be found in judgment of June 1995 and, on the other the fact that it was necessary to fill the gap in hand, because the exceptional circumstances the law resulting from the Court's judgment it has put forward justify both a retroactive and, consequently, from the invalidity of the reintroduction and a retroactive extension. Community framework, before the Member States could grant aid under general schemes which had already been approved by the Commission, for example in the area of regional aids.

23. The Commission's alternative argument seems to me to be very important because, should the view it puts forward be correct, a decision, such as that of July 1995, could be taken according to the procedure chosen by 21. In conclusion, the Commission makes it the Commission. In that case, the decision clear however, that, in its view, what is con- would have to satisfy not only the require- cerned is a reintroduction of the Community ments of that procedure but also the condi- framework with retroactive effect, the practi- tions for retroactive application. As will be cal consequence of which is the retroactive explained in more detail below, those condi- extension of the Community framework. In tions are satisfied where the objective to be the alternative, it submits that if what is con- attained so demands and where the legiti- cerned is an extension of the Community mate expectations of those concerned are framework, it has still not exceeded its pow- duly respected. I would like to begin with ers, on the one hand, because, as it has the issues of procedure.

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25. The second extension was challenged by the applicant at the time because it extended the Community framework for an indeter- minate period and thereby modified it. It considered that this was only possible after 27. The applicant is, however, of the view the consultation and subsequent agreement that the Community framework can no of the Member States. The Court, in its judg- longer be extended because it had ceased to ment of June 1995, did not deal with the be in force since the beginning of 1995. It is question whether the agreement of the Mem- not possible, it maintains, to resurrect, ber States was necessary. It based itself, through a retroactive extension, something instead, on the obligation of regular periodic which is legally 'dead'. However, the Court cooperation between the Commission and has already decided, for example, that an the Member States, from which neither the export licence, the validity of which has Commission nor a Member State can release already expired, can, provided certain condi-

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29. However, a review of the Community 33. Furthermore, consultation of the Mem- framework and its validity is not possible ber States is required for a decision to be without considering the circumstances pre- taken on extending the Community frame- vailing at the time. On the basis of such an work. Although this is expressly prescribed approach, and examining the matter in this in the text of the Community framework (in way, it will first of all be found that in a situ- this case it is the first extension which is ation such as that arising after the Court's decisive) only in the event of a modification judgment the most important thing is for the of the Community framework, the Court's Community framework to remain in force. judgment of June 1995, however, gave rise to a corresponding necessity to consult the Member States. The judgment emphasizes 6 — Case 71/82 Balm v Bruggen [1982] ECR 4647. the obligation of regular periodic coopera-

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tion on the part of the Member States and complained about that, not even Spain. N o r the Commission, which may not be unilater­ was the Court's judgment based on nullity ally suspended for an indeterminate period. of the decision for want of consent by the Consequently, it is necessary to consult the Member States. For that reason only a con­ Member States in order to extend the Com­ sultation of the Member States was required munity framework even without modifica­ for the decision to be valid. tion.

37. In this respect, however, it should be noted that what was concerned was the unmodified extension of a Community framework which had already been in force for six years. Information about the 35. In this respect, it should be pointed out substance of the Community framework was that it is not the general conditions laid therefore no longer required. The situation down in Article 93 which are decisive in this which arose as a result of the judgment was case, but the special conditions laid down in also easy to explain and to understand. It the Community framework itself. Under was simply a question of communicating to Article 93(1) it would have been necessary the Member States the fact that, as a result of for the Member States formally to consent to the Court's judgment, the Community the decision in order for it to be valid. As framework had ceased to be in force for already explained above, that is not necessary almost six months. Accordingly, no extensive for an unmodified extension of the Commu­ information was needed in advance for it to nity framework. N o r did the Member States be possible to take part in a discussion about agree to the second extension of the Com­ the measures to be taken. For that reason the munity framework. 7 None of the parties consultation in the context of the meeting on 4 July 1995 was sufficient, as I see it, to sat­ isfy the requirements of regular periodic cooperation between the Commission and 7 _ Opinion in Case C-135/93 Spain v Commisńon [1995] ECR the Member States. This is so a fortiori 1-1653, paragraph 54.

