C-332/98

FRANCE V COMMISSION

OPINION OF ADVOCATE GENERAL LA PERGOLA delivered on 14 December 1999 *

CELF's 101 meaning of Article 92(1) of the EC Treaty members are mainly publishers registered in France, although the co-operative is open to all French-language (now, after amendment, Article 87(1) EC). publishers and book distributors, wherever they are estab- lished. CELF is commercially active in distributing books, Although the aforesaid aid was granted chiefly in countries and areas that are not French-speaking, illegally because no prior notification was since in French-speaking areas, particularly Belgium, Canada and Switzerland, that task is performed by the distribution networks set up by publishers. The aid granted

Within involved in handling small orders for French-language three months of the end of the financial year, an account books placed by booksellers established abroad. The other showing how the subsidy has been used must be forwarded heads of claim — made by the Société Internationale de to the Ministry. FRF 2 million per annum is budgeted for Diffusion et d'Edition (SIDE), one of CELF's competitors — this aid. However, in the event not all this amount is were dismissed (see below, footnote 13). The Court found in applied, the amount not taken up is subtracted from the particular that, before adopting the contested decision, the following year's subsidy. The subsidy granted to CELF was Commission should have initiated the inter partes procedure FRF 2 million in 1990, FRF 2.4 million in 1991, FRF 2.7 provided for by Article 93(2) of the EC Treaty (now million in 1992 and FRF 2.5 million in 1993.

aid. FRF 79.4, or an average loss per order of FRF 203.2.

3. During the pre-litigation procedure before the Commission, France maintained that the handling of small quantities of 4. Referring to the Court's decision in the French-language books ordered by foreign Banco Exterior de Espana case, 5the Com- bookshops was a service of general eco- mission decided that there was no reason to nomic interest that no undertaking other consider CELF's subsidised activities from than CELF was prepared to provide. It was the point of view of Article 90(2) because therefore vital that subsidies should be the application of Article 92 of the Treaty granted to offset the losses caused by the to this case meant that the measure in handling of unprofitable orders — whose question, although defined as State aid, was application was subject to subsequent con- compatible with the common market trol with unused sums being deducted from because: (i) its purpose was to promote the following year's subsidy (see foot- note 2) — and was in keeping with the provision of a service that was in the public 4 — See Commission decision of 8 February 1995 relating to a procedure under Article 93 of the EC Treaty (State Aid NN 135/92, competitive activities of the French postal admin- istration; OJ 1995 C 262, page 11). See below footnotes 16 3 — Articles 87, 89 and 92 of the EC Treaty have now been and 17 and appropriate parts of the text. amended; Article 91 of the EC Treaty was repealed by the 5 — Case C-387/92 Banco Exterior de España v Ayuntamiento Treaty of Amsterdam. de Valencia [1994] ECR I-877.

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5. France seeks to justify its interest in bringing proceedings by pointing out that if the Court upholds the legality of the part of the Decision that declares that Arti- cle 90(2) of the Treaty does not apply to this case, not only would CELF be obliged to return the subsidies granted to it by the French Government over a period of almost 6 — Case 127/73 BRT v SABAM |1974] ECR 313, para- graph 20 and Case 66/86 Ahmed Saeed Flugreisen and 20 years with no prior notification to the Others v Zentrale zur Bekämpfung unlauteren Wettbewerbs [1989] ECR 803, paragraph 55. By appointing a company Commission, but also the French State to opetate a service of general economic interest, a public authority can also be granting a public right (Case C-159/94 would be financially liable for any damage Commission v France [1997]ECR I-5815, paragraph 66). to third parties caused by the breach of

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Article 93(3) of the Treaty. 7 If, however, aforesaid classification, the contested Deci- the Court upholds the grounds of action, sion actually only confirms a previous final the Commission will have to apply the decision and therefore, according to the derogation provided for by Article 90(2) to Court's case-law, cannot be open to appeal. the aid in question and therefore the On the other hand, the very identification implementation of the measure by the of the parts of the operative part of the French authorities before a final decision Decision contested by the applicant is far on authorisation was made will have to be from easy. considered entirely lawful.

