C-351/98

OPINION OF MR ALBER — CASE C-351/98

OPINION OF ADVOCATE GENERAL ALBER delivered on 7 May 2002 1

I — Introduction public services. The implementation of the programme was entrusted to the Instituto de Crédito Oficial (State credit institute) under an agreement of 27 September 1994.

1. By this application the Kingdom of Spain seeks the annulment of Commission Decision 98/693/EC of 1 July 1998 con- cerning the Spanish Plan Renove Industrial system of aid for the purchase of commer- 3. The contested measure consisted in the cial vehicles for the replacement of used granting of an interest-rate subsidy for vehicles (August 1994 — December four-year loans used to finance the pur- 1996). 2The Commission has declared the chase or hire purchase of commercial aid to be largely unlawful and incompatible vehicles, the loans not to exceed 70% of with the common market and ordered its the value of the vehicles. The subsidy recovery. amounted to a maximum of ESP 93 196 per million borrowed, equivalent to aid of 6.5% of the net purchase price. The sub- sidy was granted for the financing of vehicles of the following five categories: semi-trailers and lorries weighing more than 30 tonnes (Category A), commercial vehicles weighing between 12 and 30 II — Facts of the case and contested tonnes (Category B), commercial vehicles decision weighing between 3.5 and 12 tonnes (Cat- egory C), car-based vehicles, light commer- cial vans and commercial vehicles weighing up to 3.5 tonnes (Category D) and motor buses and coaches (Category E). 2. On 28 July 1994 the Spanish Govern- ment, without previously notifying the Commission, adopted the Plan Renove Industrial (hereinafter 'PRI') in favour of natural persons, small and medium-sized enterprises (hereinafter 'SMEs'), regional 4. The granting of the subsidy for the public bodies and bodies providing local purchase of a new vehicle was subject to the requirement that a vehicle first regis- tered in Spain 10 years previously (seven 1 — Original language: German. years in the case of tractor units) was 2 — OJ 1998 L 329, p. 23. irrevocably withdrawn from the market.

7. The Kingdom of Spain submitted its observations by letter of 26 July 1996. A supplementary request for information by the Commission on 19 December 1996 was followed by further explanations from Spain in a letter of 12 February 1997. By All other aid granted to natural persons and letter of 19 November 1997 the Commis- SMEs constitutes State aid within the sion asked the Kingdom of Spain for meaning of Article 92(1) of the Treaty, is additional information on the undertakings illegal and is incompatible with the com- that do not provide transport services as a mon market.

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Article 4 suant to Article 47(3) of the Statute until the Court had ruled in Case T-55/99.

Spain shall abolish and recover the aid referred to in Article 3. The aid shall be repaid in accordance with the provisions of national law, and maturity interest shall be 12. In its judgment of 29 September 2000 added to the sums recovered. The interest the Court of First Instance dismissed shall be calculated on the basis of the CETM's action, 3and the procedure before reference rates used in evaluating regional the Court of Justice in the present case was aid schemes and shall run from the date then continued. when the illegal aid was granted until the date when it is actually repaid.'

13. The Kingdom of Spain claims that the Court should:

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(2) order the Kingdom of Spain to pay the — infringement of Article 190 of the costs. EC Treaty (now Article 253 EC) on the basis that the statement of reasons for ordering recovery is inadequate.

15. The parties' arguments are set out under 'legal analysis' below.

A — Infringement of Article 92(1) of the EC Treaty

IV — Legal analysis 17. In the context of this plea the Spanish Government advanced two objections. It is of the opinion that the Commission is 16. The Kingdom of Spain bases its action wrong to classify the PRI measures in the on five pleas in law: contested decision as selective measures in favour of certain undertakings or branches of production. It also believes that compe- tition has not been distorted nor trade affected. — infringement of Article 92( 1 ) of the EC Treaty (now, after amendment, Article 87 EC),

( 1 ) No favouring of certain undertakings or branches of production

specified from the outset which undertak- ments, as in the case of the PRI. Advocate ings would benefit. The PRI in fact sets out General Darmon has also referred to the abstract criteria which both domestic and GATT concept of subsidies in the Slotnan foreign undertakings can fulfil. All SMEs Neptun case. 5 benefit, irrespective of the sector of the economy to which they belong.

