C-441/97

OPINION OF MR FENNELLY — CASES C-441/97 P AND C-1/98 P

OPINION OF ADVOCATE GENERAL FENNELLY delivered on 27 January 2000 *

I — Introduction Council and will then address the legal issues.

1. The present Opinion concerns separate appeals against the judgments of the Court of First Instance in Case T-243/94 British Steel v Commission 1and Case T-244/94 Wirtschaftsvereinigung Stahl and Others v Commission. 2The proceedings are princi- pally concerned with the degree to which 3. The first step was Commission Decision the Commission, having adopted general No 3855/91/ECSC of 27 November 1991 rules or a 'code' under Article 95 of the establishing Community rules for aid to the ECSC Treaty regarding the permissibility of steel industry 3(hereinafter 'the Fifth Aid certain types of State aid in the steel sector, Code' or 'the Aid Code') which was was precluded from making individual adopted on the basis of Article 95 of the decisions pursuant to the same article ECSC Treaty. The first recital in the authorising the grant of aid outside the preamble to the Aid Code states: specified categories.

I I — Legal and factual context 'Any aid in any form whatsoever and whether specific or non-specific which Member States might grant to their steel 2. I will begin by summarising the different industries is prohibited pursuant to Arti- steps taken by the Commission and the cle 4(c) of the Treaty.' 4

4. Article 1(1) of the Fifth Aid Code pro- vides:

(c) subsidies or aids granted by States, or special charges imposed by States, in 'Aid to the steel industry, whether specific any form whatsoever; or non-specific, financed by Member States or their regional or local authorities or through State resources in any form what- soever may be deemed Community aid and therefore compatible with the orderly func- tioning of the common market only if it satisfies the provisions of Articles 2 to 5.'

The fifth recital in the preamble to the Fifth Aid Code states: 5. Articles 2 to 5 of the Aid Code provide that, subject to certain conditions, aid for research and development, aid for environ- mental protection, aid for closures and aid granted under general regional aid schemes 'The strict regime thus established, which in Greece, Portugal and the territory of the now applies to the entire territory of the 12 former German Democratic Republic Member States, has ensured fair competi- respectively may be deemed to be compa- tion in this industry in recent years. It is consistent with the objective pursued through the completion of the single mar- 5 — OJ 1989 L 368, p. 185.

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tible with the common market. The Aid with an independent expert report, 7 Code entered into force on 1 January 1992 formed the basis for a Commission pro- and remained in force until 31 December gramme of voluntary capacity reduction 1996. and accompanying social measures, the broad outlines of which were welcomed by the Council in its Conclusions of 25 February 1993.

7. After the adoption of the Fifth Aid Code, the deterioration of the economic and financial situation of the steel industry prompted the Commission to prepare a restructuring plan in 1992 6which, along 9. On 22 December 1993 the Council gave its assent in accordance with the first 6 — Communication SEC (92) 2160 Towards greater competi- tiveness in the steel industry: the need of [sic] further restructuring', presented to the Council and the European 7 — Report by Mr Braun, 'Current or planned restructuring in Parliament on 23 November 1992. the steel industry', 29 January 1993.

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The first indent of the fifth point states:

10. For the purposes of the appeal against 'So as to limit the impact on competition to the Wirtscbaftsvereinigung judgment, it is the minimum, it is important that the useful to refer to the content of Deci- Italian public steel sector should make a sion 94/259. The second point in the pre- crucial contribution to the structural amble to that Decision refers to aid which adjustment still necessary in that sector, was authorised for previous restructuring through capacity reductions carried out in efforts at Ilva, but which had not been return for the aid exceptionally approved.' sufficient to restore it to viability. The first indent in the fourth point in the grounds, in

8 —OJ 1994 L 112, p. 58. 9 — OJ 1994 L 112. p. 64. This decision relates to Ilva Laminati Piani SpA (hereinafter 'Ilva'). The first indent of the sixth point of the 10 — COM (94) 125 final. grounds states that the granting of operat-

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14. In its action, British Steel relied on four pleas in law, of which two also form the basis of its appeal, viz. those alleging, I I I— The contested judgments respectively, lack of competence of the Commission to adopt the contested Deci-

11—A parallel action was also brought by the European 12. Wirtschaftsvereinigung Stahl, Thyssen Independent Steelworks Association (EISA) against the six decisions referred to above — 94/256/ECSC to 94/261/ Stahl AG, Preussag Stahl AG and Hoogo- ECSC — (Case T-239/94 [1997] ECR II-1839).

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16. In their respective pleas of breach of the Fifth Aid Code and lack of competence, Wirtschaftsvereinigung and British Steel considered that the Aid Code constituted an exhaustive and binding legal regime of general application. In particular, Article 1 of the Code expressly prohibited all oper- 18. The Court of First Instance described ating and investment aid other than that Wirtschaftsvereinigung's plea as being, provided for therein. The Commission essentially, that 'by authorising the aid in could not attempt to evade the procedure question in the contested individual deci- prescribed by the applicable basic deci- sion the Commission used the powers sion — the Aid Code —• as this was itself conferred on it by the first and second adopted by the Commission on the basis of paragraphs of Article 95 of the Treaty in Article 95 of the Treaty. Thus, the Aid order to evade the conditions laid down by Code constituted a definitive assessment of the Aid Code, which is of general applica- what was necessary to achieve the objec- tion'. 12 It interpreted British Steel's plea as tives of the Treaty, unless it was itself amended pursuant to that article by a decision of general application. 12 — Paragraph 31 or the Wirtschaftsvereinigung judgment.

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being, essentially, that 'the two contested compatible with the Treaty and the con- decisions run counter to the Aid Code and tested decision authorises, for exceptional thereby contravene the principle that an act reasons and on one occasion only, aid of general application cannot be amended which could not in principle be regarded by an individual decision'. 13 It rejected as compatible with the Treaty'. 17 The both pleas by an identical process of Court of First Instance continued: reasoning.

