C-292/95

JUDGMENT OF 15. 4. 1997 — CASE C-292/95

J U D G M E N T O F T H E C O U R T (Sixth Chamber) 15 April 1997*

In Case C-292/95,

Kingdom of Spain, represented by Alberto Navarro Gonzalez, Director General for Community Legal and Institutional Coordination, and Miguel Bravo-Ferrer Delgado, Abogado del Estado, of the State Legal Service, acting as Agents, with an address for service in Luxembourg at the Spanish Embassy, 4-6 Boulevard E. Servais,

applicant,

v

T H E C O U R T (Sixth Chamber),

composed of: G. F. Mancini, President of the Chamber, C. N . Kakouris, P. J. G. Kapteyn, G. Hirsch and R. Schintgen (Rapporteur), Judges,

Advocate General: C. O. Lenz, Registrar: R. Grass

having regard to the report of the Judge-Rapporteur,

after hearing the Opinion of the Advocate General delivered at the sitting on 7 January 1997,

gives the following

3 The framework appeared in a communication, 89/C 123/03, published in the Official Journal of the European Communities (1989 C 123, p. 3). Point 2.2 laid down an obligation for the Member States to notify various categories of aid and to provide the Commission with an annual report containing information on all aid payments, including those not subject to the obligation to provide prior noti- fication.

4 Point 2.5 of the communication provides that the framework measures are to enter into force on 1 January 1989, that they shall be valid for two years and that at the end of this period the Commission will review the utility and the scope of the framework.

5 Pending its acceptance by all the Member States, implementation of the framework was delayed until the end of the first half of 1989 in the case of ten States, until January 1990 in the case of the Kingdom of Spain and until May 1990 in the case of the Federal Republic of Germany. By letter of 5 February 1990, the Spanish Government had not in fact agreed to the application of the framework in the Kingdom of Spain until after 1 January 1990.

6 By letter of 31 December 1990 the Commission informed the Spanish Government that it had re-examined the utility and the scope of the framework and that, in view of the situation of the Community motor vehicle industry, it considered it necessary to prolong the framework measures.

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SPAIN v COMMISSION

9 By letter of 27 January 1993 the Commission first reminded the Spanish Govern- ment that in December 1990 it had decided to prolong the framework measures without limiting their period of validity, even though it had undertaken to re-examine them after two years and to amend or repeal them, if this was neces- sary, after consultation with the Member States. It then indicated that, in accord- ance with the undertaking given in its letter of 31 December 1990, it had under- taken this re-examination with the Member States at a multilateral meeting held on 8 December 1992 at which a large majority of the Member States had expressed their satisfaction with the application of the framework measures and their wish to see them continued during the next years. Finally, the Commission informed the Spanish government that, in consequence, it had decided, on 23 December 1992, not to modify the framework measures, adding that these would remain valid 'until the next revision to be organized by the Commission'.

io That Commission decision appeared in Communication 93/C 36/06, published in the Official Journal of the European Communities (1993 C 36, p. 17).

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JUDGMENT OF 15. 4. 1997 — CASE C-292/95

1 1 Taking the view that, by the decision of 23 December 1992, the Commission had prolonged the validity of the framework measures for an indefinite period and that it had thus modified their nature, without consulting the Member States, or even obtaining their consent, in breach in particular of Article 93(1) of the Treaty, the Kingdom of Spain, by application lodged at the Court on 5 April 1993, sought annulment of that decision.

— the decision of 23 December 1992 must be interpreted as having extended the framework only until its next review, which, like the previous ones, had to take place at the end of a further period of application of two years (paragraph 39).

