T-150/95

Commission of the European Communities, represented by Nicholas Khan and Paul Nemitz, of its Legal Service, acting as Agents, with an address for service in Luxembourg at the office of Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

supported by

Grand Duchy of Luxembourg, represented by Georges Schmit, Premier Con- seiller du Gouvernement in the Ministry of the Economy, acting as Agent, assisted by Bernard van de Walle de Ghelcke and Κ. Platteau, of the Brussels Bar, 13A Rue Bréderode, Brussels, with an address for service at the Ministry of the Economy, 19-21 Boulevard Royal,

* Language of the case: English.

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composed of: R. Garcia-Valdecasas, President, V. Tiili, J. Azizi, R. M. Moura Ramos and M. Jaeger, Judges,

Registrar: A. Mair, Administrator,

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having regard to the written procedure and further to the hearing on 11 March 1997,

gives the following

2 Under the first paragraph of Article 95 of the ECSC Treaty, the Commission, with the unanimous assent of the Council and having consulted the Consultative Committee, adopted Decision N o 257/80/ECSC of 1 February 1980 establishing Community rules for specific aids to the steel industry (OJ 1980 L 29, p. 5),

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commonly referred to as 'the first steel aid code'. According to the second para- graph of Part I of the preamble to that decision, the prohibition in the ECSC Treaty on subsidies or aid granted by States applies only to measures constituting purely national steel policy instruments and not to aid aimed at setting up a Com- munity steel policy, such as the restructuring of the steel industry, which was the aim of Decision N o 257/80/ECSC.

3 The first steel aid code was subsequently replaced by successive codes, each estab- lishing the rules applicable to State aid for the steel industry by laying down the criteria under which aid could be found compatible. Those codes further specified that aid to the steel industry financed by a Member State in any form whatsoever may be deemed Community aid and therefore compatible with the orderly func- tioning of the common market only if it satisfies the provisions of the code in question.

4 In 1991, Commission Decision N o 3855/91/ECSC of 27 November 1991 estab- lishing Community rules for aid to the steel industry (OJ 1991 L 362, p. 57, here- inafter 'the Fifth Code') laid down the new relevant provisions concerning the grant of State aid in this field. The Fifth Code was applicable when the contested decision was adopted and remained in force until 31 December 1996. Since 1 Janu- ary 1997, it has been replaced by Commission Decision N o 2496/96/ECSC of 18 December 1996 establishing Community rules for State aid to the steel industry (OJ 1996 L 338, p. 42), which forms the sixth steel aid code.

'In order to ensure that the steel industry and other industries have equal access to aid for research and development, in so far as this is permitted by the Treaties, the compatibility of these aid schemes with the common market will be assessed in the light of the Community framework on State aid for research and development. As the provisions on aid for environmental protection are identical to those contained in the framework on State aid in environmental matters, they have not been changed. If the rules laid down by these two general frameworks were changed substantially during the term of validity of this Decision, a proposal for an amend- ment would be presented'; and

— Article 3, which provides:

' 1 . Aid granted to steel undertakings for bringing into line with new statutory environmental standards plants which entered into service at least two years before the introduction of the standards may be deemed compatible with the common market.

2. The total amount of aid granted for this purpose may not exceed 15% net grant equivalent of the investment costs directly related to the environmental measures concerned. Where the investment is associated with an increase in the capacity of the plant, the eligible costs shall be proportionate to the initial capacity of the plant'.

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3.2.3 Investments made in order to comply with the standards may consist in either installing additional equipment to reduce or eliminate pollution and nui- sances or adapting production processes for the same purpose. In the latter case

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any portion of investment leading to an increase in existing production capacity will not qualify for the proposed assistance.

