C-415/96

4. In a decision adopted in 1992 ('the original decision') 1 the Commission declared the aid provided between 1986 and 1989 to be unlawful on the ground that it had been 3. In August 1990, the Commission initiated granted in breach of the procedural rules laid the procedure laid down in Article 93(2) of down in Article 93(3) of the Treaty, which the Treaty in respect of alleged State aid to require plans to grant aid to be notified to the Hilaturas y Tejidos Andaluces SA ('Hytasa'), Commission in sufficient time to enable it to a company operating in the textile sector. Its submit its comments. It nevertheless consid- findings showed that between 1986, the date ered that the aid satisfied the conditions for of Spain's accession to the Community, and the exception provided for in Article 92(3)(c) 1989, the State, through the Patrimonio del of the Treaty, namely aid to facilitate the Estado (the Property Office of the Ministry development of certain economic activities or of Economic Affairs and Finance), contrib- uted PTA 7 100 million to Hytasa through

1 — Commission Decision 92/317/EEC of 25 March 1992 on Sute aid in favour of Hilaturas y Tejidos Andaluces SA, now called Mediterráneo Técnica Textil S A and its buyer, OJ 1992 * Original language: English. L 171, p. 54.

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5. The Kingdom of Spain considered that the original decision, together with two other decisions adopted the same day in relation to different undertakings, 2 had been adopted in 6. The Commission, while acknowledging breach of Articles 92 and 93 of the Treaty, that the region of Sevilla, in which Hytasa was located, was covered by Article 92(3)(a), had none the less declared that provision to 2 — Commission Decision 92/318/EEC of 25 March 1992 on aid granted by Spain to Industrias Mediterráneas de la Piel SA (Imepiel), OJ 1992 L 172, p. 76, and Commission Decision 92/321/EEC of 25 March 1992 concerning aid awarded by Spain to Intelhorce SA (ex Industrias Textiles de Guadalhorce 3 — Joined Cases C-278/92 to C-280/92 Spain v Commission S A ) now called GTE, General Textil España SA, a State- [1994] ECR I-4103. owned producer of cotton textiles, OJ 1992 L 176, p. 57. 4 — Paragraphs 12 to 43 and 70 to 72 of the judgment.

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be inapplicable. It appears from the judgment on competition conditions within the Com- that there were two grounds for the Com- munity.' 5 mission's view.

7. First, the Commission had maintained that the aid in question had not been granted 9. The information referred to by the Com- under the relevant regional aid scheme but on mission essentially consisted of a restruc- the basis of ad hoc decisions of the Spanish turing programme for Hytasa submitted by Government, taking the form of discretionary Spain to the Commission in the course of the capital contributions, and that the aid should Article 93(2) procedure. Spain disputed in therefore not be considered as regional. The particular the Commission's affirmation that Court rejected the Commission's argument the restructuring plan was not likely to bring on this point; it is not relevant to these pro- about the viability of the company. ceedings.

13. Finally, the Court considered Part VI, where the Commission stated that the ques- tions whether the investment projects were in 11. First, the Court considered Part IV of the line with the interest of the Community and decision, to which the Commission referred whether they contributed to a sound restruc- in the above-quoted paragraph. It noted that turing of the company were 'discussed fur- Part IV concerned a different question and ther below'. 1 1In fact, the Court noted that did not deal with the question of the restora- the Commission discussed below the adverse tion of the viability of Hytasa. As I noted in effects of the aid on the conditions of com- my Opinion, Part IV was presumably referred petition without analysing the impact of the to by mistake, since it is Part III which deals revised plan on the restoration of Hytasa's with the soundness of the restructuring plan. 8 profitability. The Court considered, however, that such an analysis was necessary in the present case, particularly because the plan provided for a substantial redirection of pro- duction towards the manufacture of clothing.