21. Nor, according to case-law, is there selectivity where the benefit arises from the 19. Undertakings in other Member States nature or internal structure of the under- can transfer commercial vehicles to Spain, lying system. 6All undertakings can benefit register them there, then withdraw them from the PRI. The structure of the system is and — assisted by the PRI — acquire a such that only large undertakings are replacement vehicle. They can also agree excluded, but they do not face the same with the holder of a vehicle registered in financial difficulties as SMEs. Spain that the vehicle will be withdrawn and then have its withdrawal assigned to them. In either case, the terms of the PRI do not prevent transport undertakings in other Member States from participating in the programme. The assistance provided is in fact unattractive to foreign undertakings because interest rates in their own countries (bb) Commission are lower. In the final analysis, the PRI merely offsets the disadvantage to Spanish undertakings arising from interest rate differences.

24. Nor can the measure be justified by the nature or internal structure of the under- lying system. Spain has not explained what factor inherent in the system justifies the distinction made. It is not enough in this 27. If the Spanish Government's approach respect to claim that a measure pursues were taken to its logical conclusion, statu- certain economic policy objectives. This tory aid schemes or aid programmes would argument is relevant only in connection never satisfy the conditions for State aid with rules on taxation. since they typically only lay down abstract criteria to determine those who are to benefit. In fact, only subsidies granted on the basis of such general schemes can be measured against the standard set by Article 92 of the EC Treaty. The Court of Justice has repeatedly however been called (b) Analysis upon to consider aid programmes and statutory aid schemes and has not voiced any doubts in regard to selectivity on the basis that the potential recipients were defined only by means of abstract criteria, rather than being specifically named. 8 25. For a measure to be classified as State aid, Article 92( 1 ) of the EC Treaty requires 8 — See, for example, the judgments in Case C-143/99 Adria Wwn Pipeline [20011 ECU I-8365, on a scheme governed by the Austrian Energy Tax Law, Case C-156/98 Germany v 7 — The Commission refers to the indgments in Joined Cases Commission [2000f ECU I-6857, on a scheme governed by 6/69 and 11/69 Commission vFrance [1969] ECU 523. and the German Income Tax Law, and Case C-75/97 Belgium v Case C-183/91 Commission v Greece |1993] ECR 1-3131. Commission 11999) ECR 1-3671 — Maritici scheme.

33. The question is whether these distinc- 30. As the Commission rightly emphasises, tions are justified by the nature or internal only undertakings that need a commercial structure of the general system of which the vehicle for their economic activities may measure forms part. The Court of Justice claim the subsidy. Certain branches of the first developed this idea in the case of Italy economy, such as the professions, are thus v Commission which Spain cites.122 This almost entirely excluded from the subsidy. argument has since been frequently dis-

9 — Cited in footnote 5, points 46 and 63 et seq. 11 — See the judgment in CETM {cited in footnote 3, 10—Judgment in Adria-Wien Pipeline (cited in footnote 8, paragraphs 46 and 47). paragraph 35). 12 — Cited in footnote 6, paragraph 33/35.

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cussed, especially in connection with tax justified on the basis of systematic distinc- concessions and reductions in social secur- tion. ity contributions. 13

37. The first objection under the first plea 34. The facts in the present case differ from must therefore be dismissed. the circumstances in the cases cited in that the benefit consists not in exemption from a general burden but simply in the prefer- ential treatment accorded to certain under- takings on environmental and transport policy grounds. (2) Competition not distorted and intra- Community trade not affected

43. The Commission begins by emphasis- ing that the possibility of competition being distorted is enough for Article 92 of the EC Treaty to be deemed to be infringed. In 40. As the subsidy was subject to the addition, the transport sector is a market condition that another vehicle be with- that has only recently been liberalised and drawn, transport capacity is not increased. particular caution is therefore called for. In its reply, however, the Spanish Govern- ment stated that in 12.3% of cases the subsidised replacement vehicle falls into a higher category than the withdrawn vehicle.