3.2.4 The undertakings themselves must bear the entire cost of normal replace­ ment investment and operating expenses.'

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listed in paragraph 5. Paragraph 5(b) points out, in connection with one of those aspects, that although, in keeping with the 'polluter pays' principle, no aid should in general be given towards the cost of complying with mandatory standards in new plant, the new E C guidelines, in the penultimate paragraph of point 3.2.3. A, 'specifically state that firms which, instead of simply adapting existing plant more than two years old, opt to replace it by new plant meeting the new standards may receive aid in respect of that part of the investment costs that does not exceed the cost of adapting the old plant'.

π Paragraph 6 of that proposal concludes:

'Consequently, in order to comply more fully with the conditions laid down in the preamble to the Steel Aid Code, and in particular with the principle that the steel industry and other industries must have equal access to the aid in question, it is both necessary and appropriate that the Commission should decide to amend Article 3 of the Aid Code in the manner set out in the attached draft Decision'.

i2 Article 1 of the draft decision attached to the Commission's communication reads as follows:

in the Community guidelines in force on State aid for environmental protection"'.

π That Commission proposal did not receive the assent of the Council.

Facts

i4 By letter of 29 December 1993, the Grand Duchy of Luxembourg informed the Commission, pursuant to Article 6(1) of the Fifth Code, of a plan to grant aid to ProfilARBED SA in the context of the construction of a new steel plant at Esch- Schifflange, Luxembourg.

is By letter of 5 April 1994, in response to a request from the Commission, the Grand Duchy of Luxembourg provided further information concerning the planned aid.

u O n 1 June 1994, pursuant to Article 6(4) of the Fifth Code, the Commission initi­ ated a procedure against the planned aid (Commission Notice 94/C 212/07, OJ 1994 C 212, p . 7). Following the opening of that procedure, it received a number of comments, and those submitted by the applicant, then named the British Iron and Steel Producers Association (BISPA), by British Steel pic and by the United King­ dom of Great Britain and Northern Ireland were forwarded to the Luxembourg Government to allow it to reply.

2i The applicant, named BISPA when it brought the action and now the U K Steel Association, is an association established in London representing United Kingdom undertakings which produce iron and steel products of the kind defined in Annex I to the ECSC Treaty and supply those products within the Community.

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22 Although the issue of the Official Journal in which the contested decision is repro­ duced bears the date 31 December 1994, it was not in fact available from the Office for Official Publications of the European Communities until 27 May 1995.

Procedure and forms of order sought

23 The applicant brought the present action by application lodged at the Registry of the Court of First Instance on 19 July 1995.

28 In response to that request from the Court, the Commission indicated on 19 Sep- tember 1996 that the proposal to amend the Fifth Code had not yet received the assent of the Council but that it had none the less submitted new draft Commu- nity rules for aid to the steel industry (sixth code) to replace the Fifth Code, and appended a copy thereof to its response. It drew attention to the fact that Article 3 of the draft sixth code was substantially similar to Article 3 of the proposed amendment. Under the draft, the 1994 EC guidelines would be automatically applicable to aid to the steel industry.

29 The abovementioned proposal did not receive the assent of the Council. Under the final text of the sixth steel aid code, adopted by Commission Decision N o 2496/96/ECSC of 18 December 1996 (OJ 1996 L 338, p. 42), with the unanimous assent of the Council, the provision in the E C guidelines relating to aid for the steel industry is not to be applied automatically in the ECSC sector but criteria are laid down for the application of those guidelines in the ECSC sector.

30 The parties presented oral argument and replied to the questions put to them orally by the Court at the hearing on 11 March 1997.

3i The applicant claims that the Court should

— annul the contested decision; and

— order the defendant to pay the costs.

— dismiss the application; and

— order the applicant to pay the costs, including those of the intervener.

34 Arbed claims that the Court should

— dismiss the application; and

— order the defendant (sic) to pay the costs of its intervention.

35 The oral procedure was closed by decision of the President of the Fifth Chamber, Extended Composition, on 25 March 1997.