38. In this context, the applicant also asserts that, in its decision, the Commission has uni- laterally laid down a period for which the aid scheme is to apply. But this, it states, is pre- cisely what the Court's judgment prohibits. The Court, however, decided that an indefi- nite period of validity may not be laid down for the schemes unilaterally. This is to be seen against the background of the fact that 41. In case the Court does not follow my one party (either the Commission or the opinion and considers that greater involve- Member States) could thereby evade the ment of the Member States, followed by obligation of regular cooperation. In addi- their formal consent to the decision, is neces- tion, the Court itself took into account the sary, I would like to deal with the possibility two-year period originally mentioned in the for the Commission, in exceptional circum- Community framework. That is why no stances, not to apply this lengthy procedure. objection can be made on this account to the In this respect, I would like first of all to Commission's proposal of July 1995 that the refer to the fact that, in parallel to the con- Community framework should be valid until sultation of the Member States on the retro- the end of the year at the latest. active extension of the Community frame- work, discussions began on reintroducing the Community framework. In relation to this second measure, the Commission is using the more wide-ranging procedure. In any event, it may be inferred from this that the Commission did not seek to evade its obligation of cooperation with the Member 39. It should therefore be held that the States by using the shortened procedure. The Commission's decision of July 1995 satisfies sole intention was to close the existing gap in the requirements of the Community frame- the law as quickly as possible, thereby work and of cooperation between the Mem- restoring the normal situation. It can be ber States and the Commission for an assumed that discussions about extending or unmodified extension of the Community modifying the Community framework framework. would usually begin while the Community framework itself is still valid. The measure taken by the Commission merely aims to 8 — Sec paragraph 10. maintain the Community framework in

being while negotiations take place about a one such measure Spain mentions the correct possible extension or modification. Since the application of the procedure under Article Member States assumed anyway, up to the 93(1), followed, should the need arise, by a date of the Court's judgment, that the Com- procedure under Article 93(2). In addition, munity framework continued to be valid, the to cover over the gap in the law which it Commission's measure has no radical conse- feared, the Commission had the possibility quences for those involved. On the contrary, of reintroducing the Community framework it relieves the discussions of the pressure to with the agreement of the Member States devise a new scheme with the greatest pos- and, at the same time, of endowing it with sible haste and thereby enables the frame- retroactive effect, also with the Member work to be reviewed thoroughly. In view of States' agreement. the Commission's duty, as guardian of Com- munity interests, to guarantee undistorted competition, 9 and having regard to the short, limited period of validity of the meas- ure and to the concomitant opportunity for the Member States to state in detail their point of view in the context of the negotia- tions concerning the reintroduction of the Community framework, I consider it justifi- able, in this case, to allow the Commission 43. Apart from the fact that, in my view, the to dispense with a more extensive consulta- Commission's manner of proceeding was in tion and subsequent agreement by the Mem- conformity with Community law, the fol- ber States. lowing points should be added as regards the necessity of the measure taken. As the Com- mission rightly maintains, it was a matter of urgency to fill quickly, for a limited period of time and for a limited purpose, the gap in the law. The procedures proposed by the applicant would have been too lengthy for this. The result would have been a period without rules, in which the Member States could have granted aid on the basis of exist- ing aid schemes which had already been approved. This could have led to distortions in competition. If the validity of the Com- 42. As a further ground for its contention mission's decision had been made dependent that the decision is void, the applicant sub- upon the agreement of all Member States, the mits that it is disproportionate, no doubt on continuation of the Community framework the basis that, in terms of procedure, the would have been a matter left entirely to measure taken by the Commission infringes each individual Member State. It would no Community law. Such an abnormal measure, longer have been possible to act with all it maintains, is not necessary because other necessary speed, since it would have been 'normal' measures were also available. As necessary to await the decision of each individual Member State. What is more, according to the Commission's own state- 9 — For the exceptional significance of the term 'competition' for ments, it had obtained the approval of the the architecture of the Treaty sec Articles 3(g) and 3(a) of the other Member States. Treaty under 'Part One' of the Treaty headed 'Principles'.

47. Nor can there be any doubt that, in order to close the existing gap in the law, ret- 45. O n this point it should be observed that, roactive extension of the Community frame- at that time, none of the parties involved work was an appropriate measure for the could assume that the Community frame- purpose. work was no longer valid. On the contrary, the principle that acts of the Community institutions are presumed to be lawful 10 pro- vided grounds for assuming that the Com- munity framework remained in force. For that reason it cannot be inferred from the fact that the Member States respected the 48. Nor, since what is concerned is, as Community framework before the judgment explained above, a procedure which is in that they would have continued to do so conformity with Community law, can the once judgment had been given. This is also measure be regarded as disproportionate in questionable on the ground that, as the the narrower sense. In my opinion, it even Commission maintains, Spain did not at first follows from the above that a measure which accept the Community framework which does not comply with the normal procedure had been reintroduced in the meantime. would be proportionate, since the normal procedures proved to be too cumbersome and therefore inappropriate.

