C-372/97

2. In parallel with the action brought by the Italian Republic, numerous undertak- 3. The main point at issue is the extent to ings affected by the recovery order and also which the aid in question was such as to the Friuli-Venezia Giulia Region instituted distort competition in the markets con- proceedings in the Court of First Instance. cerned, which at least in the early part of In judgments delivered on 15 June 2000 the period in which the aid was paid had (hereinafter the 'Alzetta judgment') 3 and 4 not yet been fully liberalised, and whether April 2000 (hereinafter the 'Friuli-Venezia the conditions for a derogation from the GiuliaRegion judgment'), 4 the Court of prohibition on aid obtained. Another point at issue is whether the principle of the protection of legitimate expectations and 1 — Original language: German. the principle of proportionality conflict 2 — Commission Decision 98/182/EC of 30 July 1997 concern- with the requirement that the aid be ing aid granted by the F r iuli-Venezia Giulia Region (Italy) to road haulage companies in the region (OJ 1998 I. 66, p. 18) recovered. — hereinafter 'the contested decision'. 3 — J o i n e d Cases T-298/97, T-312/97, T-313/97, T-315/97, T-600/97 to T-607/97, T-1/98, T-3/98 to T-6/98 and T-23/98 Alzata Mauro anil Outers [2000] ECR II-2319. 4 — Case T-288/97 Regione Autonoma Friuli-Venezia Giulia v 5 — In Case C 298/00 P the Opinion is also being delivered on 15 Commission [2001] ECR II-1169. May 2003 ([2004] ECR I-4092).

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II— Legal framework and background to carrier established in another Member the dispute State.

7. Liberalisation of cabotage did not begin until 1 July 1990. Here again quotas were established in the first instance; these were 5. During the period in which the aid at expanded by stages through to complete issue was granted, road haulage in the opening of the market on 1 July 1998. 9 Community was still in the process of liberalisation. In this connection a distinc- tion must be made between, on the one 7 —OJ 1968 L 175, p. 13. hand, the international road haulage mar- 8 — See Council Regulation (EEC) No 881/92 of 26 March 1992 ket for cross-border transport and, on the on access to the market in the carriage of goods by road within the Community to or from the territory of a Member other, cabotage, that is to say the carriage State or passing across the territory of one or more Member of goods within one Member State by a States (OJ 1992 L 95, p. 1). 9 — See Council Regulation (EEC) No 4059/89 of 21 December 1989 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State (OJ 1989 L 390, p. 3) and Council Regulation (EEC) No 3118/93 of 25 October 1993 laying down the 6 — OJ 1970 L 130, p. 1, most recently amended by Council conditions under which non-resident carriers may operate Regulation (EEC) No 543/97 of 17 March 1997 (OJ 1997 national road haulage services within a Member State (OJ L 84, p. 6). 1993 L 279, p. 1).

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B — The contested aid provisions estab- of premises) and for the purchase of lished by the Friuli-Venezia Giulia Region equipment, including road transport vehicles (Article 4 of Law No 4/1985);

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C — The contested decision Article 3

13. On 30 July 1997 the Commission adopted the contested decision, 10 on com- The subsidies for financing equipment pletion of the administrative procedure. specifically adapted for, and used solely The operative part of that decision is for, combined transport constitute aid worded as follows: within the meaning of Article 92(1) of the Treaty but are compatible with the com- mon market by virtue of Article 3(1)(e) of Regulation (EEC) No 1107/70.

'Article 1 Article 4

Subsidies granted under Laws No 28/1981 and No 4/1985 ... up to 1 July 1990 to The subsidies granted from 1 July 1990 companies exclusively engaged in transport onwards to companies engaged in transport operations at local, regional or national operations at a local, regional or national level do not constitute State aid within the level and to companies engaged in transport meaning of Article 92(1) of the Treaty. operations at an international level are incompatible with the common market since they do not fulfil any of the conditions for derogation provided for in Article 92(2) and (3) of the Treaty, or the conditions provided for in Regulation (EEC) No 1107/70. Article 2