21. Conversely, aid which did not fall 20. Whereas those various measures had within the scope of the categories of the same legal basis, namely the first and derogations authorised generally by the second paragraphs of Article 95 of the Aid Code could benefit from an individual Treaty, and derogated from the general prohibition of aid laid down by Article 4(c) of the Treaty, the Court of First Instance 17 — Paragraph 41 of the Wirtschaftsvereinigung judgment; paragraph 49 of the British Steel judgment. took the view that their scope was differ- 18 — Paragraph 42 of the Wirtschaftsvereinigung judgment; ent: 'the Code refers in general to certain paragraph 50 of the British Steel judgment. The Court of First Instance cited in support of this proposition Case categories of aid which it regards as 113/77 NTN Toyo Bearing Company and Others v Council [1979] ECR 1185 (hereinafter 'Ballbearings'); Case 118/77 ISO v Council [1979] ECR 1277; Case 119/77 Nippon Seiko and Others v Council and Commis- sion [1979] ECR 1303; Case 120/77 Kayo Seiko and 13 — Paragraph 39 of the British Steel judgment. Others v Council and Commission [1979] ECR 1337; 14 — It cited Case 9/61 Netherlands v High Authority [1962] Case 121/77 Nachi Fujikoshi and Others v Council [1979] ECR 1363; Joined Cases 140/82, 146/82, 221/82 and ECR 213. 226/82 Walzstahl-Vereinigung and Thyssen v Commission 15 — Paragraphs 34 to 36 of the Wirtschaftsvereinigung judg- [1984] ECR 951; Joined Cases 33/86, 44/86, 110/86, ment; paragraphs 42 to 44 of the British Steel judgment. 226/86 and 285/86 Vcine-Sahgitter and Others v Com- 16 — Paragraph 38 of the Wirtschaftsvereinigung judgment; mission [1988] ECR 4309; and Case C-313/90 CJRFS and Others v Commission [1993] ECR I-1125. paragraph 46 of the British Steel judgment.

23. Although the pleas respectively of breach of the Fifth Aid Code and lack of 'The Commission is not competent under competence, which are in substance the the first and second paragraphs of Arti- same argument, are the most central to this cle 95 of the Treaty, which are concerned appeal, I must also refer to other arguments only with cases not provided for by the presented to the Court of First Instance in Treaty (see Netherlands v High Authority, support of the two applications, which cited above ...), to prohibit certain cate- form the basis of distinct pleas in the two gories of aid, since such a prohibition is appeals under consideration. already imposed by the Treaty itself, in Article 4(c). Aid not falling into categories which the Code exempts from that prohi- bition thus remains subject exclusively to Article 4(c). It follows that, where such aid nevertheless proves necessary to attain the objectives of the Treaty, the Commission is empowered to rely on Article 95 of the B. British Steel: Legitimate expectations Treaty in order to deal with that unforeseen situation, if need be by means of an individual decision.' 19 24. British Steel considered that, in this case, the principle of protection of legit- imate expectations was contravened in so far as it had anticipated that the Commis- sion would comply with the Aid Code and 22. The Commission was not entitled to if necessary amend it, or even replace it, if it relinquish this power through the adoption wished to depart from it. The Aid Code of an exhaustive aid code. 20 As the operat- was a legislative measure expressly ing aid and restructuring aid permitted by designed to prohibit all forms of subsidy the contested Decisions manifestly fell with the exception of those which it treated within none of the categories of aid gov- as compatible with the Treaty. Accordingly, erned by the Fifth Aid Code, those deci- any measure contrary to that code should sions could not be regarded as unjustified be annulled to the extent to which, in the derogations from the Aid Code, 21 or as absence of an overriding public interest, it brought about an unforeseeable change in the situation created by the Code to the 19 — Paragraph 43 of the Wirtschaftsvereinigung judgment; detriment of an operator who had acted paragraph 51 of the British Steel judgment. reasonably (and made investments) in the 20 — Paragraph 46 of the Wirtschaftsvereinigung judgment; paragraph 54 of the British Steel judgment. 21 — Paragraphs 44 and 45 of the Wirtschtiftsvereinigung judgment; paragraphs 52 and 53 of the British Steel judgment. 22 — Paragraph 46 of the Wirtschaftsvereinigung judgment.

25. According to the Commission, a mea- sure of general application such as the Fifth Aid Code could not validly give rise to a legitimate expectation. Changing condi- tions justified the adoption of additional 27. The Court of First instance added that measures. Any legitimate expectation traders cannot have a legitimate expecta- would, in any event, have been vitiated by tion that an existing situation which is the Commission's warnings, made in its capable of being altered by the Community correspondence with British Steel, that institutions in the exercise of their discre- recourse to Article 95 of the Treaty could tionary power will be maintained. 26 The not be excluded, even during the period of constant adjustments in response to fluc- application of the Aid Code. 24 tuations in the economic situation preclu- ded economic operators from claiming a vested right to the maintenance of the legal situation existing at a given time. 27 A prudent and discriminating trader could foresee the adoption of specific measures intended to deal with clear crisis situations, 26. The Court of First Instance held that with the effect that the principle of the British Steel's argument was based on the protection of legitimate expectations could mistaken idea that the existence of the Aid not be relied upon. 28 In particular, British Code gave the undertakings concerned Steel, as a substantial operator which reason to believe that no specific decision participated on the ECSC Consultative authorising State aid outside the categories Committee, should have realised that the covered by the Code would be adopted in overriding need to safeguard the position of special circumstances. However, as the the European steel industry might justify Court had already stated, the Aid Code the adoption of ad hoc decisions by the did not pursue the same object as the Commission, such as that already adopted decisions at issue, which were adopted to outside the framework of the Aid Code, to deal with an exceptional situation. The Aid deal with the exemption of the Dutch and Code was not, therefore, in any way capable of giving rise to legitimate expecta- tions as to the possibility of granting 25 — Paragraph 75 of the British Steel judgment. individual derogations from the prohibition 26 — Paragraph 76 of the British Steel judgment. The Court of First Instance cited Case C-350/88 Delacre and Others v of State aid, on the basis of the first and Commission [1990] ECR I-395, paragraph 33. second paragraphs of Article 95 of the 27 — Case 230/78 Eridania v Minister of Agriculture and Forestry [1979] ECR 2749, paragraph 22, and Case T-472/93 Campo Ebro and Others v Council [1995] ECR II-421, paragraph 52. 28 — Paragraph 77 of the British Steel judgment, which cites 23 — Paragraphs 56, 57 and 59 of the British Steel judgment. Case 78/77 Lührs v Hauptzollamt Hamburg-Jonas [1978] 24 — Paragraph 62 of the British Steel judgment. ECR 169.

