C-355/95

The case relates, in particular, to Com­ Following belated notification, which was mission Decisions 91/391/EEC of 2 received only in 1985 after repeated remind­ 26 March 1991 (the 'TWD II decision') and 3 ers from the Commission, the latter adopted 92/330/EEC of 18 December 1991 (the the TWD I decision, in which it found that 'TWD III decision'), both concerning aid the aid in question was unlawful and incom­ granted to the appellant by the Federal patible with the common market and Republic of Germany. In those decisions the ordered it to be recovered. The TWD I Commission ruled that the said aid was com­ decision became final when the deadline for patible with the common market but never­ lodging an appeal expired. theless suspended its payment until the appellant had repaid other aid unlawfully granted in the past, which had been declared incompatible with the common market by 4 Decision 86/509/EEC of 21 May 1986 (the 'TWD I decision'). 3. In October 1989 the German authorities notified the Commission of a plan to grant * Original language: Italian. new aid to the appellant, comprising a sub­ 1 — In Joined Cases T-244/93 and T-486/93 TWD v Commission sidy of DM 4.52 million and two soft loans [1995] ECR II-2265. of DM 6 and 14 million for the production 2 — OJ 1991 L 215, p. 16. of stockings and elasticated yarns (the 3 _ OJ 1992 L 183, p. 36. 4 — OJ 1986 L 300, p. 34. 'TWD II aid'). The Commission initiated

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the Article 93(2) procedure, which culmi­ the Commission initiated the procedure nated in the adoption of the TWDII under Article 93(2) of the Treaty, which cul­ decision; the operative part of that decision minated in the adoption of the TWD III provides inter alia as follows: decision mentioned above.

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6. Pointing out, however, that at the dates the validity of those decisions from various on which the disputed decisions were aspects, in accordance with the allegations adopted TWD had still not repaid the made by the appellant. TWD I aid, as required by the TWD I decision, and emphasizing that the cumula­ tive effect of the TWD I aid and the new aid would give the recipient undertaking an excessive and undue competitive advantage and unjustly enrich it, the Commission In particular, the Court dealt first with the therefore considered it appropriate to sus­ pleas alleging the Commission's lack of com­ pend payment of the TWD II and TWD III petence to make the granting of aid that is aid until the TWD I aid had been repaid. compatible with the common market condi­ tional on the repayment of previous aid and infringement of the principles governing the division of powers between the Community and the Member States, secondly with the pleas alleging that no competitive advantage had been gained from the TWD I aid, thirdly with the pleas alleging infringement of the In that regard, the Commission stated that it principle of proportionality, and finally with was obliged to draw this conclusion' owing the pleas alleging that the TWD I aid was to a situation caused by the negligent behav­ lawful. iour of the German Government and TWD , which had both infringed the mandatory rules laid down in Article 93(3) of the Treaty; in addition, it pointed out that it did not have 'any other means of coercion at its dis­ posal to accelerate or enforce implementa­ 5 8. With regard to the first aspect, which is tion of its [TWD I] decision'. the most important for the purposes of these proceedings, the Court of First Instance rejected the appellant's arguments on the basis of an interpretation of the operative parts of the contested decisions in the light of the reasons set out therein. In that regard, The judgment of the Court of First Instance the Court of First Instance first of all stated that:

the contested decisions, the Commission contested by the appellant, the Court of First considered that the cumulative effect of the Instance first stated that the role assigned to old TWD I aid and the new TWD II and the Commission in the matter by the Treaty TWD III aids would be to alter trading con­ necessarily implies that, where it considers it ditions in a way contrary to the general appropriate, it can require aid to be 'altered' interest. The meaning of the decisions in or make the admissibility of support mea­ question is therefore that the new TWD II sures subject to conditions aimed at ensuring and TWD III aids, considered in themselves, balanced trade flows and hence at safeguard­ may be compatible with the common market ing the general interest. but that they may not be authorized under Article 92(3 )(c) of the Treaty unless the cumulative effect of the old TWD I aid and the new TWD II and TWD III aids is elimi­ nated.

7 — The TWD judgment, cited above, paragraphs 53 to 56, which make reference to the principles laid down in the judgment in Case C-261/89 Italy v Commission [1991] ECR I-4437, 6 — The TWD judgment, cited above, paragraphs 51 and 52. paragraph 20.

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deal with 'conditions upon which new aid, either of the proceedings pending before the which TWD was in no way obliged to national court on the same subject-matter or request, could be granted to it'. of the appellant's legitimate expectation, pro­ tected by the applicable national law, that the aid was lawful, the Court of First Instance found first of all that 'the fact that domestic proceedings are in progress cannot affect the Commission's power to adopt all measures In that context, the Court continued, 'the necessary to ensure that competition in the aim of Article 2 of the operative parts in Community is not distorted'. 1 1

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deriving from the cumulation of the aid in operative parts. In the second, third, fourth, question had not been sufficiently demon­ fifth and sixth grounds the appellant essen­ strated, that the Commission's alleged tially repeats the arguments used in the pro­ infringement of the principle of proportion­ ceedings at first instance, maintaining that ality was based on a premiss that was also the Commission was not competent to adopt unproven, namely that the total of the Article 2 of the two decisions, that it TWD II and TWD III aid exceeded the value infringed the provisions governing the divi­ 14 of the TWD I aid, and finally that the sion of powers between the Community and question of the lawfulness of the TWD I aid the Member States, that it committed a mis­ could not be reopened, as the period for use of power, that it wrongly found that the bringing proceedings against the TWD I TWD II and TWD III aids together with the decision had long since expired and the TWD I aid gave TWD a competitive advan­ 15 decision had therefore become final. tage, and finally that it infringed the prin­ ciple of proportionality.