7 — According to the case-law of the Court, failure by govern- ments of the Member States to comply with the duties imposed on them under the last sentence of Article 93(3) of the Treaty will affect the validity of measures giving effect to aid. Adoption by the Commission of a final decision declaring the measures compatible with the common market does not therefore have the effect of regularising the invalid 8. As I have already noted (see above, measures ex post facto, since otherwise the direct effect of that prohibition would be impaired and the interests of point 2), the applicant firstly criticises the individuals subject to Community law, which are to be protected by national courts 'drawing all the necessary part of the Decision in which the Commis- inferences [concerning the breach of the law], in accordance with their national law, as regards both the validity of those sion finds that the application of the measures, and the recovery of financial support granted in disregard of that provision and possible interim measures', provisions on the control of State aid to would be disregarded. According to the Court, '[a]ny other the measure in question, given the final interpretation would have the effect of according a favour- able outcome to the non-observance by the Member State decision of compatibility adopted by the concerned of the last sentence of Article 93(3) and would defendant institution, was not such as to deprive that provision of its effectiveness' (Case C-354/90 Fédération Nattonale du Commerce Extérieur des Produits 'prevent the de jure or de facto implemen- Alimentaires and Syndicat National des Négociants et Transformateurs de Saumon v France [1991] ECR I-5505, tation' of the handling of small orders and paragraphs 16 and 17). therefore there was no reason for assessing

9. According to the French Republic, the Commission has, in particular, incorrectly applied to new aid the principles on existing aid laid down in the Court's case- law, and has ignored the fundamental 10. The applicant states that the possible difference between the two categories of applicability of Article 90(2) allows dero- measure which, according to the Court, gation from the duty to notify in advance, exists also in regard to State aid granted to which does not appear to preclude CELF undertakings covered by the derogation from carrying out its particular task and provided for by Article 90(2). 8 The judg- from the aforesaid standstill obligation. ment in the Banco Exterior de España case The applicant maintains that suspending cited by the Commission establishes that, implementation of the aid during the Com- since existing aid — such as that in ques- mission's examination procedure is incom- tion here — may continue to be implemen- patible with the specific nature of the aid in ted as long as the Commission has not question, since its purpose is to ensure a found it to be incompatible with the continuous and flexible service, which is of common market, 'it is not necessary to general economic interest, of handling examine whether and to what extent that small orders of French-language books. If, aid is capable of falling outside the scope of for example, the French authorities had had the prohibition of Article 92 by virtue of to suspend payment of the disputed sub- Article 90(2) of the Treaty'. 9In the appli- sidies immediately following the judgment cant's opinion, new aid is, however, regu- in Case T-49/93 until the Commission lated by a different principle: notwithstand- issued a final decision, this would have ing the fact that, as a general rule, such a interrupted the public service provided by measure cannot be implemented until the CELF for almost three years. In addition, adds the French Government, the Court's ruling in Lorenz — according to which a 8 — See the Banco Exterior de España case, cited above Member State may implement proposed aid (footnote 5), paragraph 18. 9 — Ibid., paragraphs 20 and 21. once the period of preliminary examination

11. The applicant claims alternatively that the section of the Decision finding that the 12. Finally, France claims that the Com- French authorities had not proved that mission misapplied Article 90(2) of the CELF was entrusted with the public service Treaty. The applicant contests the part of the Decision in which the alleged causal link between the grant of the aid in 10 — Case 120/73 Lorenz v Germany [1973] ECR 1471, para- question and the public service which no graph 4. See also inter alia order in Case 171/83 R Commission v france [19831 ECR 2621, paragraph 13, and Case C-295/97 industrie Aeronautiche e Mecchaniche other operator was prepared to provide Ronaldo Piaggio v International Factors Italia and Others was held to be logically incompatible with [1999] ECR I-3735, paragraph 49. Under this case-law, once the preliminary examination period is expired, the the statement that the support mechanism Member State must, in accordance with the principle of legal certainty in law, notify the Commission of its was also open to undertakings other than intention to implement the examined measure in order CELF (see point 4 above). The requirement for the new aid to become subject to the rules governing existing aid. applied by the Commission in this case, 11 — Subject to the general principle that when the Commission that the provider of a service of general adopts a decision following an administrative procedure in economic interest had to be in a monopoly the matter of competition policy, it must act within a reasonable time, this being determined in relation to the position, is foreign both to the wording and particular circumstances of each case and, in particular, its context, the various procedural stages followed by the to the Court's interpretation of Arti- Commission, the conduct of the parties in the course of the cle 90(2) (second alternative ground). procedure, the complexity of the case and the different interests of the various parties involved (Joined Cases T-213/95 and T-18/96 SCK and FNK v Commission [1997] ECR II-1739, paragraphs 56 and 57, and, mutatis mutan- dis, Case 223/85 RSV v Commission [1987] ECR 4617, paragraphs 12-17). Under Article 7(6) and (7) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83, page 1), the Commission shall as far as possible endeavour to adopt a decision within a period of 18 months from the opening of the procedure. This time-limit may be extended by common agreement between the Commission and the Member State con- cerned. Once the time-limit has expired, and should the Member State concerned so request, the Commission must, within two months, take a decision on the basis of the 13. Besides its submission concerning the information available to it. If the information provided is not sufficient to establish compatibility with the common inadmissibility of the application, the Com- market, the Commission must take a negative decision. This Regulation came into effect on 16 April 1999 (see mission denies that the decision is tainted Article30). by the defects alleged by the applicant (see

