C-277/00

OPINION OF MR TIZZANO — CASE C-277/00

OPINION OF ADVOCATE GENERAL TIZZANO delivered on 19 June 2003 1

Table of contents

Facts and procedure I - 3931

Facts I - 3931

The administrative procedure and the contested decision I - 3933

Assessment I - 3940 Characterisation of the loan of DEM 70.3 million made to SMI by Land Brandenburg as State aid incompatible with the common market I - 3942 (i) Non-application of the exemption provided for in Article 87(2)(c) EC and the inadequate statement of grounds on that point in the decision I - 3943

(ii) Infringement of Article 87(1) EC and Article 88 EC I-3945

Characterisation of the grant of DEM 1.8 million made to SMI for removal operations as State aid incompatible with the common market I - 3947

Characterisation of the loan made to SiMI by Land Brandenburg as State aid incompatible with the common market I - 3947

Characterisation of the grant made by BvS to SiMI as State aid incompatible with the common market I - 3948

1 — Original language: Italian.

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4. During the period 1993 to 1997, SMI Silicium M i c r o e l e k t r o n i k I n t e g r a t i o n received financing from the THA and from GmbH (hereinafter 'SiMI'), wholly owned Land Brandenburg totalling D E M 135.1 by SIM i.G.; and Microelectronic Design & million, as follows: Development GmbH (hereinafter ' M D & D'), wholly owned by SiMI. SiMI, with a capital of DEM 50 000 and 105 employees, would continue SMI's business and would pay to use the latter's assets, while M D & D, with a similar capital, would work in the — grants from the THA of DEM 64.8 field of consultancy, marketing, design and million, of which 45 million was for development of microelectronic products investments, 18 million to meet the and services. undertaking's liquidity requirements and 1.8 million for removal opera- tions; 3

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employees of MD & D. Then, on 14 July 9. During the procedure, the German 1999, MD & D bought the shares in SiMI, authorities several times communicated at their nominal value of DEM 50 000, and information to the Commission and sub- the assets of SMI i.G., for DEM 1.7 million. mitted their own observations. Only one interested third party (the Swedish Electro- nic Component Manufacturers Associa- tion) submitted observations to the Com- mission, in support of the latter's decision to initiate the procedure.

The administrative procedure and the con- tested decision 10. On the basis of the information gath- ered during the procedure, on 11 April 2000 the Commission adopted the con- tested decision, whereby it:

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them (plus interest accruing in the capital to Synergy was not sufficient, 6since meantime), in accordance with the '[the] public body [had] retained a majority rules of national law, specifying to holding in the firm and full control over its that end that 'the term "beneficiaries" activities, while private shareholders had [was to] encompass SMI, SIMI and only [taken] a minority holding'. 7 Microelectronic Design & Develop- ment GmbH (MD & D) as well as any other firm to which SMI's, SIMI's or MD & D's assets [had] been or [would] be transferred in order to evade the consequences of [the] deci- sion' (Article 3). 12. Having established that the measures in question should count as State aid incom- patible with the common market, and since the aid had been granted illegally, the Commission then thought it proper to offer some detailed guidance on the resulting obligation to effect recovery, '[h]aving regard to recent changes affecting the beneficiary'. 8

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taken into account in the conditions of to prevent its decision from being frustrated sale'.9 Applying that principle to the aid and to ensure that all distortions of granted to SiMI, the Commission then competition are eliminated, the Commis- noted 'that its shares were sold to MD & sion has a duty, if necessary, to require that D on 14 July 1999', concluding therefrom recovery proceedings should not be con- that 'this aid must be recovered from MD fined to the initial recipient but should & D'. 10 instead be extended to include any firm that continues the business of the initial firm using the transferred production plant, in so far as there are aspects of the transfer on either side which indicate that the business is in fact being continued'. 11

14. However, the Commission's reasoning regarding recovery of the aid granted to SMI is more complex.

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SIMI to MD & D's new shareholders, in annulled and that the Commission should such a way as to shelter them from the be ordered to pay the costs. The Commis- recovery of illegal State aid'. Under those sion of course opposed those claims and circumstances, it believes, 'the respective contended that the applicant should be prices paid for MD & D's shares, on the ordered to pay the costs. After the written one hand, and for SMI's assets and SIMI's procedure, during which a reply and a shares, on the other, [had] no bearing on rejoinder also were submitted, the parties the assessment of the overall transaction'. 12 presented oral argument on 21 November 2002.