29. The Commission and Italy responded that the grant of aid was part of a global programme of capacity reduction by and C. Wirtschaftsvereinigung: Breach of Arti- restoration to viability of European steel cle 95 of the Treaty undertakings and thus served the interests of the Community steel industry as a whole. Furthermore, it was necessary in order to facilitate the privatisation of Ilva in a crisis situation and further grants of aid 28. Wirtschaftsvereinigung questioned under Article 95 of the Treaty were exclu- both the compatibility with the Treaty of ded. the objectives pursued by Decision 94/259 and whether the Decision was in fact indispensable to the achievement of those objectives. In respect of the former point, it argued, inter alia, that the objective of 'providing the Italian steel industry with a 30. The Court of First Instance held that sound and economically viable structure' 30 Decision 94/259 was intended to safeguard was inconsistent with objectives regarding the common interest, in accordance with the common market and the Community the objectives of the Treaty. 32 The con- steel industry as a whole, as it related to a tinuation or aggravation of the crisis in the single Member State and, indeed, to a steel sector was liable to give rise to single undertaking, 31 while undertakings extremely serious disturbances in the in other Member States had to reduce their economies of the Member States con- capacity by their own endeavours. As cerned. 33 The Decision, together with the regards the criterion of indispensability, five other individual decisions authorising the Commission had already authorised State aid which were adopted on the same the grant of a total of ECU 14 150 million day, formed part of a comprehensive pro- in aid to Ilva between 1980 and 1989, gramme for restructuring of the steel without restoring it to viability. This pre- industry on an enduring basis and reduc- cedent showed that additional aid might be tion of production capacity in the Commu- used by Ilva simply to increase its market nity. Thus, the measure's aim was not simply to ensure the survival of the bene- ficiary undertaking — which would be 29 — Paragraph 78 of the British Steel judgment, citing Com- mission Decision 92/411/UCSC of 31 July 1992 on the contrary to the common interest — but granting of aid to steel undertakings by the Danish and Dutch Governments, OJ 1992 1. 223, p.'28. to restore its viability while keeping to a 30 — Fourth point of the grounds of Decision 94/259/ECSC. 31 — They cited Case 730/79 Philip Morns v Commission [19801 ECR 2671 and Joined Cases 351/85 and 360/85 Ribrique de fer de Charleroi v Commission [1987] 32 — Paragraph 83 of the Wirtschaftsvereinigung judgment. ECU 3639. 33 — Ibid-, paragraph 81.

minimum the impact of the aid on compe- stituted a purely speculative conjecture. tition. 34 Such an extrapolation from past experience could not be a substitute for detailed examination of the specific conditions imposed by the Decision in order to achieve the reorganisation and viability of the beneficiary undertaking. 39 The antecedents of the Decision and the statement of reasons on which it was based indicated 3 1 . Having concluded t h a t Deci- that the Commission had undertaken a sion 94/259 did pursue objectives set out thorough analysis of the sectoral crisis and in Articles 2 to 4 of the Treaty, 35 the Court of the means of resolving it, as well as of of First Instance cited the ruling of the the specific requirements to be imposed for Court of Justice in Germany v Commission the return to viability of Ilva and for that the Commission 'was under no cir- keeping to a minimum the impact of the cumstances entitled to authorise the grant- aid on competition. 40 Thus, no evidence ing of State aid which was not necessary to had been adduced to show that the Com- attain the objectives of the Treaty and mission had committed a manifest error of would be likely to give rise to distortions assessment by considering that the aid in of competition on the common market in question, on the terms laid down in Deci- steel'. 36 However, having referred to the sion 94/259, was necessary to achieve cer- conditions set out in Article 33 of the tain objectives of the Treaty. 4 1 Treaty for the review of Commission deci- sions of an economic character and to the Commission's wide discretion regarding economic and social assessments in the Community context, 37 it concluded that its review was 'limited to verifying that the facts are materially accurate and that there has been no manifest error of assess- ment'. 38 The Court of First Instance held IV — The appeal that the assertion that the ineffectiveness of aid in the past implied the inevitable failure of any attempt to restore Ilva's viability by means of further State aid was not sup- ported by any specific evidence and con- 32. Wirtschaftsvereinigung and British Steel have appealed against the respective judgments of the Court of First Instance in 34 — Ibid., paragraph 82. Case T-244/94 and Case T-243/94 pursuant 35 — Ibid., paragraphs 72 to 83. to Article 49 of the Protocol on the Statute 36 — Case 214/83 [1985] ECR 3053, paragraph 30, cited at paragraph 84 of the Wirtschaftsvereinigung judgment. of the Court of Justice of the ECSC, seeking 37 — Paragraphs 85 and 86 of the Wirtschaftsvereinigung the annulment of the judgment in each judgment. The Court of First Instance cited Philip Morris v Commission, op. cit., paragraph 24, and Joined Cases case, and of Decision 94/259 and the T-244/93 and T-486/93 TWD v Commission [1995] ECR II-2265. 38 — Paragraph 87 of the Wirtschaftsvereinigung judgment. It cited Case T-266/94 Skibsvœrftsforeningen and Others v 39 — Paragraphs 89 and 90 of the Wirtschaftsvereinigung Commission [1996] ECR II-1399, paragraph 170; Case T-17/93 Matra Hachette v Commission [1994] judgment. ECR II-595, paragraph 104; and Case T-9/93 Schöller v 40 — Ibid., paragraphs 91 to 93. Commission [1995] ECR 11-1611, paragraph 140. 41 — Ibid., paragraph 94.