12. The Court then turned to Part III of the decision, where the Commission, after sum- marising the contents of the two restructuring plans, questioned the validity of the state- ments put forward by the Spanish authorities and the forecast results and stated that the 14. The Court therefore concluded that the several contradictions noted between the two Commission's analysis of the compatibility of plans did not allow it to share the optimistic the aid in question with Article 92(3)(a) of forecasts in the conclusion of the revised the Treaty did not meet the criteria estab- plan. 9 The Court noted that the Commission lished by itself. It accordingly annulled the did not however put forward any specific second paragraph of Article 2, and Articles 3, argument to the effect that the new restruc- 4 and 5 of the original decision. turing plan would not ensure the viability of

'According to the Court of Justice, the Com- mission had not sufficiently argued its claim 18. The first recital in Part III of the amending that the new restructuring plan would not decision states: 'In order to take account of ensure the viability of Hytasa. The Commis- the judgment of the Court of Justice, the sion had not analysed the impact of the revised Commission must reassess whether the aid plan on restoring Hytasa's profitability, and given by Patrimonio del Estado to Hytasa as the Court deemed such an analysis to be nec- part of its privatisation is compatible with the essary in this case, given that the new restruc- common market.' It is followed by a fresh turing plan provided for a substantial redirec- analysis in the light of which the Commission tion of production towards the manufacture concludes that the restructuring plan did not ensure Hytasa's long-term viability and that therefore the aid could not be considered 12 — Commission Decision 97/242/EC of 18 September 1996 compatible with the common market on the amending Decision 92/317/EEC on Sute aid in favour of basis of either Article 92(3)(a) or Article Hilaturas y Tejidos Andaluces SA, now called Mediterráneo Técnica Textil SA, and its buyer, OJ 1997 L 96, p. 30. 92(3)(c).

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19. Part IV of the amending decision deals of Justice shall declare the act concerned to be with recovery of the aid. void.

20. Since the analysis carried out by the Com- mission in execution of the judgment of the 23. Spain submits that there are two prin- Court confirmed the conclusion it had reached ciples determining the effect of a judgment in the original decision, the amending deci- given in accordance with the first paragraph sion replaced the second paragraph of Article of Article 174. 2 and Articles 3 and 4 of the original decision with new provisions to the same effect. 13

with an identical, albeit procedurally sound, provisions and leaving others intact, it appears measure, it may be found in the Isoglucose to consider that, where the judgment con- cases, which concerned a regulation annulled cerns, as in this case, a specific rather than a for failure to consult the Parliament. In general measure, the fact that certain provi- Roquette Frères v Council 14 and Maizena v sions of that measure are annulled is not an Council 15 the Court annulled Regulation N o indication of partial annulment. Although the 1293/79 16 on the ground of infringement of judgment in the first proceedings annulled an essential procedural requirement, namely only the second paragraph of Article 2 and failure to consult the Parliament. In the light Articles 3 to 5, leaving intact Article 1 and the of those judgments, the Council, after con- first paragraph of Article 2, in Spain's view sulting the Parliament, adopted Regulation that is not a partial annulment of a decision N o 387/81 17 which was to similar effect. The but the integral annulment of part of a deci- Court was subsequently asked 18 to annul the sion. relevant provision of Regulation N o 387/81 on the ground that it was retroactive in that it simply reinstated the quota and levy system previously held to be unlawful when it was sought to be introduced by Regulation N o 1293/79. The Court, having confirmed that the contested provisions of Regulation N o 387/81 did not include any new measures and merely reproduced the provisions of Regula- tion N o 1293/79 previously declared void by the Court, 19 dismissed the applications.

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29. The Commission focuses not on Article determine the exact meaning of what is stated 174 but on Article 176 in analysing the effect in the operative part. It is those grounds of a judgment given in an action for annul- which, on the one hand, identify the precise ment. In particular, it submits that it cannot provision held to be illegal and, on the other, be inferred from the first paragraph of Article indicate the specific reasons 'which underlie 174 that the invalidity of the act annulled the finding of illegality contained in the opera- extends to preliminary acts. It argues that tive part and which the institution concerned Article 174 is accordingly irrelevant for deter- must take into account when replacing the mining the consequences which a judgment annulled measure.' in an action for annulment has with regard to preliminary acts: the applicable rule is that laid down in the first paragraph of Article 176.