Grounds of appeal The first and second grounds of appeal

13. As stated earlier, in the present proceed­ ings the appellant has applied to the Court of Justice to set aside the judgment of the Court 14. As the first and second grounds of of First Instance and to declare Article 2 of appeal are closely related, they must in my the contested decisions void; the appeal is view be dealt with together and constitute based on six different grounds. the central issue of these proceedings. According to the appellant, the Court of First Instance erred in law by upholding the validity of two decisions whereby the Com­ mission imposed obligations which, still according to the appellant, exceed its powers and lack an appropriate legal basis. In the first ground of appeal, the appellant claims that the Court of First Instance infringed Community law by interpreting the TWD II and TWD III decisions without taking account of the wording of their

16. As I have already said, it is true that the statements of reasons for the decisions also contain references to the financial situation Let me say at once that, contrary to the view of the recipient undertaking, and in particu­ taken by the Court of First Instance and for lar to the undue competitive advantages and reasons which I shall explain, I am strongly unjust enrichment it could enjoy if it were inclined towards a negative answer to that granted other aid in addition to that unlaw­ question. fully received and not repaid; however, the Commission does not draw the conclusions that would seem most logical, namely that the TWD II and TWD III aids are incompat- ible with the common market in so far as they strengthen the competitive position of an undertaking which has, moreover, already 15. First, the Court's reading of the con­ benefited from unlawful aid that has not tested decisions in the judgment at issue been repaid; instead, it expressly takes the stands, in my opinion, in sharp contradiction opposite view, in other words that the aid in with the wording of their operative parts. As question is compatible with the common set out at length in point 8 above, the Court market, for all the reasons stated, only then holds that the decisions are to be interpreted to make disbursement conditional on repay­ as meaning that the Commission considered ment of the TWD I aid. the TWD II and TWD III aids incompatible with the common market until such time as the TWD I aid has been repaid, with the result that the compatibility of the former is subject to the prior repayment of the latter.

the preceding aid, that is to say if it was evi­ subject to additional conditions, which dent from the decisions that, following a moreover relate to matters that are (legally at thorough investigation of the financial situa­ any rate) distinct. By contrast with its treat­ tion of the undertaking at the time of ment of aid incompatible with the common approving the aid, the Commission con­ market, the Treaty does not contain provi­ cluded that, notwithstanding the potential sions giving the Commission power to sus­ 18 positive effects of the aid on the sector in pend the payment of compatible aid. question, on the development of the region concerned and on employment, the new aid was incompatible with the common market because it unlawfully strengthened the pos­ ition of the undertaking, and that such aid could be compatible only on condition that the preceding aid be repaid. Needless to say, the statements of reasons for the decisions in Nor can such powers be deduced by way of question should take due account of such a interpretation; indeed, not even the practical 17 balancing of the interests involved. effect of the aid provisions (in particular Articles 92 and 93 of the Treaty) can be relied upon for this purpose. In my view, to prohibit (or, as in this case, to suspend) pay­ ment of aid that is compatible with the Treaty is not permissible in any event, in that the justification for such prohibition (or sus­ As we have seen, however, that is not the pension), namely that the granting of the aid case. On the contrary, in the contested deci­ entails the risk of influencing trade flows and sions the TWD II and TWD III aids are distorting competition, is missing. In impos­ expressly stated to be compatible with the ing a requirement of the kind in question, common market, yet disbursement is sus­ therefore, the Commission is clearly going pended pending repayment of other aid. beyond the limits of the task assigned to it by the Treaty.

regarding aid, in reality only corroborates other, it then suspends payment of the aid, these considerations. It states that the Com­ citing the harm caused by the cumulative mission must indeed also take into account effect of such aid with the previous aid and the obligations which a previous decision the unjust enrichment from which the recipi­ may have imposed on a Member State, but ent undertaking could benefit in that case. In precisely for the purpose of assessing the that regard, however, the Commission does compatibility of an aid with the common not conceal the fact that it is pursuing a pre­ 20 market, and not, ás the Commission and cise objective, namely in the absence of other the Court of First Instance appear to infer, 'means of coercion' that of enforcing the for the purpose of suspending the payment obligations incumbent on the German of compatible aid. authorities and on TWD as a result of the TWD I decision.

