T-129/96

JUDGMENT OF 31. 3. 1998 — CASE T-129/96

J U D G M E N T O F T H E C O U R T O F FIRST INSTANCE (Third Chamber, Extended Composition) 31 March 1998 *

In Case T-129/96,

Preussag Stahl AG, a company incorporated under German law, established in Salzgitter (Germany), represented by Jochim Sedemund, Rechtsanwalt, Berlin, with an address for service in Luxembourg at the Chambers of Aloyse May, 31 Grand-Rue, Luxembourg,

applicant,

supported by

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PREUSSAG STAHL ν COMMISSION

A P P L I C A T I O N for the annulment of Commission Decision 96/544/ECSC of 29 May 1996 concerning State aid to Walzwerk Ilsenburg G m b H (OJ 1996 L 233, p. 24),

T H E C O U R T O F FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Third Chamber, Extended Composition),

composed of: V. Tiili, President, C. P. Briet, K. Lenaerts, A. Potocki and J. D. Cooke, Judges,

Registrar: A. Mair, Administrator,

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3 According to Article 1(1) of the Code, any aid to the steel industry financed by Member States or their regional or local authorities may be deemed compatible with the orderly functioning of the common market only if it satisfies the provi- sions of Articles 2 to 5.

4 According to Article 1(3):

'Aid coming within the terms of [the Code] may be granted only after the proce- dures laid down in Article 6 have been followed and shall not be payable after 31 December 1996.

The deadline for payments of aid falling under Article 5 is 31 December 1994 with the exception of the special fiscal concessions (Investitionszulage) in the five new Länder as provided for in the German "Tax amendment law 1991", which may be payable up to 31 December 1995.'

' 1 . The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid of the types referred to in Articles 2 to 5. It shall likewise be informed of plans to grant aid to the steel industry under schemes on which it has already taken a decision under the EEC Treaty. The noti­ fications of aid plans required by the article must be lodged with the Commission at the latest by 30 June 1994 as regards aid covered by Article 5 and 30 June 1996 as regards all other aid.

3. The Commission shall seek the views of the Member States on plans ... for regional investment aid when the amount of the aided investment or of the total aided investments during 12 consecutive months is in excess of E C U 10 million, and on other major aid proposals notified to it before adopting a position on them. It shall inform the Member States of the position it has adopted on all aid propos­ als, specifying the form and volume of the aid.

4. If, after giving notice to the interested parties concerned to submit their com­ ments, the Commission finds that aid in a given case is incompatible with the pro­ visions of [the Code], it shall inform the Member State concerned of its decision. The Commission shall take such a decision not later than three months after receiving the information needed to assess the proposed aid. Article 88 of the

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Treaty shall apply in the event of a Member State's failing to comply with that decision. The planned measures falling within paragraph 1 ... may be put into effect only with the approval of and subject to any conditions laid down by the Com- mission.

PREUSSAG STAHL ν COMMISSION

9 In order to ensure the viability of the undertaking under the new market condi­ tions, Preussag had to carry out substantial rationalisation, including the transfer of production of heavy plates from its factory in Salzgitter in the former West Ger­ many to the Ilsenburg mill.

10 In order to finance the investment needed for that transfer, amounting to D M 29.5 million, it was agreed that Saxony-Anhalt would grant aid comprising an invest­ ment subsidy of D M 5.850 million and a special fiscal concession of D M 0.9505 million. That aid fell within two general regional aid schemes approved by the Commission in accordance with the relevant provisions of the E C and ECSC Treaties, namely the joint framework programme for the 'improvement of regional economic structures' and the Law on investment subsidies respectively.

1 1 The German Government notified the planned aid to the Commission by fax dated 24 November 1994, which was registered the following day by the Commis­ sion with the designation N o 777/94. The fax referred expressly to the notification, on 10 May 1994, of another proposal for investment aid of D M 11.8 million to the Ilsenburg mill for the reconversion of energy sources and the improvement of environmental protection (hereinafter 'proposed aid N o 308/94').

12 By letter dated 1 December 1994 the Commission invited the German Govern­ ment to withdraw the notification of proposed aid N o 777/94 in order to avoid having to open a procedure solely on the ground of failure to observe the time- limit for notification, which had expired at the end of June 1994. The Commission noted that the fact that the time-limit had not been observed did not preclude examination of the planned aid, provided that the institution was still in a position to adopt a decision before the end of 1994. However, as proposed aid N o 777/94 had only been notified on 25 November 1994, that is to say, just 17 working days before the Commission's last meeting in 1994, the latter considered that, even by expediting the procedure as much as possible, it would be unable to give a decision

'Martin Bangemann

Member of the European Commission

Thank you for your letter dated 7 December 1994.