32. Where however the nullity results from a formal or procedural defect, the Commission submits that the institution can and some- times must replace the annulled act, ensuring 'In order to comply with the judgment and to that the conditions of form and procedure are implement it fully, the institution is required respected. It considers that Article 176 does to have regard not only to the operative part not necessarily require the institution con- of the judgment but also to the grounds which cerned to reopen the procedure which led to led to the judgment and constitute its essen- the annulled measure and to repeat the entire tial basis, in so far as they are necessary to procedure afresh before adopting a replace- ment measure. To do so would normally be contrary to the most basic requirements of the principle of procedural economy. Where 20 — See, for example, Case 76/79 Könecke v Commission [1980] ECR 665, paragraphs 13 to 15 of the judgment and the the annulment of a measure is based on a Opinion of Advocate General Raschl, at 688 to 689. formal or procedural defect, it is settled law 21 — Joined Cases 97/86, 193/86, 99/86 and 215/86 [1988] ECR 2181, at paragraph 27 of the judgment. that the institution concerned may resume

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the proceedings from the point at which the its case before the Court in the first proceed- defect arose. 22 In this case, the original deci- ings, which, at least to judge from its reliance sion was annulled because the Commission on Intermills v Commission, 23 was that the had not sufficiendy explained the reasons for original decision was inadequately reasoned its conclusion that the restructuring plan on this point. would not have ensured the return to profit- ability of the company. The Commission's sole obligation under Article 176 was to adopt a new decision setting out adequate reasons for that conclusion. The amending decision executes that obligation.

36. Thus for example in FEDES A 24 a direc- tive had been annulled on account of a pro- cedural defect concerning the manner in which 34. In my view, it is clear from the terms of it was finally adopted and was replaced by an the judgment in the first proceedings sum- identical directive adopted in accordance with marised above that the Court annulled the the correct procedure. The Court rejected the original decision because the Commission had argument that the Council should have started not given adequate reasons for its view — the whole process anew by obtaining a new crucial to its finding that the aid was not proposal from the Commission and a new within the exception in Article 92(3)(a) — opinion from the Parliament, specifically that the restructuring plan would not ensure stating that the annulment of the directive did the viability of Hytasa. It may be noted that not affect the preparatory acts. 25 the interpretation advanced by Spain appears to be contrary to the basis on which it pleaded 23 — Case 323/82 [1984] ECR 3809. See paragraph 42 of my Opinion in the first proceedings. 24 — Cited in note 22. 22 — Case C-331/88 FEDESA and Others [1990] ECR I-4023; 25 — See paragraphs 33 and 34 of the judgment and also para- Case T-26/89 De Compte v Parliament [1991] ECR II-781, g r a p h s56 and 57 of the Opinion of Advocate General paragraph 70 of the judgment Mischo.

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39. It is furthermore clear from Transocean Marine Paint v Commission 33 that, where the Court annuls a specific provision of a deci- 'For the purposes of Article 176, it will be for sion, the Commission may, in accordance the Parliament, as the body whose act has with the general principle discussed above, been declared void, to take the necessary resume the procedure at the point at which it measures to comply with the judgment ... In was vitiated by the procedural defect at issue that respect, and in contrast with what is rather than reopen the entire procedure. stated by the defendant's lawyers, I am con- Whether a decision is annulled in whole or in vinced that it will not be necessary to carry part is irrelevant for the purposes of deter- out the entire procedure afresh. From the mining whether the Commission must in con- legal point of view at least, there is nothing to sequence reopen the procedure which pre- stop the procedure from being resumed from ceded the decision. It is the ground of the time — the Assembly's second reading — annulment which is relevant in this context: at which, as a consequence of the Court's if the ground is purely a formal or procedural judgment, it will be necessary to deem it as defect, the Commission may properly remedy having been interrupted.' 28 the defect without repeating the whole pro- cedure by adopting a new decision which replaces all or part of the initial decision as necessary.