33. Wirtschaftsvereinigung relies upon four grounds of appeal: (i) breach of the Fifth Aid Code; (ii) breach of the principle of necessity; (iii) unlawful pursuit of a purely national policy; and (iv) breach of Arti- cle 4(c) of the Treaty. British Steel relies upon two grounds of appeal, lack of competence to adopt the contested Deci- 35. Wirtschaftsvereinigung contends that sions and breach of the principle of protec- the Court of First Instance erred in law in tion of legitimate expectations. British finding that the Aid Code was binding on Steel's application is supported by Det the Commission only as regards the types Danske Stålvalseværk A/S. Both appeals of aid the grant of which was specifically are opposed by the Commission, with the regulated by the Code. It states that the support of the Italian Republic and the Court of First Instance failed to cite in full Council, while the Kingdom of Spain also the statement in the third sentence of the supports the Commission in the British fourth recital in the preamble to the Aid Steel case. Code that its rules 'prohibit the grant of any other operating or investment aid', and to draw the necessary conclusion from the third recital, which states that the rules 'cover aid, whether specific or non-specific, financed by the Member States in any form whatsoever' 42or from the similar terms of Article 1(1) of the Aid Code. It also cites 34. I shall summarise and analyse seriatim the statement in the third recital in the the grounds of appeal and the other parties' preamble to the Second Aid Code that all responses thereto in the text which follows. aid should be treated uniformly within a However, Wirtschaftsvereinigung's first single procedural framework and that a and fourth grounds of appeal may be comprehensive Community aid scheme was discussed together, along with British Steel's first ground of appeal, by reason of their essential similarity. 42 — Emphasis added in both quotations.

Wirtschaftsvereinigung also cites the Com- mission's practice, when refusing to author- ise aid, of stating that the only possible exceptions to the prohibition contained in Article 4(c) of the Treaty are those provi- 37. Thus, the sole circumstance in which ded for explicitly and restrictively in the individual derogating measures may be Aid Code. 45 deemed lawful is where the general mea- sure expressly provides for this possibi- lity, 4 7 as was the case in Article 12 of the Second Aid Code. Such a legal basis for individual derogations was deliberately excluded from the Fifth Aid Code. 36. Wirtschaftsvereinigung submits that Wirtschaftsvereinigung invokes as an addi- the general regime set out in the Fifth Aid tional example the Court's rulings that any aid which did not comply with the binding rules adopted by the Council under Arti- 43 — Commission Decision No 2320/81/ECSC of 7 August cle 92(3 )(e) of the EC Treaty (now, after 1981 establishing Community rules for aids to the steel industry, OJ 1981 L 228, p. 14. 44 — Commission Decision No 3484/85/ECSC, op. cit., foot- note 4 above. 45 — See, for example, the third recital, first indent, in the 46 — Ballbearings, op. cit., paragraph 21; Case C-303/94 Par- preamble to Commission Decision 96/678/ECSC of liament v Council [1996] ECR I-2943, paragraph 23. 30 July 1996 concerning certain aid proposed by Italy as 47 — Case T-7/93 Langnese-Iglo v Commission [1995] part of a programme for the restructuring of its private ECR II-1533, paragraph 208; Case T-9/93 Schöller v steel industry, OJ 1996 L 316, p. 24. Commission [1995] ECR II-1611, paragraph 162.

39. The Commission, the Council and Italy contest Wirtschaftsvereinigung's submis- sions. Its references to statements in the aid codes and other secondary measures do not affect the finding of the Court of First Instance that the Commission was not competent under Article 95 of the Treaty to adopt a general prohibition of aid not expressly covered by the Fifth Aid Code, as 38. In support of its fourth ground of such a prohibition was already provided for appeal, that of breach of Article 4(c) of by Article 4(c) of the Treaty. In any event, the Treaty, Wirtschaftsvereinigung cites the having regard in particular to the joint order of the Court in Case C-399/95 R statement entered in the Council minutes of Germany v Commission to the effect that 17 December 1993, the recitals and provi- the Fifth Aid Code established strict rules sions of secondary law relied upon by regarding the grant of aid in the sensitive Wirtschaftsvereinigung either make clear steel sector without prejudicing the general that the general prohibition of aid derives rules applicable to it under the ECSC directly from Article 4(c) of the Treaty, 51 Treaty. 50 The contested judgment does or can be construed as referring only to the not explain why an individual decision specific types of aid addressed by the Aid Code in question, 52 or can be interpreted as being merely declaratory of the Com- 48 — Council Directive 87/167/EEC of 26 January 1987 on aid mission's inability, acting alone, to approve to shipbuilding, OJ 1987 L 69, p. 55; Council Directive 90/684/EUC of 21 December 1990 on aid to shipbuilding, other types of aid in the absence of OJ 1990 L 380, p. 2 7 ; Council Regulation (EC) No 3094/95 of 22 December 1995 on aid to shipbuilding, OJ 1995 L 332, p. I. 49 —Joined Cases C-356/90 and C-180/91 Belgium v Commis- 51 — First recital in the preamble to the Fifth Aid Code; sixth sion [1993] ECR I-2323, paragraphs 30 to 32; Case recital i n the preamble to the Third Aid Code (Commission C-400/92 Germany v Commission |1994| ECR I-4701. Decision No 3484/85/ECSC, op. cit.). 50 — [1996] ECR I-2441, paragraph 53. 52 — Third recital in the preamble to the Fifth Aid Code.