— infringement of Article 92( 1 ) of the 14. In the statement of reasons, the Com- Treaty and failure to provide sufficient mission explained inter alia that the sub- reasons as the Commission did not sidies covered by Article 1 did not consti- state the extent to which the measures tute aid within the meaning of Article 92( I ) actually distort or threaten to distort of the Treaty because the cabotage market competition nor the extent to which had been closed to competition until 1 July they actually affect intra-Community 1990. Otherwise, however, competition trade; had already existed in the markets con- cerned — albeit in the framework of quota arrangements — and the measures at issue were potentially such as to affect that competition. — erroneous retusai of a derogation under Article 92(3)(c) of the Treaty and Article 3(1)(d) of Regulation No 1 107/70 (aid in the framework of a rationalisation plan directed at redu- cing overcapacity); 15. The Commission made the point that the aid measure was not allowable as compensation for alleged disadvantages suffered by the transport undertakings in relation to competitors in Austria. Nor did — infringement of Article 93 of the the fact that the beneficiaries were for the Treaty in that the aid was charac- most part small undertakings operating at terised as new aid; and local or regional level preclude distortion of infra-Community trade. Lastly, the Com- mission considered that the conditions for derogations from the prohibition on aid laid down by Articles 77, 92 and 93 of the — infringement of the principle of the Treaty and by Article 3 of Regulation No protection of legitimate expectations 1107/70 were not met. and of the principle of reasonableness

(2) in either case, order the Commission to 2 1 . Before the individual pleas in law are pay the costs. looked at more closely, the point should first be made that the present action has become partly devoid of purpose.

18. The Commission contends that the Court should: 22. This is because the contested decision has already been annulled in part by the Alzetta judgment and the Friuli-Venezia Giulia Region judgment. The Court of First (1) dismiss the action; and Instance has annulled Article 2 of the decision in so far as it declares aid to be illegal that was granted from 1 July 1990 onwards to companies engaged solely in transport operations at a local, regional or (2) order the Italian Republic to pay the national level. The corresponding order in costs. Article 5 of the contested decision for the

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aid to be abolished and recovered was also discrete part of the decision relating to the annulled. As the Commission considers that region alone. It follows that the case-law of subsidies accorded to this group of under- the Court, according to which the matter to takings prior to 1 July 1990 do not in any be tried by the Community judicature case constitute aid, it follows that all relates only to those aspects of the decision subsidies which were granted to under- which concern the applicant, whereas takings engaged solely in transport opera- unchallenged aspects concerning other tions within the national territory are no addressees do not form part of the matter longer affected. to be tried, 12 does not stand in the way of the partial discontinuance of the present dispute.

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affect competition or distort intra-Commu- excludes at the outset the possibility that nity trade as they were only on a very i n t r a - C o m m u n i t y t r a d e m i g h t be modest scale and as the beneficiaries were affected. 14 Nor need actual distortion of in the main very small undertakings with a intra-Community trade be proved. modest market share. Prior to full liberal- isation, competition did not exist in respect of cross-border transport.

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competition exist in the sector concerned. 34. According to case-law, the very cir- Cross-border road haulage was only partly cumstances in which aid is granted may be opened up in the Community between 1969 sufficient to show that the aid is capable of and 1 January 1993. In the framework of affecting trade between Member States and quota arrangements, transport undertak- of distorting or threatening to distort ings received a licence, usable for only one competition; in such cases, it is sufficient vehicle and valid for a period of one year. for the Commission to set out those circumstances in the statement of reasons for its decision. 17 In the contested decision the Commission explained that the aid strengthened the position of the recipient undertakings in relation to competitors that were not beneficiaries by improving their financial situation and hence their scope for action. The result was also adversely to affect intra-Community trade. It follows that the Commission has complied with the 32. An effective competitive situation did requirements of case-law. exist within the limit of the quotas laid down. 16 The aid recipients operating from the Friuli-Venezia Giulia Region that were in possession of a licence were in competi- tion with undertakings from other parts of Italy and with undertakings from other Member States. The Italian Government's complaint that competition existed in the international road haulage sector only from the date of full liberalisation of the markets must therefore be rejected.

40. In that case, however, that finding related to undertakings not operating in the transport sector. Elsewhere in the same 37. The Court has consistently held 19 that judgment, the Court took the view that even aid of a small amount is liable to professional road transport is a sector distort competition and affect trade. whose particular market structure, charac- terised by overcapacity and a large number of small undertakings, is such that even aid of a relatively low amount to small under- takings is liable to affect competition. 22

38. The Court has, in a recently delivered judgment, confirmed the cited case-law and has stated further that '[o]ther factors may be decisive when assessing the effect of aid on trade, such as ... whether the under- takings that receive it are operating in a 41. It follows then from the Court's more sector that is particularly exposed to recent case-law that even aid of a relatively competition'. 20 low amount to small undertakings in the transport sector may be such as to affect competition and distort trade between Member States.