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39 The Commission then examines, in the sixth paragraph, whether the aid envisaged meets all the conditions set out in the Community guidelines, and concludes that it does, including the ceiling of 15% gross of the investment (seventh paragraph).

40 The contested decision concludes, in the ninth and tenth paragraphs, as follows: 'Accordingly, the Commission considers that it is possible, under Article 3(1) of the State aid code, to consider as compatible with the common market aid not exceeding 15% gross granted to firms which, instead of bringing into line with new environmental standards plants which entered into service at least two years before the introduction of the standards, decide to replace them by new facilities meeting the new standards provided that the aid does not exceed that which would have been granted for adapting the old steelworks. Since the aid conforms to Article 3 of [the Fifth Code], it may therefore be considered compatible with the common market.

The Commission has therefore decided to terminate the procedure initiated in respect of the aid granted to ProfilARBED for environmental protection'.

Substance

Arguments of the parties

43 The interveners submit in their statements in intervention that the work in the present case does not involve constructing new plant meeting the new environ- mental protection standards but adapting existing old plant to meet those stan- dards. The aid in issue therefore meets the criteria laid down by Article 3(1) of the Fifth Code and is thus compatible with the common market.

44 The Grand Duchy of Luxembourg explains that the plant in question comprises the liquid phase in the Esch-Schifflange steel production complex, the liquid phase being an integrated production tool composed of a ladle furnace, a steel furnace and two continuous casting units, with the steel furnace and the continuous casting units being unable to operate independently. The contested aid was intended for the replacement of the steel furnace — which was originally of the L D - A C oxygen-based design — by an electric arc furnace. The Grand Duchy emphasizes that the only part of the liquid phase to have been replaced is the steel furnace, a tool which cannot be viewed in isolation and which is only one of the sections in an integrated production complex for the manufacture of semi-finished steel prod- ucts. Thus, despite the replacement of the steel furnace, the plant itself has remained in place and only been modernized.

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45 Arbed too submits that the construction of a new electric arc furnace in the Esch- Schifflange complex does not amount to the construction of new plant but must be regarded as a modernization of that complex.

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JUDGMENT OF 25. 9.1997 — CASE T-150/95

of which will soon be exhausted. The applicant stresses that, without such a replacement, Luxembourg's geographical position would have entailed an increase in Arbed's production costs due to the incorporation of the transport costs for the raw materials. The replacement of the old L D - A C furnace by the new electric arc furnace, which is the essential element of the new production process, cannot be regarded as an adaptation of an existing production process but must be regarded as the replacement of one process by another. Finally, the applicant points out that the existing L D - A C plant will be definitively shut down by the end of 1997 once the changeover between production processes has been completed, as stated by Arbed in its newsletters, appended by the applicant to its observations on the statements in intervention.

Findings of the Court

so In the light of the specific circumstances of the case and of the fact that the argu- ments put forward by the interveners as to whether or not the purpose of the aid in issue was to adapt existing plant are closely bound up with the applicant's single plea in law alleging infringement of Article 3(1) of the Fifth Code, the Court con- siders it appropriate to examine the interveners' arguments, without there being any need to rule on their admissibility.

si According to the contested decision (see paragraph 36 above), the aid in issue is intended for the replacement of old plant by new facilities meeting the new Luxembourg environmental protection standards.

53 At a further stage in its analysis, in the second paragraph of the section entitled 'The Commission's assessment', it states: 'It transpires that, rather than adapting its old plant to the new provisions, Arbed decided to speed up its programme of replacing old plant [by new] facilities meeting the new standards. The electric steel plant is the replacement, conforming to the new standards, for the old LD-AC steel plants, which were built in the 1960s and 1970s. Assuming the existing facili­ ties are retained, the estimated total investment cost to Arbed would have been Lfrs 1.5 billion, of which Lfrs 750 million for primary dust extraction (Lfrs 150 million for a converter upstream of the dry electrostatic filter and Lfrs 600 million for a new furnace chimney-stack) and Lfrs 750 million for secondary dust extrac­ tion in the steel plant. Consequently, the investment costs connected with environ­ mental protection will not exceed the amounts that would have been involved in adapting the old plant'.