44. It stresses that even very low levels of aid in the transport sector might result in competition being distorted and intra- Community trade being affected, since this 41. It was, moreover, only in its reply that is a market beset with structural problems the Spanish Government argued that the and overcapacity. The de minimis rule is decision did not contain an adequate state- not therefore applicable in this sector. The ment of reasons for the claim that intra- PRI also stimulates an increase in capacity. Community trade was affected.

45. The Commission further maintains that 42. Own-account transport and transport own-account transport and transport for for hire or reward are not part of the same hire or reward constitute one market since market. This is evident from the cor- the activities involved are interchangeable. responding distinction made in the case of In this connection the Court of Justice licences. Undertakings engaged in transport asked the Commission before the hearing

(b) Analysis 46. During the hearing the Commission stated that merger control and aid super­ vision were governed by completely dif­ ferent principles. However, own-account activities were also taken into account in the context of merger control in the deter­ mination of the market relevant to the merger, provided that they were inter­ changeable with activities undertaken for 48. Article 92(1) of the EC Treaty prohibits hire or reward. 16 State aid that distorts or threatens to distort competition and affects intra-Community trade. 15 — See Commission Decision 92/385/EEC of 28 April 1992 declaring the compatibility with the common market of a concentration (Case No IV/M.126 — Accor/Wagon-lits, in application of Council Regulation (EEC) No 4064/89, OJ 1992 L 204, p. 1); Commission Decision 93/9/EEC of 30 September 1992 declaring the compatibility of a concentration with the common market (Case No IV/M.214 — Du Pont/ICI, OJ 1993 L 7, p. 13); and Commission Decision 96/346/EĽC of 20 September 1995 relating to a proceeding pursuant to Council Regulation (EEC) No 4064/89 (Case No IV/M.553 — RTL/Veronica/ Endemol, OJ 1996 L 134, p. 32); the determination of the relevant market was confirmed by the judgment of the Court of Eirst Instance in Case T-221/95 Endemol v Commission [1999] ECU II-1299, paragraph 107 et seq. 49. In examining the Commission's find­ 16 — See Commission Decision of 11 July 2000 declaring a concentration to be compatible with the common market ings on these provisions in the contested (Case No IV/M.1943 — Telefonica/Endemol according to decision, it must be borne in mind that the Council Regulation (EEC) No 4064/69, OJ 2000 C 235, p. 6, paragraph 8 (TV programmes limited to captive use Commission enjoys considerable discretion are taken into account only if they arc not available on the in the application of Article 92 of the EC market. If, on the other hand, programmes made in-house are offered on the TV programme market, they form part Treaty. The Court of Justice may not of the relevant market); and Commission Decision of 3 July 2001 (COMP/JV.55 — Hutchison/RCPM/ECT, therefore substitute its own assessment for paragraph 71, accessible through bttp://www.europa.eu/ int/comm/competition/mergers/cases/decisions/ that of the Commission, but must confine jv55_en.pdf). itself to considering whether that assess-