In other words, pursuant to the Treaty but also on the basis of the case-law of the Court of Justice, the Commission has two possible It therefore seems rather obvious to me that alternatives: either to state, taking account of the Commission really intended to seize the all the relevant factors, including the finan­ opportunity offered by the procedures for cial situation of the undertaking and pre­ the TWD II and TWD III aid to give effect vious circumstances, that the aid is incompat- to and enforce the obligation imposed on the ible with the common market, in which case German authorities (and indirectly on TWD) it can and indeed must order payment to be by the TWD I decision to recover the suspended, or to state, as a result of such an TWD I aid. investigation, that the aid is compatible with the common market, but in that case it is obviously not permitted to oppose its dis­ bursement.

of the same decisions it defines as compatible if the State does not comply with the Court's with the common market, without, as I have judgment that it has failed to fulfil its obliga­ said, authorization from any provision of the tions, the Commission can resort to the pro­ Treaty and hence clearly acting in excess of cedure laid down in Article 171 of the Treaty its powers. As I have already pointed out, a and ask the Court to impose a fine on the different conclusion could be reached only if State in question. the Commission had found that the new aid was incompatible with the common market owing to its cumulative effects with the pre­ vious aid, and had given due reasons for that finding; only in that case would it have been (also) legally justified to suspend payment of the new aid. 22. On the basis of the foregoing consider­ ations, therefore, it seems to me that the fol­ lowing conclusion is unavoidable: to allow the appeal and consequently to set aside the contested judgment and, in accordance with the application, to annul Article 2 of the TWD II and TWD III decisions on the grounds of the Commission's lack of compe­ tence and excess of powers.

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23. Only one course of action is available to Although this solution would be legally the Court of Justice to overcome this prob­ sound, at least on the basis of a flexible inter­ lem: to annul the contested decisions in their pretation of the aforesaid case-law of the entirety for failure to state reasons. Court of Justice, it seems to me to ignore the operative procedural principle that the wishes of the applicant with regard to the claim should take precedence. In the present case, the annulment of the decisions in their entirety, when the appellant has (for obvious reasons) expressly sought their annulment In other words, the Court could decide, in only in part, would in the end completely accordance with established case-law, to distort the essential outcome of the applica­ assess of its own motion the reasons on tion which, even if upheld, would entail con­ which the decisions in question were sequences for the appellant that were ulti­ 21 based; and it could reach the conclusion mately more disadvantageous than if it were that, in the present case, the requirement to dismissed. 23

state reasons had not been complied with, for example because, as mentioned, the express declaration of compatibility of the new aid with the common market is not suf­ ficiently proven (or is at any rate contradic­ tory), given the distortion of competition which, according to the Commission itself, arises from the cumulation of the new aid 25. Those considerations also strengthen my with the previous aid. In that way, the Court inclination towards the first of the solutions would be entitled to annul the decisions in outlined, which affects only the validity of their entirety without this constituting a rul­ the obligation to suspend payment of the ing ultra petita. 22 new aid; in taking that view, I am fully aware that the (only) merit of such a solution is ultimately that it will provide a useful indica­ tion for the future.

In the alternative, however, should this Court favour a solution different from that which I have outlined, I shall review, albeit briefly, the other grounds relied upon by the appellant. On the basis of what I consider to be the 24 correct interpretation of the decisions, it is fairly clear that the procedure laid down under Article 93(2) of the Treaty for deter­ mining whether an aid is compatible or The fourth ground of appeal incompatible with the common market was in fact used by the Commission for other purposes, namely to induce the State to which the decisions are addressed to comply with obligations imposed by another prior decision in the matter. It therefore appears to me that, in so doing, the Commission com­ mitted a misuse of procedure, of the kind envisaged in the case-law of the Court of 26. The fourth ground, in particular, Justice cited by the Court of First deserves brief consideration; as mentioned, 25 Instance, and that this constitutes a further in this ground the appellant claims that the ground, if one were needed, for annulling Commission misused its powers in adopting Article 2 of the decisions. the contested decisions.

28. I consider, by contrast, that the remain­ 29. Instead the fifth and sixth grounds of ing grounds of appeal should all be rejected, appeal, which relate respectively to an alleg­ for various reasons. edly mistaken assessment of the competitive advantages deriving from the cumulation of the aids in question and to the alleged infringement of the principle of proportion­ In my view, the third ground, which relates ality (owing to the greater overall amount of to the alleged infringement of the principles the TWD II and TWD III aids by compari­ governing the division of powers between son with the TWD I aid), are inadmissible. the Community and the Member States, is unfounded. As this argument is essentially identical to that already pleaded before the Court of First Instance and rejected by the These arguments seek to cast doubt on find­ latter, I need only recall the reasons set out ings of fact already made by the Court of in the contested judgment on this point, First Instance and which cannot therefore be which appear to be correct, adequate and reviewed on appeal.

Conclusion

30. In the light of the foregoing considerations , I therefore propose that the Court of Justice should :

— allow the appeal and set aside the judgment of the Court of First Instance of 13 September 1995 in Joined Cases T-244 / 93 and T-486 / 93 TWD v Commis- sion',

— annul Article 2 of Commission Decision 91 / 391 / EEC of 26 March 1991 and Article 2 of Commission Decision 92 / 330 / EEC of 18 December 1991;

— order the Commission to pay the costs .