additional measures based on Article 95 of the Treaty, because that procedure is speci- the Treaty. 53 fically designed for use in exceptional situations. Indeed, the agent for Italy went so far as to question the appropriateness of the use of Article 95 to adopt measures as general in their scope as the Aid Codes. He stressed the emergency character of action envisaged in the article. For the same reason, the Commission cannot tie its hands regarding future recourse to that provision of the Treaty in cases not pro- vided for in a general measure. To do this would deprive it of the capacity to respond 40. As Decision 94/259 was different in to new circumstances which Article 95 was scope from the Fifth Aid Code, the Court of supposed to assure. The approach to State First Instance's statement that derogations aid for naval construction under the EC from the terms of the Aid Code could only Treaty is irrelevant because of the different be adopted through general amending scheme of competences to approve aid measures was obiter. By the same token, under the two Treaties; in any event, the there was clearly no need for the Fifth Aid Council could have authorised further aid Code to provide expressly for the possibi- on the basis of Article 93 of the EC Treaty lity of derogating decisions. The circum- (now Article 88 EC) in exceptional circum- stances of Ballbearings were entirely differ- stances, just as under Article 95 of the ent, as that case involved the imposition of ECSC Treaty. a sanction under Article 113 of the EC Treaty (now, after amendment, Article 133 EC) when the requirements in a secondary general measure for non-imposition of a sanction had been satisfied. There is in fact no hierarchy as between general and indi- vidual measures adopted by the Commis- sion on the basis of Article 95 of the Treaty, each with the unanimous approval of the Council. The present case does not involve a distinction between basic normative acts such as the Aid Code, which have, accord- 41. They submit that these contentions are ing to Wirtschaftsvereinigung, the charac- not undermined by the order in Case ter of an abstract general rule, and dele- C-399/95 R Germany v Commission, 54 as gated executive acts, adopted by the Com- that case did not relate to the adoption mission alone, implementing or derogating under Article 95 of the Treaty of an from such acts. The principle of equality additional Commission decision on aid does not pose an obstacle to the adoption outside the scope of the Fifth Aid Code. of individual decisions under Article 95 of The Court of First Instance explained at paragraph 34 of the Wirtschaftsvereini- gung judgment that Article 4(c) of the 53 — Article 1(1) of the Fifth Aid Code; Commission Decisions Treaty did not prevent the authorisation, 96/678/ECSC and 97/258/ECSC (op. cit.) and Commission Decision 97/332/ECSC of 26 February 1997 concerning closure aid which Italy plans to grant to Mini Acciaieria Odolese as part of the restructuring of the private steel industry, OJ 1997 L 139, p. 27. 54 — Op. cit.

by way of derogation, on the basis of in any form whatsoever', and that in Article 95, of aid intended to deal with similar terms in the third recital, should unforeseen situations. In so far as it is not be understood as extending to cate- identical with the first ground of appeal, gories of aid not set out in the Code, this ground constitutes an inadmissible new such as operating aid and investment argument. aid. This is confirmed by the reference in the fifth recital to conformity with the Consensus on the steel industry concluded with the United States, which prohibited such forms of aid. 55 The Commission responds that the 42. Regarding its first ground of appeal, second recital in the preamble states British Steel claims that the Court of First that the aid codes since 1986 'estab- Instance accepted its principal point that lished rules authorising the grant of aid the Commission is not competent to adopt to the steel industry in certain cases individual decisions in fields which are expressly provided for', without pre- governed completely by a general decision. judging the treatment to be accorded to The Commission maintains that this point other types of aid. The reference to the is uncontested and uncontroversial, but Consensus concluded with the United irrelevant, as the Fifth Aid Code only States merely confirmed that the Aid regulates exhaustively the grant of those Code did not violate it; this did not types of aid referred to in Articles 2 to 5 prevent the approval of other types of thereof. aid in 1994, after the expiry of the Consensus in March 1992. At the oral hearing in the Wirtschaftsvereinigitng case, the agent for the Commission viewed as hypothetical a question from the bench as to whether or not the Consensus would have impeded the 43. British Steel submits that the Court of adoption of a measure such as Deci- First Instance erred in law, at para- sion 94/259 before its expiry at the end graphs 50 and 51 of the British Steel of March 1992. judgment, in holding that the scope of application of the Fifth Aid Code was confined to those categories of aid expressly permitted thereby. This is borne out, it says, by reference to (a) its preamble, (b) its text, (c) the history of the steel aid codes, (d) the Commission's own practice and (e) the writings of certain authors. (b) British Steel submits that Article 1(1) of the Fifth Aid Code should be under- stood as indicating that the Commis- sion had exhaustively exercised its

competence under Article 95(1) of the cle 4(c) of the Treaty, which remains Treaty in providing for the compatibil- subject to derogation pursuant to Arti- ity with the Treaty of the categories of cle 95(1) of the Treaty, rather than aid described in Articles 2 to 5 of the being constitutive in themselves of an Aid Code. The Commission remarks exhaustive prohibition, which the that Article 1(1) of the Aid Code is not Commission would not, in any event, worded as a prohibition of all other be competent to adopt under Arti- types of aid and cannot be construed as cle 95(1). such; whereas the adoption of the Aid Code, taken on its own, had the effect that all types of aid not covered by it remained prohibited, this resulted from the continued application of Arti- cle 4(c) of the Treaty'rather than from Article 1(1) of the Aid Code, and therefore remained potentially subject to further derogation on the basis of Article 95(1) of the Treaty. The nar- rowing of the scope of the aid codes (the first and second codes having also covered operating aid and restructuring (d) British Steel cites as an example of the aid) should be construed merely as a practice of the Commission a number limitation of the delegation of author- of decisions either refusing to approve ity to the Commission to act in indivi- a grant of aid or requiring the reim- dual cases without having to seek the bursement of aid already paid on the unanimous approval of the Council. ground that it was not compatible with The Council did not thereby intend to the Fifth Aid Code. 56 The Commission deprive itself of the power to approve replies that it was simply unable to such aid in cases where the Commis- approve such aid using the authority sion proposed to deem them compati- delegated to it by the Aid Code to ble with the common market. approve certain categories of aid with- out seeking Council approval in indi- vidual cases. British Steel also adverts to the fact that a derogation for aid granted to the Dutch and Danish steel industries by way of an alleviation of tax liability for carbon dioxide emis- sions, which was not within the scope of Articles 2 to 5 of the Fifth Aid Code, (c) British Steel takes a contrary view of was approved by way of an amend- the progressive narrowing of the scope ment to the Aid Code. The Commis- of the aid codes, viewing it as indicat- sion states that this view is mistaken ing that the exhaustive regulation of and that the measure in question, the categories of potentially permissible aid was becoming stricter. The Com- mission replies that passages in the 56 — Commission Decision 96/678/ECSC, op. cit.; Commission Decision 96/617/ECSC of 17 July 1996, OJ 1996 L 274, various aid codes which state that other p. 30; Commission Decision 96/484/ECSC, OJ 1996 types of aid are prohibited are merely L 198, p. 40; Commission Decision 96/236/ECSC, OJ 1996 L 78, p. 31; Commission Decision 97/21/ECSC, reiterations of the prohibition in Arti- OJ 1997 L 8, p. 14.