My colleague Karel van Miert and I share your view as to the urgency of adopting a decision on the aid to undertakings situated in the new German Länder so that their economic development is not hindered by excessively long administrative procedures.

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19 O n 15 February 1995 the Commission decided to open the examination procedure pursuant to Article 6(4) of the Code with regard to proposed aid N o 777/94. That decision was notified to the German authorities by letter dated 10 March 1995, subsequently reproduced in a notice published in the Official Journal of the Euro- pean Communities (OJ 1995 C 289, p. 11). The Commission pointed out in the let- ter that the extremely late notification of the planned aid had made it impossible to give a decision on its compatibility before 31 December 1994 and that, after that date, it was no longer competent to adopt a decision according to the wording of

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Article 5 of the Code itself. In addition, the Commission invited other Member States and other interested parties to submit their comments on proposed aid N o 777/94 within one month of the date of publication of the notice.

20 By letter dated 23 February 1995 Mr Bangemann informed Preussag that the authorisation referred to in his letter dated 21 December 1994 concerned proposed aid N o 308/94 and not proposed aid N o 777/94.

21 The special fiscal concession relating to proposed aid N o 777/94 was granted by two decisions of the Finanzamt Wolfenbüttel of 26 October 1995 and 9 January 1996, for D M 428 975.70 and D M 190 052 respectively, and was paid to the appli- cant on those dates.

Forms of order sought by the parties

25 The applicant claims that the Court should:

— order the Commission, pursuant to Article 23 of the ECSC Statute of the Court, to produce before the Court all the documents (proposals, minutes of meetings, etc.) which might clarify the circumstances leading to the adoption of the contested decision;

— grant the applicant access to the documents produced;

— annul the contested decision;

— order the Commission to pay the costs.

— annul the contested decision.

28 In its observations on the Federal Republic of Germany's statement in interven- tion, the Commission claims that the Court should:

— dismiss the intervener's arguments;

— order the intervener to pay some of the costs.

The claim for annulment

Admissibility

32 It follows that the Commission's plea of inadmissibility cannot succeed.

Substance

33 In support of its application for annulment Preussag essentially raises seven pleas in law.

The first plea, concerning the scope of the Commission's powers ratione temporis

— Arguments of the parties

34 Preussag alleges, essentially, that there is no provision in the Code which prohibits the Commission from deciding, after 31 December 1994, that the regional invest­ ment aids referred to in Article 5 are compatible provided that the material condi­ tions for their authorisation were satisfied before that date, as they were in this case. The deadline of 31 December 1994 laid down in the second paragraph of Article 1(3) of the Code is intended only to restrict the period for payment of those aids. Furthermore, the Commission is not released from its duty to adopt a decision on the material compatibility of aid paid without proper notification or before being authorised by the Commission (Case C-301/87 France v Commission [1990] E C R I-307). Finally, the Commission did not itself consider that it would be impossible to adopt a decision on the compatibility of proposed aid N o 777/94 after 31 December 1994, having regard to the fact that it opened the examination procedure and sought the views of the Member States and other interested parties after that date.

36 The Commission contends, essentially, that 31 December 1994 is the deadline both for payment and for the adoption of a decision and that payment of the aid should follow authorisation and not precede it since, pursuant to Article 6(4) of the Code, Member States may not grant aid without the Commission's approval. From 1 January 1995, the absolute prohibition on aid laid down in Article 4(c) of the Treaty was restored and a decision adopted after that date could not have rendered aid already paid lawful. The procedural irregularity resulting from failure to respect the time-limit for notification therefore rendered the aid clearly incompat­ ible with the Treaty and the Commission had no power ratione temporis to autho­ rise it. The Commission was none the less required to open the examination pro­ cedure pursuant to Article 6(3) and (4) of the Code, which fell to be applied even if the aids were not compatible with the Code.

37 Furthermore, this dispute differs considerably from that in Skibsvœrftsforeningen, cited above. Finally, the reference to Article 5 of the Code in the second paragraph of Article 1(3) confirms that the time-limit for adopting a decision expired on 31 December 1994, even in respect of the special fiscal concessions.