50. In the application of Article 92 of the EC Treaty the Commission may base its decisions on guidelines and communi- cations. In view of the level of aid provided under the PRI the Commission could 18 have applied the communication on de minimis aid and, on this basis, declared the measures compatible with the common market. It refused to do so, however, because it regards this as a transport sector 52. For an accurate definition of what is measure, in which the communication is meant by own-account transport reference not applicable. should be made to the definition in point 4 of Annex I to the First Council Directive of 23 July 1962 on the establishment of certain common rules for international transport (carrying of goods by road for hire or reward), 19 as amended by Council Regulation (EEC) No 881/92 of 26 March 1992 20 o n access to the market in the carriage of goods by road within the Community to or from the territory of a 51. However, only some of the benefici- Member State or passing across the terri- aries under the PRI are undertakings that tory of one or more Member States. 21 provide transport services for hire or reward, i.e. transport undertakings in the narrower sense. The PRI also benefits 19 — OJ, English Special Edition, First Series 1959-1962, p. 267. undertakings operating mainly in other 20 — OJ 1992 L 95, p. 1. sectors of the economy that use their own 21 — The definition cited reads as follows: 4. Carriage of goods in motor vehicles provided the following conditions are fulfilled: (a) the goods carried must be the property of the under- taking or must have been sold, bought, let out on hire 17 —Judgments in Case C-169/95 Spain v Commission [1997] or hired, produced, extracted, processed or repaired by ECR 1-135, paragraph 34, Case C-288/96 Germany v the undertaking; Commission [2000] ECR 1-8237, paragraph 26, and Case (b) the purpose of the journey must be to carry the goods C-310/99 Italy v Commission [2002] ECR I-2289, to or from the undertaking or to move them, either paragraph 46. inside the undertaking or outside for its own require- 18 — In this respect, however, certain reservations persist where ments; the detail is concerned. Although the subsidy per vehicle is (c) motor vehicles used for such carriage must be driven by small, the aid per applicant under the PRI is not restricted employees of the undertaking; to a specific number of vehicles. In theory it would (d) the vehicles carrying the goods must be owned by the therefore be possible for the aid to exceed the limit of ECU undertaking or have been bought by it on deferred 100 000 in three years in certain cases. A further question terms or hired... ; is how far the PRI precludes the cumulation of more than (e) carriage must be no more than ancillary to the overall one type of aid, as the de minimis communication requires. activities of the undertaking.'

54. The de minimis rule was at first 56. The judgment in CIRFS also states that included in the Community guidelines for the Commission must comply with any State aid to small and medium-sized enter- guidelines it adopts. 28 But that case con- prises of 20 May 1992 23 and was replaced cerned 'aid discipline' in the synthetic fibre by the communication on de minimis industry, which had been adopted with the aid. 24 With effect from 23 July 1996 the approval of the Member States as an Commission replaced the 1992 SME Com- 25 — O J 1996 C 213, p. 4. 26 — See footnote 12 of the contested decision. 22 — Advocate General Léger points out that there appears to be some inconsistency between the de mininus communi- 27 —Judgment m Case C-310/99 Italy v Commission (cited in cation and the Court's ruling that even the smallest footnote 17), paragraph 52; sec also the judgment in Case amount of aid may affect intra-Community trade (see C-288/96 Germany v Commission (cited in footnote 17), further point SS below) (Opinion in Case C-382/99 paragraph 62. Netherlands v Commission [20021 LCR I-5163, point 4.5). 28 — Judgment in Case C-313/90 CIRFS and Others v Com- 23 — O J 1992 C 21.1, p. 2. mission 119931 ECR I-1125, paragraphs 34 and 36; see also the judgement in Case C-311/94 lissel-Vhet [1996] 24 — O J 1996 C 68, p. 9. ECR I-5023, paragraph 42.

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appropriate measure based on Article 93(1) cation does not apply in the transport of the EC Treaty. 29 However, this state- sector. The Commission has given a broad ment is true, mutatis mutandis, of the interpretation of the term 'transport sec- guidelines laid down by the Commission tor'. According to its interpretation, the in the communication on de minimis aid. 30 transport sector includes any transport operation, regardless of whether it is effected by a transport undertaking for hire or reward or by an undertaking in another sphere for its own account.

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exclusion of the transport sector the fact 64. The issue discussed during the hearing that in this sector, with its many small as to whether the definition of the market undertakings, even relatively small should be based on the same standards in amounts of aid can have an impact on the cases of merger control and aid super- intra-Community competition and trade. vision need not be answered conclusively The exclusion therefore takes account of here, since the Commission has made it the specific conditions in the transport clear that in the context of merger control it market. also takes account of own-account activ- ities when determining the relevant market in so far as they are interchangeable with services provided by third parties in each case.