45. In Netherlands v High Authority, 59 the Court observed that '[t]he only object of the first paragraph of Article 95 is to institute special rules for departing from (2) Analysis the Treaty with the object of empowering the High Authority to meet an unforeseen situation'. 60 No such departure from the Treaty is involved in circumstances where the Commission is able to act using powers conferred by the Treaty and, thus, to apply the Treaty in circumstances covered by its provisions. That case concerned a Commis- sion recommendation to the Member States 44. Neither Wirtschaftsvereinigung nor which did not impose new obligations but British Steel expressly contested in their merely specified their obligations under the written pleadings the central element of the Treaty itself. The Court found that the reasoning of the Court of First Instance in Commission was competent to do so under the contested judgments, that is, that the other provisions of the Treaty and that, as a Commission is not competent to adopt result, Article 95 of the Treaty was not a measures under Article 95(1) of the Treaty permissible legal basis for such measures. which merely reiterate an existing prohibi- The conclusion in that case that Article 95 tion of State aid provided for in Article 4(c) of the Treaty was merely residual in of the Treaty itself. As I indicated above, character and was not the appropriate legal counsel for Wirtschaftsvereinigung criti- basis for the Commission action at issue is cised this position at the oral hearing in highly relevant to the circumstances of the that case as formalist and as being incon- present case, which also raises the question sistent with the protective objectives of the judgment in Ballbearings. The appellants in both cases may also be understood as 59 — Case 9/61, op. cit., footnote 14, at p. 23.1. implicitly questioning this aspect of the 60 — It is also useful to recall the approach adopted by the Court in Case 45/86 Commission v Council [1987| ECR 1493, contested judgments, by arguing that the paragraph 13, to Article 235 of the EC Treaty (now Article 308 EC), which has a similar function in the scheme of that Treaty: i t follows from the very wording of Article 235 that its use as the legal basis for a measure is justified only where no other provision of the Treaty gives 57 — Op. cit., footnote 29 above. the Community institutions the necessary power to adopt 58 — Paragraph 384 of the Report, 1992. the measure in question'.

47. It is not, in my view, unduly formalist to interpret a secondary measure in the light of the limited competences of the adopting institution, or to preclude an institution from tying its hands regarding future acts in a way not provided for by the constituent authority. Once this point is established, the appellants' arguments regarding the proper interpretation of the Fifth Aid Code must fail. The Fifth Aid Code constitutes a limited grant of execu- tive authority to the Commission, acting 46. This view requires the Fifth Aid Code alone, to approve a limited range of types to be construed as establishing a 'positive' of aid in defined circumstances. The Fifth list of types of aid which, when they Aid Code could not lawfully contain, and comply with the conditions set out therein, should not, therefore, in case of ambiguity, may be deemed compatible with the com- be construed as containing, a general mon market by the Commission, without prohibition of types of State aid other than further recourse to the Council. This can- those which it expressly permits. As a not foreclose recourse to additional mea- result, it was always open to the Commis- sures, either general or individual, based sion under Article 95 of the Treaty, as was directly on Article 95 of the Treaty, to reiterated in the joint statement of the approve (or regulate approval by the Com- Council and the Commission of 17 Decem- mission alone) of types of aid on which the ber 1993, to adopt additional measures, Fifth Aid Code is silent. The situation in the either general or individual, providing for present cases is thus quite different from the approval of aid of a type for which the that under earlier Aid Codes, which con- Fifth Aid Code makes no detailed provi- tained general rules regarding approval of sion. restructuring aid: during their period of application, a challenge to an individual decision on the basis of Article 95 of the Treaty approving restructuring aid on grounds not foreseen in those Codes would have required the Community judicature to

Instance that the Commission could not which was the subject of extensive separate authorise aid which fell within one of the analysis by the Court of First Instance. categories of aid defined by the Fifth Aid Code by an individual decision conflicting with the general rules established by that Code. 62 The analysis set out in the imme- diately preceding paragraphs clearly obvi- ates the need to discuss in this case a possible hierarchy of norms in the applica- tion of Article 95(1) of the Treaty in the field of State aid or the possible application of the Ballbearings judgment in an ECSC 49. For the sake of completeness, I will context. The Commission must, of course, now address the various interpretative comply with the terms of the Fifth Aid arguments put forward in the two appeals, Code when deciding, on its own, upon in the light of these conclusions of principle whether to authorise aid which comes regarding the Commission's competence. I within its terms. On the other hand, it is might add that, read on their own, the free, as I have already said, subject to terms of the Fifth Aid Code confirm the compliance with other Treaty rules, includ- foregoing conclusion of principle regarding ing the conditions in Article 95(1) itself, to its limited scope. Article 1(1) of the Fifth seek the approval of the Council for any Aid Code should consequently be under- other proposed measure, general or indivi- stood, when it states that aid 'whether dual, authorising the grant of aid in other specific or non-specific ... in any form circumstances. This is precisely what occur- whatsoever' may be deemed to be Com- red in the case of the contested Decisions. It munity aid 'only if it satisfies the provisions is not necessary for the Aid Code to provide of Articles 2 to 5', merely as establishing in for such 'derogations', because they are general terms the scope of the derogation derogations from Article 4(c) of the Treaty from Article 4(c) of the Treaty and that the rather than from the Aid Code and are Commission possesses no additional power based, as is the Aid Code, directly on under the Aid Code to approve other types Article 95(1). 63 This also disposes of of aid. As the Commission pointed out, Wirtschaftsvereinigung's fourth ground of Article 1(1) of the Aid Code is not phrased appeal — such individual derogations in terms of a prohibition and does not, from the general rule set out in Article 4(c) therefore, purport to exclude the adoption of the Treaty are permitted provided they of other measures derogating from the serve the attainment of the objectives in prohibition in Article 4(c) of the Treaty. Articles 2 to 4 of the Treaty, a question