54 It is also clear from the documents before the Court that the Grand Duchy of Luxembourg notified the planned aid in the context of investment intended to speed up the programme for replacing the existing steel plant facilities. The Luxembourg Ministry of the Economy sent the Commission a memorandum dated 29 December 1993, forwarded by letter from the office of the Permanent Representative of the Grand Duchy of Luxembourg of 30 December 1993 and headed 'Memorandum concerning investments for environmental protection made by ProfilARBED SA in the context of the installation of an electric arc furnace at Esch-Schifflange', the first paragraph of which refers to 'the construction of a new electric arc furnace at Esch-Schifflange'.

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UK STEEL ASSOCIATION y COMMISSION

59 In the light of all the foregoing, the Court considers that the importance of the facilities replaced, the scale of the changes to the production process and the sub- stantial change in the composition of the raw material following completion of the investment for which the aid was intended amount to more than the adaptation of existing facilities. The Commission could thus rightly conclude, in the contested decision (see paragraphs 51 to 53 above), that the investment for which the aid was intended consisted not in adapting old facilities to meet new requirements but in replacing old plant by new facilities meeting the new environmental standards.

60 The interveners' argument on this point is therefore unfounded.

Infringement of Article 3(1) of the Fifth Code

Arguments of the parties

64 It points out that the provisions concerning State aid in the ECSC Treaty differ from those in the EC Treaty. Whilst Article 4(c) of the ECSC Treaty provides that all subsidies or aids granted by States in any form whatsoever are to be prohibited, Article 92 of the EC Treaty allows aid to be granted from public sources in the circumstances therein defined.

65 Due to the severe problems faced by undertakings operating within the ECSC, the applicant states, the Commission adopted, in accordance with the very rigorous procedure laid down in Article 95 of the ECSC Treaty, a derogation from the gen- eral principle that aid is prohibited in the ECSC field, in the form of the first steel aid code, subsequently replaced by various successive versions.

66 The applicant concludes that the steel aid code must be interpreted narrowly and by reference only to its express wording, because it is an overriding principle of law that derogations from a Treaty principle should be interpreted strictly.

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UK STEEL ASSOCIATION v COMMISSION

67 The Commission points out, first of all, that the applicant does not contest that the aid was in line with the 1994 EC guidelines. Nor, it stresses, does the applicant contest that the costs for adapting the existing plant to the new environmental standards would have been significantly higher than the expenditure necessary for the new plant to comply with those standards and that consequently the maximum aid that could have been approved on the basis of Article 3(1) of the Fifth Code was significantly more than the aid approved in the contested decision.

70 The Commission points out that the Single European Act strengthened the impor- tance of the Community powers in the environmental field. In particular, the last line of the first subparagraph of Article 130r(2) of the EC Treaty provides: 'Envi- ronmental protection requirements must be integrated into the definition and implementation of other Community policies'.

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JUDGMENT OF 25. 9.1997 — CASE T-150/95

7i The Commission notes that the purpose of Article 3(1) of the Fifth Code coincides with the corresponding provision in the 1994 EC guidelines. In its view, the refer- ence in the preamble to the Fifth Code to the two general frameworks on State aid (the EC framework and the ECSC framework, the latter being established by the Fifth Code itself) confirms that the steel industry and other industries are to be given equal treatment with regard to aid for environmental protection.

72 The Commission explains that the principles underlying the rules in the Fifth Code on State aid for environmental protection, which have not been changed, are even better explained in Part II of the preamble to the fourth code, which states: 'It would be unjustified ... to deny the Community steel industry aid ... for bringing plants into line with new environmental standards. Aid for these purposes which is in the public interest and satisfies the conditions laid down in this Decision should be available to the steel industry, just as similar aid is permitted to other industries under Article[s] 92 and 93 of the EEC Treaty'.