62. The question is what services the trans- port market encompasses. In the contested decision all the Commission has to say 65. What is not disputed, then, is that the about this is the following: determining factor in the definition of the market in both instances is whether all activities are able to meet the same need; services with different features form one market only where they are interchange- able to more than a limited extent. 32

'The transport sector is made up of trans- port for hire or reward as well as own- account transport, as both activities are regarded as being interchangeable. From a 66. Nor is it sufficient for the customer to macroeconomic as well as an operational have a theoretical choice between the two point of view in certain situations the forms of activity. There must also be some outsourcing of transport services permits degree of probability that they are actually an optimum allocation of resources and interchanged in a not insignificant number brings a desired element of flexibility to the of cases. organisation of transport.'

68. An SME that already undertakes own- account transport with a vehicle of its own has at some stage opted in principle for this system in view of its specific needs, and invested in a vehicle. It will be at pains to use this vehicle to make the investment and 71. On a proper interpretation of the de ongoing costs worthwhile. It will consider minimis rule, the rule would only have been using a third party only if the overall inapplicable in regard to subsidies awarded circumstances are so changed that it seems to transport undertakings that provide advantageous to depart from the original commercial transport services for hire or decision to operate its own vehicle. reward. Only those undertakings operate in the transport market, which is characte- rised by a large number of undertakings and in which even small amounts of aid may lead to a distortion of competition.

33 — See point 4 of Annex I to the First Council Directive on the establishment of certain common rules for international transport (carrying of goods by road for hire or reward) (OJ, English Special Edition, First Series 1959-1962, 69. The Commission failed to appreciate p. 267), as amended by Council Regulation (EEC) No 881/92 of 26 March 1992 on access to the market in that for an individual undertaking to reor- the carriage of goods by road within the Community to or from the territory of a Member State or passing across the ganise its transport arrangement is a long- territory of one or more Member States (OJ 1992 L 95, term process, if it occurs at all. It wrongly p. 1).

73. The Commission's error in its appli- cation of the de minimis rule means that the contested decision ought to be annulled in its entirety. 76. Should the Court of Justice come to the conclusion that the Commission was right to regard the de minimis rule as inappli- cable, it would be necessary to determine whether its contention that subsidies under the PRI distort or threaten to distort competition and affect intra-Community 74. A partial annulment of the decision, trade is free from manifest errors of assess- limited to the part which concerns aid to ment. undertakings engaged in own-account transport, is not an option open to the Court of Justice. It is for the Commission to reassess the measure as a whole, applying the de minimis rule correctly. What must be considered in this context is whether the subsidy received by non-professional car- 77. To ascertain what influence the meas- riers meets the requirements of the de ures have on competition, the market minimis rule, in particular, whether the affected by the subsidies first needs to be threshold is not exceeded, and whether defined.

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(i) Definition of the relevant market its own vehicles by way of an activity that is subsidiary to another principal activity are in fact interchangeable with the services provided by third parties. The fact that the relevant group of recipients under the PRI were hitherto using their own vehicles for these purposes militates against the prop- osition that they are interchangeable. 78. The Commission did not make any detailed findings in the contested decision as to the definition of the relevant market. In the context of examining the sphere of application of the de minimis rule, it merely found, as already stated, that the transport 81. The erroneous definition of the relevant sector encompasses both transport for hire market thus constitutes a further ground or reward and own-account transport. 34 for annulling the contested decision.

84. The Spanish Government's argument that the PRI was intended merely to offset 86. Where the position of domestic under- the different rates of interest on loans in the takings competing with undertakings from Member States is irrelevant here. Differ- other Member States is strengthened by ences in the general legal and economic subsidies from State resources which distort environments in the Member States can be competition, intra-Community trade is also overcome only through the approximation affected. 37 of laws. A unilateral change to a given cost factor in a sector of a Member State's economy is, on the other hand, likely to disturb the existing equilibrium. 35