17. Moreover, since 'Megaxess and the other buyers of MD & D, and of course MD & D itself, were perfectly aware of the existence of the present procedure and Legal assessment should, in any case, have taken it into account', the Commission then concluded that 'the term "the recipient" encompasse [d] not only SIMI and SMI but also MD & D and any other firm to which SMI's, SIMI's or MD & D's assets [had] been or [would] be transferred in order to evade the Introductory remarks consequences of [the] decision'. 13

19. In the application initiating these pro- ceedings, the German Government puts forward four pleas in law, complaining in particular of: Proceedings before the Court

18. By application lodged on 11 July 2000, (i) breach of the right to a fair hearing and the Federal Republic of Germany claimed of Article 88(2) EC, in that the order that the contested decision should be for recovery is addressed also to SiMI, MD & D and other unnamed under- takings, without the Commission hav- 12 — Points JO and 51. ing undertaken any inquiry in respect 13 — Point 52. of them;

Arguments of the parties

(iv) various defects relating to the order to recover the aid from undertakings 21. Apart from the general complaints other than SMI, particularly: the Com- regarding non-application of the exemption mission's lack of competence; infringe- provided for in Article 87(2)(c) 14 and the ment in various respects of Article 87 inadequate statement of grounds on that (1) EC and Article 88(2) EC; infringe- point in the decision, which relate without ment of essential procedural require- ments through inadequate reconstruction of the facts and defec- 14 — This states that 'aid granted to the economy of certain tive statement of grounds; and infrin- areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in gement of the principles of legal order to compensate for the economic disadvantages caused by that division' is compatible with the common certainty and proportionality. market.

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distinction to all the measures at issue, the the highest bidder; or liquidation of the firm specific complaints made by the applicant would have been less costly. In any other regarding characterisation of the grants instance of privatisation, the giving of paid by the THA to SMI as State aid financial grants would not be regarded as incompatible with the common market are State aid or, at least, would be regarded as based on the decisions, referred to above, in aid given under a regime authorised by the which the Commission authorised the first Commission. and second regimes of aid from the THA.

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— a defective statement of grounds, in so 4 9 % of SMI's capital to Synergy and that far as the decision entirely disregarded the Commission did not even take time to the German authorities' arguments to assess whether or not in actual fact Synergy the effect that the contracts for the sale had acquired management or control of the of 4 9 % of SMI's capital to Synergy company. The Commission simply noted created a privatisation under the sec- that Synergy had acquired only a minority ond THA regime; holding in SMI and inferred arbitrarily that the THA had retained control of the company and that there had therefore not actually been a privatisation.

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was also to be found in the fact that the Assessment trustee for the THA's shares was given only secondary and limited powers of super- vision.

28. Having thus briefly described the posi- tions of the parties, I shall now examine the complaint. It will be noted first of all that, in the contested decision, the Commission found that the grants made by the THA did not fall to be included in the second or third THA aid regimes since the sale of 49% of SMI's capital to Sinergy 'within the mean- 27. The Commission objects, in reply, that, ing of [those] regimes [could not] be notwithstanding the request for informa- regarded as a "privatisation"'. In support tion addressed to the German Government of that finding, the Commission stated in in the letter informing it that the procedure particular that '[u]nder those regimes, had been initiated, that government had grants were authorised in the case of only given it the relevant factual particulars privatisation precisely because of THA's unwillingly and incompletely, so forcing it unique and unprecedented task, namely the to adopt a decision on the basis of the only transformation of a planned State economy information available. 1 5In particular, the into a market economy. Nevertheless, such Commission states that it was unable to aid can attain its objective only if publicly take account of the material and legal owned enterprises are sold and control of circumstances of the transfer of 49% of them transferred to private investors'. In the SMI's capital to Synergy because (a) it only present case however, according to the received the contracts for the transfer with Commission, 'a public body [had] retained the application and (b) the claim that the a majority holding in the firm and full content of those contracts had already been control over its activities, while private produced to the Commission in the three shareholders had [taken] only a minority communications referred to by the German holding'. 16 Government was untrue. The Commission then adds that, in any case, given the legal meaning of privatisation that it accepted, there was no reason to go more deeply into the transfer of the management and control of SMI to Synergy.