46. However, the Commission itself refers to the fact that, during the transitional period, the Member States were probably also obliged to respect the Community 49. Finally, it remains to be considered framework on the basis of Article 5 of the whether the Commission could confer retro- EC Treaty. However, even if such a duty active effect on its decision. In this respect, the applicant relies on Article 93(2). It states that the Commission itself said in its Guide de procédure, that in the context of this pro- 10 — Case C-137/92 P Commission v BASF and Others [1994] ECR 1-2555, paragraph 48. vision measures could not be taken retroac-

51. In addition the applicant maintains that such a retroactive extension is incompatible with the obligation of regular cooperation between the Member States and the Com- mission and could not be justified even by exceptional circumstances. 54. According to the Commission, the crite- ria for retroactive effect laid down by the case-law of the Court are also fulfilled in this case.

52. The Commission had contended that such exceptional circumstances did exist. O n the one hand it pointed out that the Court did not deliver its judgment until after the 55. The Court has consistently held that, as date, specified in the judgment itself, of the a general rule, the principle of legal certainty fresh review and the expiry of the validity of precludes a Community measure from tak- the Community framework. O n the other ing effect from a point in time before its hand, the applicant maintains that the Com- publication. It may exceptionally be other- mission had undertaken no review of the wise where the purpose to be achieved so

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At first glance, this is not readily a major need for investment despite overca- comprehensible in relation to the period pacity. between January 1995 and the delivery of the judgment, in June 1995. The Commission itself maintains that all Member States respected the Community framework during that period. The Commission says nothing about the situation following the delivery of the judgment. In any case, it was at that time, 57. It is questionable, however, whether the once all the parties concerned had been legitimate expectations of the parties con- informed that the Community framework cerned were duly respected.

I judgment, as it could not be sure that all the agree with this analysis. Until the Court Member States really had respected the issued its differing interpretation, all the par- Community framework. Had it subse- ties concerned must have assumed that, in quently come to light that, during that accordance with its own rules, the Commu- period, aid had been granted which was nity framework had been extended for an incompatible with the third Community indeterminate period. framework, no action could have been taken to remedy this because no rules existed dur- ing that time. If that aid had come under a general aid scheme which had already been approved by the Commission, it would auto- matically have been compatible with the common market. 12 As the Commission 58. The Commission goes on to say that none of the Member States, in particular none of the Member States which made no 11 — Case 98/78 Rocke [1979] ECR 69; Case 99/78 Decker complaint about the extension, could profess [1979] ECR 101; Cise 224/82 Meiko-Konseroenfabrik to have understood the 1992 decision as [1983] ECR 2539, paragraph 12; Case C-337/88 SAFA [1990] ECR 1-1, paragraph 13; Case C-331/88 Fedem [1990] meaning that it was only valid for two years. ECR 1-4023, paragraph 45. The Commission rightly refers to the fact 12 — Then it would have been those who respected the rules who would have been the fools. that Spain had already complained about the

62. In conclusion, therefore, it must be held that the measure taken by the Commission did not infringe rules of procedure, that it 60. Another point in favour of the legiti- was proportionate and that, notwithstanding macy of the retroactivity in this case is to be its retroactive effect, it did not contravene found in the judgment in Fedesa. That case the principle of the protection of legitimate concerned a directive which had been expectations. annulled because of a procedural defect and replaced by a new directive which was to apply with retroactive effect. The Court took into account the fact that the period of time between the annulment of the first directive and the notification or publication of the Costs second was very short. This is also the case here. N o t as much as four weeks elapsed between the Court's judgment and the decision to extend the Community frame- work. 63. Under Article 69(2) of the Rules of Pro- cedure, if costs have been applied for, the unsuccessful party — in this case the King- dom of Spain — is to be ordered to pay the costs. 61. In Fedesa the Court also took into account the fact that the earlier directive had been annulled because of a procedural defect 13 — Fedesa, paragraph 47 (see footnote 11).

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SPAIN v COMMISSION

C — Conclusion

64. I therefore propose that the Court should,

(1) dismiss the application;