88. According to settled case-law, how- the result that undertakings established in ever, the fact that the aid is comparatively other Member States have less chance of limited in scale and is granted only to exporting their products to the market in undertakings of a limited size does not that Member State... exclude the possibility of intra-Community trade being affected.3 8 Even relatively minor amounts of aid may affect trade between Member States if there is strong competition in the sector concerned. 39 This is particularly true of the transport market, which — as the Commission has stated without being challenged — is highly frag- Similarly, where a Member State grants aid mented and beset by overcapacity. to undertakings operating in the service and distribution industries, it is not necessary for the recipient undertakings themselves to carry on their business outside the Member State for the aid to have an effect on Community trade, especially in the case of undertakings established close to the fron- tier between two Member States.' 89. Spain also argues that the recipient undertakings play little part in intra-Com- munity transport. This again is not to say, however, that intra-Community trade is not affected. As the Court of Justice has ruled, 40 (iii) Inadequate statement of reasons as regards adverse effects on intra-Commu- nity trade

'... that although in certain cases the very 93. In view of the link which, according to circumstances in which the aid has been the case-law, exists between the granted may show that it is liable to affect strengthening of an undertaking's competi- trade between Member States and to distort tive position and the effects on intra-Com- or threaten to distort competition, the munity trade, there was no need for a more Commission must at least set out those detailed statement of reasons. The plea that circumstances in the statement of reasons the statement of reasons with regard to for its decision.' 42 effects on trade was inadequate must there- fore be dismissed.

92. The Commission complied with these requirements in the contested decision by stating (section IV, last paragraph): (iii) Conclusion

'Where aid strengthens the financial pos- ition of firms in a particular sector involved

98. The amount of the subsidy depends solely on the purchase price, with no 95. The Spanish Government is of the account taken of special factors relating to opinion that the requirements for exemp- environmental protection or road safety. tion from the prohibition of aid pursuant to Subsidised vehicles — like those with- Article 92(3)(c) of the EC Treaty are met, drawn — had merely to comply with the since the measures under the PRI con- existing standards. Although stricter stan- tributed to improved environmental pro- dards sometimes applied to new vehicles tection and road safety. The PRI did not than to vehicles first registered before a increase capacity in the transport sector, given date, a vehicle that was withdrawn nor were undertakings in other Member might already have met these standards. States placed at a disadvantage.

99. According to the Community guide- 96. The mere fact that vehicles over 10 lines for aid to environmental protection, years old were replaced with new ones led only additional costs attributable to envi- to a reduction in the emission of harmful ronmental protection are eligible. In the substances, so that there was no need to case of aid for adjustments to new stan- adopt separate measures to encourage that dards, not more than 15% of additional trend. The PRI resulted in the applicable costs may be offset by the aid. Under the standards being met prematurely, since PRI, on the other hand, the calculation of vehicles were replaced earlier than required the subsidy is based on the total purchase by law. price.

102. In the application of this derogation 105. The Commission classified the PRI as the Commission enjoys a wide discretion, a measure within the meaning of the exercise of which involves assessments of an economic and social nature which 44 — Judgment in Maribel (cited in footnote 8), paragraph 55 and judgment in Case C-303/88 Italy v Commission (cited in footnote 39), paragraph 34. 43 — The Commission refers in this context to the judgment of 45 — See the judgment in Joined Cases C-278/92 to C-280/92 the Court of First Instance in Siemens v Commission (cited Spurn v Commission (cited in footnote 40), paragraph 51. in footnote 36). 46 — See point 50 above.

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Article 92(3)(c) of the EC Treaty, but 108. To summarise, it can thus be said that refused any exemption under the Commu- the measure had certain favourable effects nity guidelines for aid to environmental on road safety and environmental protec- protection. It is necessary to determine tion in that it resulted in old vehicles being whether its evaluation of the PRI is free replaced with new ones earlier — albeit from manifest errors in the exercise of its perhaps only slightly earlier — than would discretion. have been the case had the subsidy not been available.