accept that a 'privatisation' had been 31. However, I doubt whether that is the effected in this case, the point being stressed true position. As the applicant rightly that the THA had retained a majority observes, far from availing itself of the holding in SMI and also 'full control over authority provided by the Boussac judg- its activities'. But it also seems to have been ment, the Commission continued to argue established that, as the German Govern- with the German authorities and to ask ment noted and the Commission has not them for information in the course of a denied, that assessment conflicted with the procedure which lasted for all of two years true facts because the contracts for the and eight months, during which time the transfer of 49% of SMI's capital gave institution assuredly had the opportunity of Synergy control of the company. It is shedding light on a matter of particular therefore not difficult to conclude that the importance to the broad logic of its Commission's assessment of the character decision, namely the control of SMI after of the measures at issue as State aid 49% of its capital had been transferred to incompatible with the common market Synergy. was in fact based on an erroneous recon- struction of the facts.

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based its decision on the mistaken assump- 34. In the light of the foregoing considera- tion that, following the transfer of 49% of tions, I therefore believe that the present the capital of SMI, the THA had retained complaint is well founded and that, there- 'full control over its activities'. fore, the contested decision must be annulled to the extent to which it char- acterises the grants made by the THA to SMI as State aid incompatible with the common market, without there being any need to consider the other complaints regarding that aspect.

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39. I would observe first that, since it lays down 'a derogation from the general principle ... that State aid is incompatible

37. The Commission replies that, during the procedure, the German authorities did 18 — The Commission refers in particular to Joined Cases not submit any argument regarding possi- T-132/96 and T-143/96 Freistaat Sachsen and Others v Commission [1999] ECR II-3663, and to Case C-156/98 ble application of that exemption and that Germany v Commission [2000] ECR I-6857).

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4 1 . That view is further supported by the fact that, as the Commission rightly points out, even before the Court the German Government provided no information which might lead to that exemption being held applicable. Far from showing that the measures at issue were required in order to compensate for the economic disadvantages arising from the isolation of the city of

40. Therefore, in view of the narrow and 22 — In support of this see, for example, the judgment of the Court in Case C-382/99 Netherlands v Commission [2002] specific scope of this exemption, I have to ECR I-5163, pointing out that 'the legality of a decision concerning State aid, particularly in regard to the obliga- agree with the Commission that, not having tion to state reasons, is to be assessed in the light of the information provided by the Member State at the time the decision was adopted'. On the basis of that principle, the Court held in particular that the applicant government could not 'argue that the Commission failed to consider the 19 — Germany v Commission, paragraph 49. objective of protection of the environment when assessing the compatibility of the disputed measures with Article 92 20 — Ibid., paragraph 52. (1) of the Treaty' because it had 'not invoke[d] such 21 — Ibid., paragraphs 53 and 55. grounds during the administrative phase' (paragraph 84).

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Frankfurt an der Oder caused by the 43. In the light of the foregoing considera- establishment of the historical frontier tions, therefore, I consider that these inside Germany, the applicant government complaints must be rejected. simply pointed out that the city was close to the boundary with Poland and made a general claim of alleged economic isolation, although it gave no further details.

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45. The Commission responds, first, that German Länder from a planned economy no privatisation was effected here as to a market economy, I do not think they provided for in the second THA aid regime. can also cover measures adopted by other It also points to the contradictions in the public entities, such as Land Brandenburg, reasoning of the applicant government, supplementing those of the THA. which, first, contends that SMI was entirely removed from the control of the THA no later than the time of the sale to Land Brandenburg of 5 1 % of its capital and then seeks to justify the loan subsequently granted by the Land on the basis of the second THA regime. Regardless of the link between that loan and the privatisation of SMI, the Commission also maintains that the decision authorising the second THA regime must be construed narrowly and therefore cannot cover aid granted by other 48. Clearly, that does not mean that public bodies. measures adopted by other public entities in order to facilitate the THA's complex mission cannot be treated by the Commis- sion in the same way as those of the THA itself; it means only that such measures do not come within the scope of the decisions authorising the THA regimes and must therefore be specifically notified to and 46. I consider that the Commission's argu- approved by the Commission in accordance ment conclusively justifies rejecting the with the provisions of the Treaty regarding present complaint. State aid. Moreover, it seems clear to me that this approach does not create any undue interference with the German autho- rities' choices regarding the resources to be employed in order to ease the process of privatisation: it only gives due legal effect to the choices freely made by those authorities.