1 4 Since the Kingdom of Spain's objections to the Commission's decision of 23 December 1992 to prolong the validity of the framework until that institution organized its review were thus founded on the incorrect premiss that the decision had altered the duration of validity of the framework by prolonging it for an indefinite period, the Court dismissed the application. However, considering that the legal position taken by the Kingdom of Spain had been largely upheld, the Court decided that the parties were to bear their own costs.

i7 By letter of 6 July 1995, the Commission informed the Spanish Government that, in the Community interests, it had decided to prolong its decision of 23 December 1992 with retroactive effect from 1 January 1995, so that the framework was to remain in application without interruption. The Commission stated that the pro- longation was provisional and would apply only until the completion of the pro- cedure provided for in Article 93(1) of the Treaty, which it had decided to com- mence simultaneously (followed, if necessary, by procedures under Article 93(2)) and, at the most, for a period of one year, that is to say until 31 December 1995. It stated that its decision was justified by an overriding Community interest, namely maintenance of undistorted competition in the motor vehicle sector, and was intended to avoid effects contrary to the common interest and irreversible for the structure of the market in the sector concerned.

is The Commission went on to state that the measure which it had decided on was a mere prolongation, pursuant to Article 93(1) of the Treaty, for a limited period, of the initial framework which had been agreed to by the Member States. It reminded the Spanish Government that this measure had been presented to the Member States at the multilateral meeting held on 4 July 1995 and that, consequently, in accordance with the obligations to cooperate under the Treaty, in particular Article 5, the decision meant that the Member States had to refrain from granting

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SPAIN v COMMISSION

aid in the motor vehicle sector without first notifying it to the Commission or without waiting for its final decision in accordance with the rules laid down in the framework.

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JUDGMENT OF 15. 4. 1997 — CASE C-292/95

22 First, the consultations which the Commission maintains it held during the multi- lateral meeting of 4 July 1995 took place in conditions which did not satisfy the obligation of regular and periodic cooperation which, according to the judgment in Spain v Commission, ensued from that provision.

23 Second, having regard to the expiry of the validity period of the framework estab- lished by the decision of 23 December 1992, such as was confirmed by that judg- ment, its restoration has the effect of novation and should have been decided upon according to the procedure applicable to the introduction of a framework as an 'appropriate measure' within the meaning of Article 93(1), requiring the Member States' agreement.

24 Third, the Kingdom of Spain disputes that the exceptional circumstances arising from the judgment in Spain v Commission, relied on by the Commission, are such as to justify making the contested decision retroactive.

25 In response to those objections, the Commission states that the aim of the con- tested decision was solely to fill, as a matter of urgency and on a transitional basis, the legal void which was created following the judgment in Case C-13 5/93 Spain v Commission while respecting the spirit of Article 93(1) of the Treaty. It considers that, owing to the overriding need to fill that void, it was entitled to adopt the contested decision without having recourse to the normal procedure for adopting a framework, involving a proposal on its part, a multilateral meeting with the Mem- ber States and their agreement.

30 Without any prolongation, the framework ceases to exist on the date on which it is set to expire, so that a decision to prolong it, adopted, as in this case, after expiry of the period of validity of the decision which it prolongs constitutes a modifica- tion of the existing legal situation and must be adopted according to the same pro- cedure as that required for the adoption of the decision which established the original framework or of a decision making modifications to it.

3i During the procedure before the Court, the Commission did in fact accept that its decision would normally have to be adopted according to the procedure for adopt- ing a new framework, requiring the Member States' agreement.

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JUDGMENT OF 15. 4. 1997 — CASE C-292/95

32 The Commission did indeed state that, in view of the exceptional circumstances created by the judgment in Case C-l35/93 Spain v Commission and having regard to the overriding need to maintain undistorted competition in the motor vehicle sector and to avoid effects contrary to the common interest and irreversible for the structure of the market in the sector concerned, it could dispense with obtaining the Member States' agreement in this case.

33 However, it is precisely such considerations which the Commission must also take into account when deciding to introduce a framework according to the procedure normally applicable which, as it accepts, requires the Member States' agreement.

O n those grounds,

T H E C O U R T (Sixth Chamber)

hereby:

1. Annuls the Commission's decision, notified by letter of 6 July 1995, to pro- long, with retroactive effect from 1 January 1995, the Commission decision of 23 December 1992 which had itself prolonged the validity of the Commu- nity framework on State aid to the motor vehicle industry;

2. Orders the Commission to pay the costs.

Mancini Kakouris Kapteyn