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of the Commission's approach to and the certain exceptional cases. 49 The Commis- case-law on operating aid: subsidies are in sion did not discuss these provisions in the essence there to fund replacement invest- contested decision. Nor, clearly, is the aid ments which are necessary anyway, 47 granted under the PRI comparable to cases although acquisitions may be brought for- in which the Commission exceptionally ward a little as a result of the subsidy. deems operating aid to be permissible under the Community guidelines.

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dards (paragraph 3.2, A, of the Community question because Spain has not proved that guidelines) to be inapplicable since they the requirements for the exemption of apply only to investment in certain kinds of adaptation aid or aid as an incentive to equipment. However, this restriction is not exceed environmental standards have been supported by the wording of the Commu- satisfied. It should be borne in mind that nity guidelines. They merely refer in general the Community guidelines apply under a terms to plant and equipment. derogation from the prohibition of aid in Article 92(1) of the EC Treaty and must therefore be interpreted narrowly. 50

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Although it argued unchallenged that the total of 41 months. During this period the measures implementing the aid authorised Commission took no action for a total oi by the Commission in 1993 contain a rule 32 months — spread over various stages on cumulation, it did not comment on the of the procedure — whereas the Spanish likelihood of cumulation with aid auth- authorities responded to requests for infor- orised in 1996. The Commission also mation without delay on each occasion. rightly emphasises that only an appropriate prohibition in the PRI itself would defi- nitely prevent cumulation with other aid, but the PRI contains no such prohibition.

124. The long periods during which the Commission failed to react led the Spanish Government to expect that there would be no objection to the aid. As a result, the 122. As the Commission cannot, therefore, number of authorised subsidies rose to by its refusal of an exemption pursuant to about 14 500. Article 92(3)(c) of the EC Treaty, be accused of having committed a manifest error in the exercise of its discretion, the second plea must be dismissed.

125. The Court of Justice has declined to apply the principle of the protection of legitimate expectations only when national authorities have been dilatory in forward- ing information, 5 1which, however, they were not in this case. In the RSV case 52the C — Infringement of the principle of the Court annulled a Commission decision protection of legitimate expectations because a legitimate expectation arose based on the length of the procedure.

its obligation to notify pursuant to (2) Analysis Article 93(3) of the EC Treaty it cannot rely on a legitimate expectation as to the permissibility of the aid. Nor, in this specific instance, was the duration of the procedure excessive. Delays were attribu- table to lack of cooperation on the part of 129. Reference must first be made to the the Spanish authorities. settled case-law of the Court of Justice, according to which the recipient of aid may not entertain a legitimate expectation that aid is lawful unless it has been granted in compliance with the procedure laid down in Article 93 of the EC Treaty. 53 That finding applies in particular to any Member State which has granted aid without pre- viously notifying it.

127. In any case, the fact that a procedure is lengthy is not enough in itself to justify a legitimate expectation. It must be accom- panied by actions or statements by the 130. The Court of Justice ruled in the RSV Commission from which the Member State case that, where the Commission causes could infer that the aid was compatible delay during the administrative procedure, with the common market. In fact, the the recipient of aid may in certain circum- Commission gave no such indications at stances entertain a legitimate expectation any time during the procedure. that the Commission will no longer order its recovery. 54 However, as the Commis- sion rightly emphasises, there were in the RSV case, aside from the length of the procedure before the Commission, excep- tional circumstances which could legit- imately lead the recipient to entertain the expectation that the Commission would not object to the aid.

132. In practice, the Commission always closes the preliminary procedure — including preliminary procedures relating to unnotified aid — with a decision either initiating the formal procedure or stating that the measure does not constitute aid or 135. What must be taken into account in that it has no objection to it. 55 this context, however, is whether the length of the procedure is attributable to the Commission alone or is also due to the fact that the Member State did not forward all the necessary information to the Com- mission without delay, contrary to its 133. Once a Member State has been obligation under Article 5 of the EC Treaty informed that the Commission has initiated (now Article 10 EC). 56 a preliminary procedure, it can assume that the Commission will not object to the measure only when it has received a decision to that effect. This is equally true of the period after the opening of the formal procedure, since this stage of the 136. It is not apparent that the Commis- procedure too is closed with a decision. The sion took no action for an unusually long fact that the procedure has continued for a time or that the procedure was delayed for certain period cannot as a rule justify a no reason. The length of the procedure is, legitimate expectation. rather, due also to the Spanish authorities' failure to forward all the necessary infor- mation to the Commission without delay.