73 The Commission submits that it is possible to grant aid to firms which, instead of simply adapting existing plant more than two years old, opt to replace it by new plant meeting the new standards, and states that such an interpretation is con- firmed by Article 3(2) of the Fifth Code. That provision sets a ceiling of 15% net grant equivalent of the investment costs directly related to the environmental mea- sures concerned and expressly states that where the investment is associated with an increase in the capacity of the plant, the eligible costs are to be proportionate to the initial capacity of the plant.

76 T h e C o m m i s s i o n also p o i n t s o u t that, ' i n f r i n g e m e n t of this T r e a t y ' being o n e of t h e g r o u n d s for a n n u l m e n t p r o v i d e d u n d e r Article 33 of t h e E C S C Treaty, this c a n n o t involve a review of t h e merits of t h e e c o n o m i c analysis o n w h i c h t h e c o n ­ tested decision is based, since t h e g r o u n d s o n w h i c h a decision m a y b e challenged are expressly confined in Article 33 t o t h o s e susceptible t o judicial, n o t e c o n o m i c , review. I t s u b m i t s that, in t h e c o n t e x t of r e v i e w i n g t h e legality of decisions based o n Article 95 a n d t h e Fifth C o d e , s u c h r e v i e w m u s t b e confined t o examining w h e t h e r it h a s c o m m i t t e d a manifest e r r o r in its a p p r e c i a t i o n of t h e necessity of t h e aid a u t h o r i z e d for t h e furtherance of t h e aims of t h e Treaty.

77 The Grand D u c h y of Luxembourg points out that Article 3 of the Fifth Code lays down three conditions to be met before aid can be declared compatible with the orderly functioning of the common market: (i) the aid must be granted for bring­ ing existing plant into line with new environmental standards; (ii) the plant in question must have been in service for at least two years; and (iii) the aid must not exceed 15% net of the amount of the investment. In the Grand Duchy's opinion, those three conditions are met in the present case.

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JUDGMENT OF 25.9.1997 — CASE T-150/95

78 The first condition — that the aid must be granted for bringing existing plant into line with new environmental standards — is met in the present case, the Grand Duchy of Luxembourg notes, following the adoption of two ministerial decrees laying down the operating conditions imposed on ProfilARBED SA, relating in particular to dust and noise emissions.

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82 Arbed submits that the only question open to interpretation as regards Article 3(1) of the Fifth Code is whether there is any limitation on the extent of the modern­ ization necessary for the plant to meet the new environmental protection stan­ dards. As long as the aid authorized contributes to the achievement of the objec­ tive pursued by Article 3 of the Fifth Code, it considers, there is nothing in that article to require the Commission to take into account the nature and extent of the modernization.

83 Arbed therefore submits that, even if the replacement of the LD-AC steel convert­ ers by electric arc furnaces is regarded as the replacement rather than the adapta­ tion of existing plant, the Commission correctly applied the Fifth Code when it considered that such replacement was covered by Article 3(1).

84 Arbed also challenges the alleged need for a formal amendment of the Fifth Code to bring it into line with the evolution of the regime for environmental aid under the E C Treaty since, when the Fifth Code was adopted, the Community (EC) rules on environmental protection already made it possible to authorize State aid granted to undertakings for adapting their existing activities to new environmental standards, the only condition required being the existence of a polluting activity for at least two years before the entry into force of those standards, as was made clear in the 1974 E C framework and confirmed in the 1987 EC framework.