39. In another ruling, Case C-351/98 Spain v Commission, the Court did however conclude that 'a small amount of aid to an 42. The point must however be made that the Commission did not, in setting out the 19 — Tubemeuse, cited in footnote 14, paragraph 43, Case reasons for the contested decision, expressly C-303/88 Italy v Commission [1991] ECR I-1433, para- mention the particular market structure graph 27, Joined Cases C-278/92 to C-280/92 Spain v Commission [1994] ECR I-4103, paragraph 42, and Case T-214/95 Vlaams Gewest v Commission [1998 ECR II-717, paragraphs 46, 49 and 50. 20 — Case C-113/00 Spain v Commission, cited in footnote 17. paragraph 30, and Case C-351/98 Spain v Commission. 21 — Cited in footnote 17, paragraph 51. cited in footnote 17, paragraph 51. 22 — Paragraphs 63 to 65.

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service. The derogation provisions under 2. Assessment Article 92(3)(c) of the Treaty and Article 3 (1)(d) of Regulation No 1107/70 had thus been applicable. (a) Article 3(d) of Regulation No 1107/70

50. Article 3 of Regulation No 1107/70 2 4 states inter alia:

48. The Commission objects that a deroga- tion under Article 3(1)(d) of Regulation No 1107/70 was not available because the aid did not form part of a reorganisation plan for the sector and there was no excess '... Member States shall neither take coor- capacity. Nor had the Italian authorities, in dination measures nor impose obligations the course of the administrative procedure, inherent in the concept of a public service provided any detailed justification for a which involve the granting of aids pursuant derogation under Article 92(3)(c) of the to Article 77 of the Treaty except in the Treaty. The measures should be viewed following cases or circumstances: rather as operational aid, which could not as a rule be exempted from the prohibition on aid. The fact that the aid was such as to augment road haulage capacities is in itself sufficient to preclude a derogation.

(d) until the entry into force of Community rules on access to the transport market, where aid is granted as an exceptional and temporary measure in order to eliminate, as part of a reorganisation plan, excess capa- 49. The Commission also rejects the con- city causing serious structural problems, tention that it failed to give sufficient and thus to contribute towards meeting reasons. It is incumbent on the Member more effectively the needs of the transport State to demonstrate that the conditions for market.' a derogation obtain. The extent of the requirement to state reasons depends on the arguments put forward by the Member State. 24 — Cited in footnote 6.

54. As regards the application of Article 92 (3) of the Treaty the Commission enjoys a wide discretion, the exercise of which 52. In the statement of reasons in the involves assessments of an economic and contested decision, the Commission main- social nature which must be made within a tained that the aid had not been granted as Community context. 25 Judicial review of part of any reorganisation plan and that the manner in which that discretion is excess capacity did not exist in the trans- exercised is confined to establishing that port sector. In the proceedings before the the rules of procedure and the rules relating Court, the Italian Government did not put to the duty to give reasons have been forward any arguments that might call that complied with and to verifying the accuracy assertion into question. As the conditions of the facts relied on and that there has been for a derogation from the prohibition on no error of law, manifest error of assess- aid under Article 3(d) of Regulation No ment in regard to the facts or misuse of 1107/70 are therefore not met, the Com- powers. 26 mission was right not to invoke that provision.

55. The Commission took the view in the 13th paragraph of section VIII of the (b) Article 92(3)(c) of the Treaty contested decision that aid for leasing new vehicles is operating aid as such aid relieves the undertaking of expenses it would normally have to bear in pursuit of its

25 — Case C-303/88 Italy v Commission, cited in footnote 19, paragraph 34, Case C-75/97 Belgium v Commission [1999] ECR I-3671, paragraph 55 — Maribel, and Case C-351/98 Spain v Commission, cited in footnote 17, 53. Under Article 92(3)(c) of the Treaty, paragraph 74. aid to facilitate the development of certain 26 — Case C-303/88 Italy v Commission, cited in footnote 19, paragraph 34, and Case C-351/98 Spain v Commission, economic activities or of certain economic cited in footnote 17, paragraph 74.

57. The Commission further based the 1. Arguments of the parties refusal of a derogation under Article 92(3) (c) of the Treaty on the view that the aid did not form part of a measure of general interest, such as a restructuring plan. The Italian Government has, admittedly, argued on this point that the purpose of the aid was to promote the development of a specific economic sector, since it was directed at 60. The Italian Government contends that restructuring and the provision of improved the measures in favour of undertakings service. It has not, however, established the engaged in international road haulage existence of a corresponding plan in the should not have been characterised as new interests of the Community. aid as the transport market concerned was not (fully) liberalised until after the regional laws of 1981 and 1985 entered into force. Existing aid may be prohibited by the Commission only ex nunc and it may not order its recovery. 58. It follows, moreover, from the above considerations that the Commission has also given sufficient reasons for its refusal to exempt the measures from the prohibi- tion on State aid.