134. An unusually long period of inactivity on the Commission's part or delay without 137. The Commission asked the Spanish 55 — Sec paragraph 4.2.3 of 'Cuide tu procedures in State aid authorities for information on the PRI by cases', reprinted in: Rules applicable to State aid Commis- letter of 9 February 1995. They forwarded sion (ed.): Competition Law in the European Commu- nities, Vol. II A, 1999; sec also Article 13 of Council Regulation (KC) 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, p. 1), which was not yet 56 — Judgment in Case C-303/88 Italy v Commission (cited in applicable in the present case, however. footnote 39), paragraph 43.

139. The formal procedure continued for almost two years. This is admittedly longer (1) Arguments of the parties than the (extendable) period of 18 months since laid down by the Council in Article 7(6) of Regulation No 659/1999 for formal investigation procedures relating to notified aid, 57 but it is not unusually long. Firstly, the PRI is not notified aid. 141. In the Spanish Government's opinion, the recovery of aid which is incompatible 57 — Regulation No 659/1999 had not yet entered into force with the common market is not an auto- when the decision was adopted and does not therefore matic consequence of an infringement of apply in this case, but it does set a standard for comparison. Article 92 of the EC Treaty, but is at the

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Commission's discretion. 58 It argues that it which recovery is as a rule the logical is evident from the Commission's com- consequence of the finding that aid is munications on its approach to unnotified incompatible with the common market. 60 aid that recovery is ordered only 'as a rule', The serious consequences of recovery for unless special circumstances obtain. The the recipients did not justify a departure Spanish Government also cites a number of from the general rule. decisions in which the Commission has refrained from ordering recovery.

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147. The Spanish Government has not entertain a legitimate expectation that the advanced any sound arguments to support aid is lawful. 64 Furthermore, the Commis- its claim that recovery should not be sion published its decision on the opening required. It merely referred to serious of the formal procedure in the Official implications for the recipients of aid, with- Journal of the European Communities on out giving any further details. It cannot 13 September 1996.65 It must therefore be therefore be regarded as an error in the assumed that the doubts expressed by the exercise of its discretion for the Commis- Commission in the decision about the sion to order recovery and so award higher compatibility of the aid with the common priority to the goal of restoring competitive market were known. 66 Nor, for the reasons conditions than to the interests of the aid given above, 67 does the fact that the recipients. 62 procedure then continued for two years constitute grounds for a legitimate expec- tation.

148. It does not follow from the judgment 150. The fourth plea must therefore be of the Court of First Instance in Cityflyer63 dismissed. that the Commission should completely eschew recovery for reasons of propor- tionality in a case such as this. In fact, the Court of First Instance simply ruled that recovery should be restricted to what is necessary to eliminate the distortion of competition. In the case of a loan on E — Infringement of Article 190 of the EC preferential terms the whole capital should Treaty on the basis that the statement of not therefore as a rule be repaid immedi- the reasons for ordering recovery was ately, but only the difference between the inadequate preferential interest rate and the normal market rate.

(2) Analysis

V — Costs

153. According to the case-law of the Court of Justice, no further statement of reasons is needed for the recovery of aid to be ordered where the aid has been granted contrary to Article 93(3). 68 This is 155. Under Article 69(2) of the Rules of especially true where the aid also proves Procedure the unsuccessful party is to be ordered to pay the costs if they have been applied for. As the Commission has been 68 —Judgment in Case C-310/99 Italy v Commission (cited in unsuccessful and the Kingdom of Spain has footnote 17), paragraph 106 and judgment in Joined Cases applied for costs, the Commission must be C-278/92 to C-280/92 Spam v Commission (citedin footnote 40), paragraph 78. ordered to pay the costs.

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VI — Conclusion