85 Arbed also submits that the applicant's reasoning concerning the alleged need for a narrow interpretation of Article 3(1) of the Fifth Code fails to take account of the specific nature of the ECSC Treaty and its limited scope. In its view, when Article 4(c) of the ECSC Treaty prohibits subsidies or aids granted by States or special charges imposed by States in any form whatsoever, this must be understood, in view of the limited scope of the Treaty, as referring to aid to production and/or distribution and cannot concern aid for environmental protection, since environ­ mental policy is not covered by the ECSC Treaty. Arbed points out that it is

88 A s regards w o r d i n g , Article 3(1) refers o n l y t o ' b r i n g i n g i n t o line w i t h n e w ... stan- d a r d s plants w h i c h entered i n t o service at least t w o years before t h e i n t r o d u c t i o n of the s t a n d a r d s ' . A p u r e l y literal i n t e r p r e t a t i o n of Article 3(1) therefore excludes a n y investment n o t i n t e n d e d t o b r i n g facilities already in service into line w i t h n e w s t a n d a r d s by, for example, replacing t h e m b y n e w facilities, even if t h e y meet the environmental protection standards.

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89 The Commission expressly found in the contested decision that in this case exist­ ing plant was not being adapted but was being replaced by new facilities. It has submitted, however, that an interpretation of Article 3(1) in the light of its context and purpose leads to the conclusion that such a possibility is consistent with Article 3(1).

90 That reasoning must therefore be examined to determine whether it is well founded.

9i O n the basis of the principle set out in Part II of the preamble to the Fifth Code, that the steel industry and other industries must have equal access to aid for envi­ ronmental protection, the contested decision states, in the third paragraph of the section entitled 'The Commission's assessment', that the same provisions of Com­ munity legislation regarding aid for environmental protection should be generally applicable to all firms, whether steel firms or not.

96 Secondly, the automatic application of the E C guidelines to the steel sector is not provided for in the Fifth Code. Such automatic application cannot be inferred from the principle stated in the preamble to the Fifth Code, that the steel industry and other industries must have equal access to aid for environmental protection. That preamble merely notes that the rules governing aid for environmental protec- tion laid down by the two frameworks were identical at the time when the Fifth Code was adopted. However, the second paragraph of Part II of the preamble (see paragraph 5 above) states that it would be necessary to present a proposal for an amendment to the Fifth Code if the rules laid down by the two general frame- works were changed substantially during the term of validity of the Fifth Code. The application of the EC guidelines to the steel sector is therefore not automatic.

97 Thirdly, the EC framework in force when the Fifth Code was adopted — the EC framework adopted in 1980 and extended in 1987 — was in fact amended in 1994. The penultimate paragraph of point 3.2.3. A of the new guidelines provides for the possibility of granting aid for investment intended to replace existing plant by new plant. That possibility was not expressly provided for in the 1987 E C framework, which was in force when the Fifth Code was approved.

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98 The eventuality envisaged in the second paragraph of Part II of the preamble to the Fifth Code has therefore occurred, since the rules laid down by the 1987 EC framework were changed substantially by the 1994 EC guidelines during the term of validity of the Fifth Code. Consequently, application to the ECSC sector of the principle established by the new 1994 EC guidelines was conditional on the pre- sentation of a proposal for the amendment of the Fifth Code to bring it into line with the new guidelines.

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JUDGMENT OF 25. 9.1997 — CASE T-150/95

ιοί In the light of all the foregoing, it is clear that Article 3 of the Fifth Code does not provide for the possibility of granting aid to firms which, instead of simply adapt­ ing existing plant, opt to replace it by new plant meeting the new environmental standards. Consequently, the assumption in the contested decision, that it is pos­ sible to extend that provision of the E C guidelines to the steel aid code because it does not contradict the wording of Article 3 of the Fifth Code, must be rejected, since it does run counter to the clear wording of that article.

102 That conclusion cannot be altered by the fact that the national environmental stan­ dards in question are more stringent than in other Member States, by the fact that the amount of aid authorized is at least one-third lower than the amount which it might have been possible to authorize, or by the fact that the aid does not exceed the Umit of 15% of the investment costs directly related to the environmental measure concerned, since those considerations cannot justify granting aid to the steel industry which does not meet the conditions laid down in Article 3(1) of the Fifth Code.