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— Findings of the Court

38 The Court notes that Article 1(1) of the Code states expressly that aid to the steel industry coming within the terms of the Code may be deemed compatible with the orderly functioning of the common market only if it satisfies the provisions of Articles 2 to 5.

1995 pursuant to the second paragraph of Article 1(3) of the Code. That deferral of the deadline for payment resulted solely from the condition, to which the right to special fiscal concessions was subjected, to the effect that the aided investments had already been made. It could not operate so as to extend the deadline imposed on the Commission for adopting decisions on the compatibility of that type of aid.

43 N o r can the applicant rely on the Commission's obligation to adopt a decision on the compatibility with the EC Treaty of aid paid without proper notification or before being authorised by the Commission. Unlike the EC Treaty, which empow- ers the Commission to adopt decisions on the compatibility of State aids on a per- manent basis, the derogation laid down in the Code to the principle of the absolute prohibition of aid in Article 4(c) of the Treaty was limited in time. In this case the derogation must be interpreted even more strictly since, according to the 11th recital in the preamble to the Code, 'as regional investment aids are exceptional in nature, there would be no justification in maintaining them beyond the appropri- ate period for the modernisation of the steel plants concerned, which is set at three years'.

44 As the Commission correctly pointed out, this dispute differs significantly from that in Skibsværftsforeningen, cited above, where the Commission effectively authorised operating aid in May 1994 even though Article 10a of Directive 90/684 provided that those aids could be deemed compatible with the common market until 31 December 1993 on condition, inter alia, that no other production aid was granted for contracts signed between 1 July 1990 and 31 December 1993.

The second plea, alleging that the time available for examining proposed aid N o 777/94 was sufficient

— Arguments of the parties

48 According to Preussag, supported effectively by the Federal Republic of Germany, the mere fact that the time-limit for notification was not observed should not have precluded examination of proposed aid N o 777/94, since the Commission still had some six weeks within which to adopt a decision before 31 December 1994. The consultation of the other Member States pursuant to Article 6(3) of the Code required only a short notice pointing out that the planned aid satisfied the material conditions for authorisation.

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49 In order to assess the compatibility of proposed aid N o 777/94, the Commission could simply have established that, as is apparent from the notification of pro- posed aid N o 308/94, the recipient of the aid was located in the territory of the former G D R and the aid was accompanied by a reduction in the overall produc- tion capacity of that territory.

PREUSSAG STAHL ν COMMISSION

54 The deadline laid down by the second paragraph of Article 1(3) for the payment of aid granted for investment under regional aid schemes within the meaning of Article 5 of the Code was 31 December 1994, subject to the derogation in respect of special fiscal concessions referred to above. Notification of that aid had to be made before 30 June 1994 pursuant to the last sentence of Article 6(1). In contrast, aids falling within the other categories to which the Code applied and which might be paid until 31 December 1996 pursuant to the first paragraph of Article 1(3) of the Code could validly be notified until 30 June 1996, pursuant to the last sentence of Article 6(1).

55 Furthermore, when, as here, the Commission was required by Article 6(3) of the Code to seek the views of the Member States on the notified planned aid before adopting a position in that respect, in the first place Member States could not put the planned measures into effect before the expiry of three months from the date of receipt of notification of the planned aid, according to the second sentence of Article 6(5), and in the second place the second sentence of Article 6(4) allowed the Commission a period of three months after receiving the information needed to assess the proposed aid in order to take a decision.

56 It follows that, in this case, the Commission needed at least six months before the deadline of 31 December 1994 in order to open and close the procedure before that deadline (Skibsværftsforeningen, cited in paragraph 44 above, paragraph 99).

60 In those circumstances, the plea must be rejected.

The third plea, alleging infringement of Article 6(4), first and second sentences, of the Code

61 According to Preussag, the contested decision is illegal in that the Commission relied on a simple procedural provision to declare the aid incompatible with the common market and to order repayment, even though it was established from the outset that it was materially valid and the first and second sentences of Article 6(4) of the Code empower the Commission to take a negative decision only in the event of material incompatibility of the aid.

62 The Commission contends that this dispute does not relate to a simple infringe- ment of an internal time-limit but to the fact that it lacked any substantive com- petence as from 1 January 1995.

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68 The plea must therefore be dismissed.