38. There are numerous cases where the Court 29 — Case 13/69 [1970] ECR 3. 30 — Case 347/82 [1984] ECR 1847, paragraphs 11 to 13 of the of Justice and the Court of First Instance have judgment and the Opinion of Advocate General Verloren van Themaat, at 1859. 31 — Joined Cases T-10/92, T-11/92, T-12/92 and T-15/92 [1992] ECR II-2667, paragraph 47 of the judgment. 32 — Cited in note 22, paragraph 70 of the judgment. 26 — Case 34/86 Council v Parliament [1986] ECR 2155. 33 — Case 17/74 [1974] ECR 1063, paragraph 20 of the judgment 17 — Paragraph 47 of the judgment. and the Opinion of Advocate Genera] Warner, at 1090 to 28 — Paragraph 18. 1092.

40. I am not persuaded by Spain's argument The right to be heard that the principle described above confers an unacceptable advantage on the Commission. It may be noted that the issue arose in two of the Isoglucose cases, 34 where it was argued that, where the Court annulled a measure without ordering (pursuant to the second paragraph of Article 174) that certain effects are to remain in force, it was not permissible to restore the situation as if the judgment of nullity had not been delivered, since parties 42. Spain puts forward a separate plea that would be deterred from bringing proceedings the Commission infringed its right to be heard and the legislature might be induced to ignore (les droits de la défense). That plea assumes procedural requirements. Although the Court that the Commission was required to reopen did not address the point, Advocate General the Article 93(2) procedure. As I have indi- Reischl specifically rejected the argument. 35 cated, I do not consider that the Commission was under any such obligation. N o r was Spain's right to be heard infringed. The Com- mission was, in my view correctly, resuming the procedure at a stage at which Spain had already been heard. It appears (and has not been disputed, subject to one point to which I return below) that the Commission was basing its analysis on material which had been put forward by or made available to Spain in the context of the Article 93(2) procedure which culminated in the original decision, and in the context of •which there was no allega- tion of infringement of the right to be heard. There was therefore no infringement of the right to be heard on which Spain can rely in 41. To conclude, since the Court in the first these proceedings. proceedings annulled the original decision because the Commission had not given ade- quate reasons for its view that the restruc- turing plan would not ensure the viability of Hytasa, the requirements of the first para- graph of Article 176 are satisfied by the Com- mission's adoption of a new decision in which its reasons for that view are adequately set out. It may be noted that Spain has not chal- lenged the adequacy of the reasons given by the Commission in the amending decision. 43. Spain submits that it is not relevant that, during the original procedure, Spain was heard, stressing what it regards as an obvious differ- ence between presenting observations on the 34 — Amylum v Council and Tunnel Refineries v Council, both cited in note 18. profitability of the undertaking at a specific 35 — At 3151 and 3152. point (1990 to 1991) and several years later.

45. It is clear from their terms that the final two recitals are indeed merely intended to In 1992, two credits amounting to PTA 300 confirm the Commission's view that the plan milhon were given to the company by the did not render the company viable. That view Instituto de Fomento de Andalucía (IFA- is analysed in some detail in recitals seven to ) [The IFA is a public entity belonging to the twenty-six of Part III of the amending deci- Andalusian Autonomous Community], as part sion. It is not alleged that the analysis in those of an aid scheme approved by the Commis- recitals is based on anything other than mate- sion [State aid N 624/92]. MTT finds itself at rial made available by Spain to the Commis- present in financial straits, with liabilities sion in the earlier procedure. In those cir- worth some PTA 10 000 million, so that it cumstances, I do not see how Spain's right to has been decided by the competent Spanish be heard can have been infringed. authorities to suspend indefinitely the pay- ments of the company, with a view to its liq- uidation and the subsequent sale of its assets 36 — C a s eC-261/89 Italy v Commission [1991] ECR I-4437, to pay its debts.' paragraph 21 of the judgment.

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