case, the preamble of a measure cannot, on 51. I also agree with the Commission's its own, alter its scope. Thus, the fact that argument that the progressive narrowing the fourth recital in the preamble to the Aid of the scope of the aid codes cannot be Code states that the rules contained in the construed as establishing a wider legislative previous aid codes prohibited the grant of prohibition of aid. It should, instead, be any other form of aid may be misleading, understood as circumscribing the Commis- but that statement does not correspond to sion's power to approve aid, subject to any actual provision of the Aid Code. In compliance with conditions defined in the any event, the first recital in the preamble Codes, without further recourse to the to the Fifth Aid Code clearly states that Council. Given the requirement of unani- 'any aid in any form whatsoever... is mity in the Council, this probably had the prohibited pursuant to Article 4(c) of the effect of reducing the amount of aid Treaty', 64 which is more accurate, while capable of being authorised. the second recital indicates that the earlier aid codes 'established rules authorising the grant of aid to the steel industry in certain cases expressly provided for', 65 which confirms that the Aid Code only creates a positive list of compatible aid. The refer- ence immediately afterwards, in the third 52. The references in the preamble to the recital, to the rules covering aid, whether Second Aid Code to a single procedural specific or non-specific, financed by Mem- framework and to a comprehensive Com- ber States in any form whatsoever should, munity aid scheme may perhaps be under- in my view, be read simply as indicating stood as referring to the wider ambit of the that the types of aid expressly provided for Codes preceding the Fifth Aid Code, but by Articles 2 to 5 of the Aid Code could they cannot establish that the Commission take any form. The statement in the fifth had bound itself (or could bind itself) to recital that the Aid Code conforms to the abide by this ordinarily commendable pol- Consensus concluded with the United icy when faced with unforeseen situations States is not inconsistent with the analysis that required a special response. It may also above — non-conformity would have be noted that the passage quoted by the arisen, if at all, only from further measures appellants from the preamble to the Third adopted on the basis of Article 95(1) of the Aid Code states that aid which was not Treaty authorising aid which did not fall expressly provided for in that comprehen- within the scope of that Consensus. 66 sive set of Community rules would have to be regarded as prohibited by Article 4(c) of the Treaty — thus opening the way to derogation from that Treaty provision, in appropriate circumstances, on the basis of Article 95(1) of the Treaty.

ing Danish and Dutch aid in respect of authorise State aid from absolutely excep- environmental taxes was adopted as an tional cases ('under no circumstances ... aid individual decision rather than as an which was not necessary')68 to a general amendment of the Fifth Aid Code. Thus, norm ('whenever ... necessary'). 69 They to the extent that the practice of the contend that the Court of First Instance institutions is relevant to the interpretation should have concluded that, in principle, of other measures adopted by them, 67 this restructuring aid cannot be necessary more measure does not support the appellant's than once. This point of principle is borne case. out by the Community Guidelines on State aid for rescuing and restructuring firms in difficulty, which state that restructuring aid should normally need to be granted only once, 70 and is reiterated in several other measures. 71 54. The immediately foregoing analysis of the terms of the Fifth Aid Code is entirely consistent with my view, supporting that of the Court of First Instance at paragraph 43 of the Wirtschaftsvereinigung judgment and at paragraph 51 of the British Steel judgment, regarding the proper interpreta- tion of the Treaty itself and of the permis- sible scope of the Aid Code. I conclude, therefore, that Wirtschaftsvereinigung's first and fourth grounds of appeal should be rejected, as should British Steel's first 56. The Commission submits that this ground of appeal. ground is inadmissible, as it challenges the Court of First Instance's assessment of the facts regarding Ilva's receipt of earlier aid and the present necessity for further restructuring aid at the time of adoption of Decision 94/259. 72 There is no sugges- tion of error on the part of the Court of First Instance in assessing the Commission's B. Wirtschaftsvereinigung: (ii) Breach of appreciation of the situation other than the principle of necessity recourse to policy statements under the EC Treaty which are not cast in absolute terms.