below, points 17 and 18). The Commission mission, cited above, the Court, having also requests the Court to dismiss as declared that the Commission had failed to inadmissible the considerations raised in meet its obligation to initiate the inter the alternative by the French Government, partes procedure provided for by Arti- which are foreign to the grounds on which cle 93(2) of the Treaty, annulled that part the Commission concluded that it was not of the 1993 Decision which related to the necessary to consider whether and to what aid in question (see footnote 1 above). I do extent the aid granted to CELF could not therefore believe that classification by escape the rules governing State aid pur- the 1993 Decision of this measure, imple- suant to Article 90(2) of the Treaty. 12 mented without prior notification and therefore 'illegal', as 'State aid' is, as the Commission claims, res judicata. There was a possibility that the formal inter partes examination procedure that the Commission was required to initiate by virtue of the Court's decision of 18 Sep- tember 1995, and which it did indeed initiate on 30 July 1996, would end in a different result, or even with a declaration III— Legal analysis that the subsidies granted to CELF did not constitute State aid within the meaning of the Treaty. Under the Court's decision, the Commission was bound only to allow the interested parties to take part in the detailed examination procedure, but it retained its discretion to assess the merits of the measure in question. However, Admissibility following the expiry of the period in which the Court's decision could be appealed, the other findings contained in the 1993 Deci- sion — regarding measures introduced by France in CELF's favour other than the subsidies in question, 13 — became res 14. Since the Commission, without raising judicata, so that the Court of First Instance any formal objections, has raised serious doubts as to the admissibility of this appeal, I shall start from that position in my examination of the case. I must imme- diately state that I find the defendant's arguments unconvincing. I would point out firstly that in Case T-49/93 SIDE v Com- 13 — The 1993 Decision covered not only the aid adduced in this case but also three other aid schemes administered by CELF on behalf of the French State: (i) subsidies for air 12 — See also Case T-138/89 NBV and NVB v Commission freight or airmail going to the overseas departments and [1992] ECR II-2181, paragraph 31, according to which territories or to distant foreign countries, (ii) the 'Page à any assessments made by the Commission in the reasoned page' programme, which enables readers in Central and part of a decision against which an appeal for annulment is Eastern Europe to be offered French-language works at Drought may form the basis for such an appeal only so long half-price, and (iii) the 'Plus' programme, designed to as they constitute the necessary basis for the operative part provide half-price text-books for university students in of the decision. sub-Saharan Africa in the first stage of their courses.

rejected SIDE'S action in their respect (see Treaty the subsidies granted to CELF above, footnote 1). I therefore consider cannot be considered State aid, the conclu- that the Decision is not immune from sion contained in the operative part (com- challenge in so far as it merely confirms patibility of the aid with the common the definitive findings contained in the market) necessarily means, given the 1993 Decision. grounds for the Decision, that the Commis- sion intended to dismiss the aforesaid arguments of the French authorities. 15 In other words, the French Government does not merely contest certain considerations in the Decision which it considers unfavour- able but also attacks the operative part of the Decision precisely because of what it does not say. 16 The Commission's argu- ment here would also mean that the defendant institution (or any other institu- tion) would be able to prevent the Com- munity courts from ruling on the legality of decisions contained in measures it had