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The fifth plea, alleging infringement of the principle of protection of legitimate expectations

— Arguments of the parties

69 Preussag, supported by the Federal Republic of Germany, submits that the pay- ment of the aid in question is entirely a consequence of the Commission's admin- istrative error in which the letter dated 21 December 1994 had its origin (see para- graph 15 above). Preussag considered the fax of the same date, which reproduced that letter, simply to be written communication of the decision of the Commission, adopted that day, to authorise proposed aid N o 777/94, and consequently com- menced the tender procedures necessary to carry out its proposed investment on 28 December 1994.

74 The Commission recalls that an undertaking to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the appropriate procedure, which a diligent businessman should be able to determine. The fact that the time-limit for notifica­ tion had been considerably exceeded, as those involved were aware, should, in itself, have prevented Preussag from forming any legitimate expectation.

75 If Preussag and Saxony-Anhalt had taken the necessary steps, they would have become aware that the Commission had sent telex SG(94)D/37659 on 21 Decem­ ber 1994, stating that the institution had no objections in respect of a number of planned aids, including proposed aid N o 308/94, and from which it was clear that the procedure for examination of proposed aid N o 777/94 was still pending. Fur­ thermore, the letter from Mr Bangemann dated 21 December 1994 did not corre­ spond to any step in the procedure for examination of aid.

76 The fact that the proposed investments were put into effect (the Commission denies that that commenced on 28 December 1994) cannot, in any event, change the legal situation, since Preussag should not have done so if it was acting in good faith.

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— Findings of the Court

79 By letter dated 1 December 1994 the Commission invited the German Govern­ ment to withdraw the notification of proposed aid N o 777/94. The exceptional delay in notifying it precluded the adoption of a decision on compatibility before the deadline of 31 December 1994 laid down by Article 5 of the Code, which is binding in its entirety pursuant to the second paragraph of Article 14 of the Treaty. Furthermore, it is common ground that Commission decisions authorising State aids are notified by the Commission to the Member State concerned. Thus, by telex SG(94)D/37659 of 21 December 1994, referred to above, the Commission officially informed the German authorities that it had decided not to raise any objections in respect of 26 proposals which were listed and clearly identified by number; they did not include proposed aid N o 777/94. Finally, the facts show that on 21 December 1994 the Commission had not yet sought the views of the Mem­ ber States on the proposal in accordance with Article 6(3) of the Code.

80 It follows that the German authorities, the only party with which the Commis­ sion, as an institution, had a duty to communicate, must have been aware that the latter had not approved proposed aid N o 777/94. The same is true of Preussag, which had even greater reason to ascertain from those authorities that the planned aid had been authorised, given that it was aware of the Commission's negative pos­ ition with regard to it.

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81 In those circumstances, the reply given as early as 21 December 1994 in the letter signed by Mr Bangemann to the request for intervention submitted by Preussag on 7 December 1993 could not have given the applicant an assurance that the Com­ mission had altered its position.

86 Preussag points out that proposed aid N o 777/94 could lawfully be granted because more than three months elapsed between its notification and 10 March 1995, when the Commission informed the Federal Government that it had opened

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the examination procedure pursuant to Article 6(4) of the Code. The German Government was not required to inform the Commission in advance of its inten- tion to put that planned aid into effect, since the Commission had itself informed Preussag of the authorisation of the aid by letter dated 21 December 1994.

87 The Commission contends that it was not informed that the aid had been put into effect and that it was granted within a month of its notification.

— Findings of the Court

91 In Preussag's view, the contested decision does not set out the reasons which led the Commission to rely solely on the alleged failure to observe the time-limit for notification to order recovery of the aid, to consider that it lacked power to declare the aid compatible after 31 December 1994 and not to take into account Preussag's legitimate expectation that the aid in question would be authorised.

92 The Commission replies that the contested decision was properly based on the limited period of validity of the Code and that the absence of legitimate expecta­ tions was dealt with equally explicitly.

93 As is apparent from the examination of the preceding pleas, the statement of the reasons on which the contested decision was based clearly and unequivocally reveals the Commission's reasoning, in accordance with the requirements of the first paragraph of Article 15 of the Treaty, enabling the applicant to know the rea­ sons for the measure adopted so that it could defend its rights and ascertain whether or not the decision was well founded and the Court to exercise its power of review in that respect (Case C-278/95 Ρ Siemens ν Commission [1997] E C R I-2507, paragraph 17; Case T-358/94 Air France ν Commission [1996] E C R II-2109, paragraph 161).

94 The plea must therefore be dismissed.

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O n those grounds,

T H E C O U R T O F FIRST INSTANCE (Third Chamber, Extended Composition)

hereby:

1. Dismisses the application;

Registrar President

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