An absolute principle, 'one time, last time', for the pursuit of objectives set out in would be impermissible in the light of the Articles 2 to 4 of the Treaty. The policy complex assessment which must be under- slogan 'one time, last time' may be a useful taken pursuant to Article 95 of the Treaty, expression of the need to be scrupulous in in the light of the objectives set out in examining successive requests for author- Articles 2 to 4 of the Treaty. The dicta of isation of the granting of aid to the same the Court of Justice and the Court of First undertakings, but it cannot be elevated into Instance compared by the appellants are a binding principle which precludes the identical in meaning. examination by the Commission of the requirements of the public interest in the circumstances of each individual case. Once this argument of principle is rejected, so too must be this ground of appeal — as the Commission has stated, Wirtschaftsver- einigung has not taken issue with the Court of First Instance's concrete examination, summarised at paragraph 31 above, of the 57. There does not appear to me to be any Commission's assessment of the necessity merit in Wirtschaftsvereinigung's argument for aid to be granted in the light of the regarding the terminology used by the concomitant reductions in capacity and Court of First Instance. The common other obligations imposed on Ilva. requirement in the Court of First Instance's judgment and the Court's earlier case-law is that aid should only be authorised when it is shown to be necessary; it is notable, indeed, that the Court of First Instance actually cited the passage from the Court's judgment in Case 214/83 Germany v Commission, 73 relied upon by Wirtschafts- vereinigung. The more general argument of principle that aid can only be necessary on C. Wirtschaftsvereinigung: (iii) Unlawful one occasion to safeguard the viability of pursuit of a purely national policy an enterprise fails, in my view, to take into account the changing nature of business conditions, to which the Commission is enabled to respond by Article 95(1) of the Treaty. To take an extreme case, it can hardly be suggested that aid granted to 58. The appellants submit that the con- Community steel undertakings in the tested judgment does not take into account 1950s, after the establishment of the Coal the grave error of appreciation of the and Steel Community, would, in principle, Commission, demonstrated in the fourth have been sufficient to enable them to face point, first indent, second sentence of the all the competitive challenges of the 1990s grounds of Decision 94/259, in making the and would have precluded the Commis- reinforcement of the Italian steel industry sion, in the latter case, from authorising the objective of that Decision. This is additional aid which it deemed necessary contrary to the statement in Fabrique de fer de Charleroi v Commission, that the specific needs of a single Member State 73 — Op. cit. could not legitimately be taken into

59. The Commission argues that this ground is inadmissible as it merely com- D. British Steel: (ii) Legitimate expecta- prises a vague allegation which does not tions take issue with the relevant parts of the Court of First Instance's analysis. 75 Italy contends that it is inadmissible because it is a new argument and that, in any event, it is apparent that the Italian steel industry 61. British Steel submits that the Commis- constitutes an important part of the Com- sion's practice gave rise to a legitimate munity sector as a whole. expectation that it would not authorise restructuring aid during the period of validity of the Aid Code. It gives as examples a number of Commission deci- sions which refused to authorise aid on the basis that it fell outside the scope of the Aid Code. 76 Furthermore, it could not be deemed to have been alerted to the Com- 60. This ground of appeal seems to me to mission's plans by virtue of being repre- derive clearly from the argument made sented on the ECSC Consultative Commit- before the Court of First Instance, which is tee because its members sat in their perso- summarised at paragraph 28 above, and so nal capacity. Finally, Decision 92/411 per- cannot, in my view, be rejected as an mitting relief for Danish and Dutch steel inadmissible new argument. It is clear, undertakings from certain environmental however, that the Court of First Instance taxes was not comparable to the contested did address the argument that aid author- Decisions, as it did not involve restructur- ised with the objective of providing the ing aid and merely permitted the extension Italian steel industry with a sound and to the steel sector of a more general aid economically viable structure did not serve otherwise governed by the EC Treaty. Its the objectives of the Treaty. Its response, adoption could not, therefore, affect British based on the general crisis in the steel sector Steel's legitimate expectations. and on the fact that Decision 94/259 was part of a wider package of measures concerning a variety of steel undertakings, is summarised at paragraph 30 above. As Wirtschaftsvereinigung does not challenge any particular element of the Court of First 62. The Commission contends that British Steel's argument refers in large part to 74 — Op. cit., paragraph 19. 75 — Paragraphs 72 to 95, 106 to 119 of the Wirtschaftsver- cinigung judgment. 76 — See the decisions cited in footnotes 45 and 56 above.

Commission practice after the date of the fact that much of the Commission adoption of the contested Decisions. The practice referred to by British Steel post- Court cannot substitute its assessment in dates the adoption of the contested Deci- this regard for that of the Court of First sions, the Commission's refusals to author- Instance, or examine new evidence put ise aid in those cases may be understood as forward by British Steel. The Council, Italy referring to its lack of competence to and Spain argue that there could be no approve aid which did not come within legitimate expectation that a given regula- Articles 2 to 5 of the Aid Code under its tory position would be maintained as the simplified procedures. Thus, they could not proper functioning of the common market engender any legitimate expectations about required constant adaptations to economic non-recourse by the Commission to Arti- conditions; in any event, the Fifth Aid Code cle 95(1) of the Treaty to approve such aid. was not exhaustive in character. Although Although, as British Steel points out, Deci- one of British Steel's directors sat on the sion 92/411 is quite different in subject- Consultative Committee in a personal matter to the contested Decisions, I do not capacity, the Commission submits that this think these differences are material. That did not mean that British Steel was not kept Decision is a clear case, before the adoption informed of its discussions; it was for of the contested Decisions, of approval of British Steel to prove otherwise. Italy adds aid which fell outside the scope of the Aid that this was a purely subsidiary element of Code. If Article 1(1) of the Aid Code were the Court of First Instance's reasoning. to be read as prohibiting all other forms of aid — which, in my view, is not its proper construction — it would exclude, in equal measure, approval by individual decision of the types of aid covered by Decision 92/411 63. I see no reason to depart from the and by the contested Decisions. By the Court of First Instance's basic finding, same token, the continued possibility of summarised at paragraph 26 above, that authorising the grant of aid by way of tax the Aid Code did not give rise to a relief illustrated that Article 95(1) of the legitimate expectation that other types of Treaty could easily be used to authorise aid would not be authorised by the Com- other types of aid as well. In the light of mission because its terms did not (and these observations, the nature of the infor- could not) exclude, during its period of mation which was, or should have been, validity, such further grants of aid in available to British Steel by virtue of one of exceptional circumstances. In this context, its directors sitting on the ECSC Consulta- the Court of First Instance was correct to tive Committee does not appear to me to be state that well-informed traders could not material to the outcome of the case. I assume that a given legal situation would recommend, therefore, that the Court reject be maintained even in the face of altered British Steel's second ground of appeal. economic conditions. Even if one ignores

— the appellants pay the costs.

In Case C-1/98 P British Steel Pic v Commission of the European Communities, that

— the appeal be rejected; and that

— the appellant pay the costs.

I- 10321