27 —Case T-459/93 [1995] ECR II-1675, paragraph 48, con- 61. The Commission, on the other hand, firmed by the judgment of the Court in Case C-278/95 P maintains that competition existed in the Siemens v Commission [1997] ECR I-2507, paragraph 20 et seq. See also Case C-288/96 Germany v Commission market for international road haulage [2000] ECR I-8237, paragraphs 89 and 90. services as from the inception of liberal- I - 3698

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67. The total amount of the disbursements the Commission give further reasons for is, admittedly, small but it would, for the recovery. 30 individual undertaking, be an extremely heavy burden to have to reimburse the subsidy together with interest. The obliga- tion to reimburse would in all likelihood result in many undertakings leaving the market, with serious consequences for the social situation and the employment mar- ket. The Commission ought, in any case, to 2. Assessment have provided better justification for the recovery order.

(i) Interpretation of the contested decision

68. The Commission objects that, accord- ing to the Court's consistent case-law, a 70. The finding in Article 4 of the contested Member State whose authorities have decision 31 that the subsidies granted from 1 granted aid in breach of Article 93 of the July 1990 onwards to undertakings Treaty may not rely on the legitimate engaged in transport operations at local, expectations of the recipient undertaking regional or national level and to under- in order to dispense with implementing a takings engaged in transport operations at decision. 28 an international level are incompatible with the common market has to be interpreted in the overall context of the operative part of that decision.

69. The Italian authorities did not give notification of the measure and the Com- mission did not have any grounds for 71. The date specified in Article 4 is approving the measures. Recovery of connected with the finding in Article 1, unlawful aid is the logical consequence of where the Commission states that subsidies the finding that it is unlawful and cannot be granted up to 1 July 1990 to undertakings regarded as disproportionate. 29 The fact engaged in transport operations at local, that undertakings may have to leave the regional or national level do not constitute market as a result of the recovery order aid. This statement, which relates only to does not stand in the way of that order. internal transport operations, has to be Nor, in accordance with the case-law, need taken into account for the time-limit specified in Article 4 to have any meaning.

76. The Court has, admittedly, found that the fundamental requirement of legal cer- tainty has the effect of preventing the Commission from indefinitely delaying the exercise of its powers. 34 The Court has further held that a dilatory approach by the (ii) The principle of the protection of Commission during the administrative pro- legitimate expectations cedure could in certain circumstances estab-

32 — See Case C-5/89 Commission v Germany [1990] ECR I- 3437, paragraph 14, and Case C-24/95 Alean Deutschland 74. The Italian Government does not call [1997] ECR I-1591, paragraph 25. 33 — See points 31 and 32 above. into question the Court's consistently held 34 — Joined Cases C-74/00 P and C-75/00 P Falck and view that recipients may not entertain a Acciaierìe di Bolzano v Commission [2002] ECR I-7869, paragraph 140, and Case 52/69 Ceigy v Commission legitimate expectation that aid is lawful [1972] ECR 787, paragraph 21.

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lish a legitimate expectation on the appli- aid, from taking account in individual cases cant's part that the Commission would of the principle of the protection of refrain from ordering the recovery of the legitimate expectations within the limits aid. 35 established by the Court's decisions. 36

36 — See, for example, Case C-5/89 Commission v Germany 35 — Case 223/85 RSV v Commission [1987] ECR 4617, [1990] ECR I-3437, paragraphs 12 and 13, and Alcan paragraph 17. Deutschland, cited in footnote 32, paragraphs 24 and 25.

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disproportionate to the objectives of the aid in question, the Commission did not, Treaty in regard to State aids'. 37 moreover, need to justify that order further. 38

85. As the complaint of infringement of the 82. This does not prevent the Commission principle of proportionality is also unsuc- refraining from recovery where the circum- cessful, the plea must be dismissed in its stances are exceptional. What in fact the entirety. Court has done in the case-law cited has simply been to provide the Commission with a guideline for the exercise of its discretion in the normal case.

V — Costs

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VI — Conclusion

87. In the light of the foregoing I propose that the Court should:

(1) declare the dispute discontinued in so far as the applicant has claimed that the Court should:

— annul Article 2 of Commission Decision 98/182/EC of 30 July 1997 concerning aid granted by the Friuli-Venezia Giulia Region (Italy) to road haulage undertakings in the Region in so far as it declares illegal the aid granted from 1 July 1990 onwards to undertakings exclusively engaged in transport operations at local, regional or national level, and