However, I do not 15 — See also paragraph 104 of SCK and FNK v Commission believe I need share the Commission's view (cited above, footnote 11). The Court of First Instance as I have described it. According to the dismissed the primary application for annulment of the contested decision in Case T-18/96, which concerned a established case-law of the Court, the procedure pursuant to Article 85 of the EC Treaty (now Article 81 EC), so far as this concerned the operative part operative part of a measure cannot be that stated that Article 85(1) applied to the practices in dissociated from its grounds and therefore question and imposed a fine on the applicants, but the Court did not rule on the applications for exemption under should be interpreted, if necessary, by Article 85(3) of the Treaty. The Court noted that the grounds given for the contested decision showed that the taking account of the grounds that led to Commission had considered whether Article 85(1) could its adoption. 14 Consequently, even though be declared inapplicable to the case by virtue of paragraph (3) of the same article. The Court therefore took the view the operative part of the Decision does not that, even though the operative part of the contested decision did not rule expressly on the applications for explicitly relate to the argument raised by exemption, the finding of infringements and the orders to France during the administrative examina- terminate them contained in the operative part necessarily meant, in the light of the grounds for the decision, that the tion procedure initiated on 30 July 1996, Commission intended to reject the applications in question (paragraphs 102-104). according to which by virtue of the dero- 16 — One need only compare it with the literal tenor of the gation provided for in Article 90(2) of the aforementioned decision of 8 February 1995 on aid to competitive services offered by the French postal admin- istration (see footnote 4 above), which — although adopted in the form of a letter addressed to the French Government and not formally divided into a grounds part 14 — See inter alia Joined Cases 97/86, 99/86, 193/86 and and an operative part — clearly stated that 'pursuant to 215/86 Asteris and Others v Commission [1988] Article 90(2), the measures in question do not constitute

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tive part of the Decision. The operative part to the judgment of the Court of First was liable to be prejudicial to the French Instance in the 'French postal administra- Republic in the way claimed — at least tion' case, 17 according to which, when according to Articles 90(2) and 93(3) of the Article 90(2) is applicable to a measure Treaty, read together, as contended in the subject in principle to Community regula- application — in so far as it states that the tion of State aid, the effect of those rules aid in question was granted in violation of 'may nevertheless be curtailed so that a a standstill obligation, which the French prohibition giving effect to new aid may be authorities claim was inapplicable precisely declared inapplicable' (see paragraph 172, by virtue of the aforesaid Article 90(2). my italics). Assuming that the action is to be declared admissible, I shall now consider whether the main ground raised by the appellant is well founded.

Merits: breach of Article 90(2), in conjunc- tion with Article 92, of the EC Treaty

17. The Commission points out that in the French postal administration case the prin-

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ciple laid down by the Community court provisions of Article 93'. 19 The French was very different from that invoked by Government's separation of the obligation France. It is one thing to state that Arti- to give prior notification of a planned cle 90(2) of the Treaty can allow direct aid measure, on the one hand, from the stand- granted to offset the additional cost of still clause, on the other (see above, providing a public service to escape the point 10) is therefore totally arbitrary. essential prohibition laid down by Arti- Moreover, the applicant itself admits that cle 92 of the EC Treaty, 18 but it is quite the duty to give prior notification of a new another to assert, as does the applicant, aid is not removed even if the derogation that the derogation provided for in Arti- provided for by Article 90(2) of the Treaty cle 90(2) can prevent application of a is applicable to the beneficiary; conse- procedural rule, namely the standstill obli- quently, in this case, such separation does gation imposed by the Treaty to prevent not preclude breach of Community law by implementation of aid contrary to the France, which failed to give notification of common market. the measure in question (see above, point 1). The Commission adds that, although France's arguments tend to limit the asserted inapplicability of the standstill obligation to particular situations in which the permanent and flexible operation of a service of general economic interest would otherwise be endangered, the applicant does not state which authority would be competent to make such an assessment or when such a decision would have to be made.