103 Consequently, the argument put forward by the Grand Duchy of Luxembourg, that the contested aid meets the three conditions laid down by Article 3 of the Fifth Code, cannot be accepted, since the first condition — that the aid must be intended to bring existing plant into line with new environmental protection stan­ dards — is not met in this case. That being so, no purpose can be served by analys­ ing the Grand Duchy of Luxembourg's arguments concerning the other two con­ ditions.

107 As regards the adaptation of the production process for the same purpose, it must be borne in mind that, as held in paragraph 59 above, the investment for which the aid was intended concerns the replacement of the existing LD-AC plant by a new electric arc furnace and, whilst the production process developed using the old plant could use up to 30% to 4 0 % scrap as raw material, the electric arc produc­ tion process resulting from the investment for which the aid was intended makes it

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JUDGMENT OF 25. 9.1997 — CASE T-150/95

possible to use 100% scrap as raw material. The L D - A C plant will, moreover, be definitively shut down at the end of 1997. The basic oxygen or L D - A C process has in fact been replaced by an electric arc production process. Consequently, the investment made by Arbed clearly does not constitute the adaptation of a produc- tion process but the replacement of one such process by another.

ios In any event, moreover, it must be noted that, under point 3.2.4 of the 1987 EC framework, in force when the Fifth Code was adopted, the entire cost of replace- ment investment should be borne by the undertakings.

109 The interveners' argument is therefore unfounded.

in Arbed's argument is, moreover, contradicted by the Commission itself, which notes that it is obliged by the ECSC Treaty itself and in particular by Article 3(d) to take measures to protect the environment in the common interest.

114 In the light of the foregoing considerations, it is clear that the rules to be applied in the ECSC sector in order to ensure that such concerns are addressed are those laid down in the Fifth Code, account being taken of the objectives set out in the Treaty and in particular the prohibition in Article 4(c) of any State aid in any form what­ soever. Since the Fifth Code constitutes a derogation from Article 4 of the ECSC Treaty, it must be interpreted strictly.

us The need for a strict interpretation is confirmed by the very wording of the pre­ ambles to the fourth and fifth codes, in which the Council and the Commission clearly stated their intention that the steel aid codes should be interpreted strictly

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and solely by reference to their express terms. The fifth paragraph of Part I of the preamble to the fourth code stated:

119 The Court therefore considers that Article 3(1), having regard to the context of the Fifth Code in which it occurs and the objective which it pursues (see Case C-99/94 Birkenbeul ν Hauptzollamt Koblenz [1996] E C R 1-1791, paragraph 12), must be interpreted with the greatest possible regard to its wording.

no The arguments of the Commission and the interveners are therefore not such as to invalidate the Court's conclusion that Article 3 of the Fifth Code does not provide for the possibility of granting aid to firms which, instead of simply adapting exist­ ing plant, opt to replace it by new plant meeting new environmental standards.

πι In the light of all the foregoing, the contested decision must be held to infringe Article 3(1) of the Fifth Code and must therefore be annulled.

Costs

122 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has been unsuccessful and the applicant has applied for costs, the Commission must be ordered to pay the costs.

123 Under the first subparagraph of Article 87(4), Member States which have inter­ vened in the proceedings are to bear their own costs. Under the third subpara­ graph of that provision, the Court may order an intervener other than a State which is a party to the EEA Agreement, a Member State, an institution or the EFTA Surveillance Authority to bear its own costs. In the circumstances of this case, the intervener Arbed must bear its own costs.

2. Orders the Commission to pay the costs;

3. Orders the Grand Duchy of Luxembourg and Arbed SA to bear their own costs.

Garcia-Valdecasas Tiili Azizi

Moura Ramos Jaeger

Delivered in open court in Luxembourg on 25 September 1997.

H. Jung R. Garcia-Valdecasas