Member State with regard to unnotified examine the other two grounds relied on by aid — even if the aid is eventually declared France in the alternative, whose purpose, as compatible with the common market — for the Commission has correctly observed, is the purpose of removing the taint of to make comments in abundantiam (see illegality caused by the implementation of above, points 11 to 13) that are foreign to the measure and of preventing the effects, the main ground for the measure at issue. under national law, of a breach of Arti- Acceptance of those grounds would not cle 93(3) of the EC Treaty. Needless to say, therefore lead to annulment of the part of no aid can be deemed properly introduced the decision attacked by the applicant. unless it has been subject to preliminary examination, for which Article 93 gives sole competence to the Commission. Fail- ure to notify planned aid will inevitably carry with it the risk that a measure which could adversely affect competition within the common market might be implemen- ted. Any Member State knowingly putting itself in a position of illegality cannot therefore benefit from any derogation to the general rules of procedure. The princi- ple I have stated is, moreover, the same as that underlying the ruling in Lorenz (see above, footnote 10, and the relevant part of the text): according to the Court, any Member State planning to grant aid has a legitimate interest, worthy of protection, in being rapidly informed of its legal position. That protection cannot, however, be invoked by that State if it has implemented the aid without having notified the Com- mission beforehand. 20 I therefore consider that if, as in this case, a Member State 20. That said, and in order to ensure that grants aid without prior notification, it this examination is complete, I am bound cannot then invoke the legal protection to ask whether the combination of Arti- provided for under the Treaty to assert that cles 90(2) and 92 (more exactly, the last the performance of a public service sentence of 93(3) of the EC Treaty), as entrusted to an undertaking has been understood by the French authorities in this prejudiced by the duty to suspend imple- case, could apply if the aid here in question mentation of the measure during the exam- had been properly notified. In such a case, ination procedure that the Commission has would the Commission, at the end of an in any case commenced. This plea cannot inter partes examination procedure, be therefore be accepted. I shall not, however, required to ascertain 21 whether the requirements laid down in Article 90(2) had been met, even if the final decision was 20 — See SFEI v La Poste (cited above, footnote 18), paragraph 48. Consequently, the Court takes the view that if the Member State in question has any doubt as to the nature of 21 —The burden of proof remaining squarely upon the party State aid contained in the planned measures, it can protect invoking the derogation in question: therefore, in this case, its interests by notifying the Commission of its plans and on France (Case C-157/94 Commission v Netherlands obliging the latter to take a decision within two months. [1997] ECR I-5699, point 51).

23 — Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between under- takings (01 1989 L 395 p 1; corrigenda — whole text republished in OJ 1990 L 257, p. 13) as amended by Council Regulation (EC) No 1310/97 of 30 June 1997 (OJ 1997 L 180 p 1). Moreover Article 7(4) of the afore- said Regulation states that the Commission may, on presentation of a properly justified request and at any time, grant a derogation from the obligation to suspend the operation — which is otherwise applicable before notifi- cation and before the operation is declared compatible 22. I must make it clear that the solution I with the common market — which derogation may be favour does not derive from the fact that made subject to conditions and obligations in order to ensure conditions of effective competition. In deciding whether to allow the application for derogation, the Commission takes particular account of the effect suspen- sion may have on one or more of the undertakings 22 — See, mutatis mutandis, Case C-320/91 Corbeau [1993] involved and on third parties and also of the harm caused ECR I-2533, paragraph 16. Application of the derogation by concentration to competition. Under Article 3 of is not, however, subject to the very survival of the Regulation No 659/1999 (see above, footnote 11), there undertaking in question being threatened in terms of its can be no derogation to the clause suspending implemen- financial equilibrium or economic viability. tation of aid subject to notification.

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24. The situation is completely different where the derogation under Article 90(2) of the Treaty is invoked by a Member State granting aid in order to evade the standstill obligation. There are two possibilities: 25 — Case 41/83 Italy v Commission [1985] ECR 873, para- graph 30. During the consideration process, the Member States' interest in using particular undertakings as eco- nomic and fiscal policy instruments and the Community's interest in maintaining the unity of the common market 24 — Opinion of General Advocate Reischl in Lorenz (cited have to be taken into account (Case C-202/88 France v above, footnote 10), page 1485, page 1488 in particular. Commission [1991] ECR I-1223, p. 12).

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IV — Conclusion

In view of the considerations set out above, I propose that the Court should

— dismiss the action and