51. Referring to the characterisation of the loan of DEM 4 million made to SiMI by Land Brandenburg as State aid incompa- tible with the common market, in addition to the general complaints regarding failure to apply the exemption provided for in Article 87(2)(c) EC and the inadequate statement of reasons on that point in the decision (already considered in points 36 to 43 to be unfounded), the applicant argues that the Commission made an erroneous reconstruction of the facts and infringed Article 87(1) EC and Article 88 EC by 50. The German Government specifically failing to find that that grant was covered disputes the characterisation of the grant of by an aid regime authorised by the Com- DEM 1.8 million made to SMI for removal mission. According to the applicant, that operations (by its account, from the BvS) as loan was granted on the basis of the State aid incompatible with the common 'directive of Land Brandenburg on the market. As has been stated earlier, 25 grant of resources from the consolidation however, the contested decision treats the fund for the protection of small and measure to which the applicant government medium industrial undertakings', which refers as a grant given by the THA and provided for an aid scheme expressly analyses it together with other grants made authorised by the Commission. 27 by that body, totalling DEM 64.8 mil- lion. 26 Therefore, since I have already proposed annulment of the contested deci- sion in so far as it characterised the grants made by the THA to SMI as State aid incompatible with the common market (see above, points 21 to 34), I consider that there is no need to rule on this complaint, 52. In response to those complaints, the since the proposed partial annulment of the Commission observes that, during the decision would render it redundant. administrative procedure, the German Gov- ernment did not say that the loan had been granted on the basis of that directive by Land Brandenburg and at no time did it 25 — See above, in note 1. 26 — More specifically, according to the contested decision the grants made by the THA to SMI, totalling DEM 64.8 million, break down as follows: 45 million for investments, 18 million to meet the undertaking's liquidity requirements' and 1.8 million for removal operations. 27 — A reference to the decision authorising; this regime is found in OJ 1995C-295, p.24.

54. In the light of the foregoing, therefore, I consider that the present complaints also must be declared unfounded.

28 — See Netherlands v Commission in which, as has been — infringing the right to a fair hearing, stated, the Court pointed out that 'the legality of a decision and Article 88(2) EC, in that the order concerning State aid, particularly in regard to the obliga- tion to state reasons, is to be assessed in the light of the for recovery is addressed also to SiMI, information provided by the Member State at the time the decision was adopted' (paragraph 84). MD & D and other unnamed under-

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takings, without the Commission hav- regarding identification of the parties ing undertaken an inquiry in respect of required to repay illegal State aid upon a them; transfer of shares in the beneficiary com- pany (a 'share deal') or of its assets (an 'asset deal').

— lacking competence to establish how the national authorities must proceed to recover the illegal aid;

60. The German Government further observes that MD & D cannot be required to repay the aid granted to SMI merely because it acquired that company's assets: it would be absurd to believe that an obliga- tion to repay must follow SMI's assets forever since, if that were the case, nobody would be prepared to buy them and they would simply be destroyed. The applicant 62. Lastly, the German Government dis- also notes that SiMI was not wound up putes the Commission's view that the after the sale of its shares to MD & D, and distortion of competition produced by the it continued to exist with its rights and grant of State aid is not removed if whoever obligations intact: any liability for repay- acquires the assets of the beneficiary under- ment of the aid should therefore also taking uses them to continue the latter's continue to attach to SiMI, and MD & D business. The applicant claims that any- could not be held liable. body acquiring the beneficiary undertak- ing's assets at market price is not causing any distortion of competition, since he has not obtained any abnormal advantage over his competitors.

61. The applicant also denies that the operations carried out by the administrator were intended to circumvent the obligation to repay the aid. By selling SMI's assets at the market price, the administrator did not 63. For its part, the Commission first gives in fact put those assets 'in a safe place', a general clarification of its view as to how because the money earned by the sale to identify who is required to repay aid became part of the insolvency assets following a transfer of shares in the remaining subject to the obligation of beneficiary company (a 'share deal') or of repayment. Nor does the fact that SMI's its assets (an 'asset deal').

30 — It is not clear whether, in excluding the purchasers' liability, the Commission also requires tlie sale to be made 66. However, as regards a sale of the by an open and unconditional procedure. However, I would observe that, were that the case, the reasons for the beneficiary company's assets to outside distinction between separate sale of the beneficiary undertakings, the Commission makes — company's assets and sale as a single lot would not be clear. 31 — It is not very clear which of these instances the Commission is referring to but, from the general nature of its arguments, it seems we may deduce that the same rule should apply to a sale of assets by the beneficiary company, in a voluntary 29 — Case C-303/88 Italy v Commission [1991] ECR I-1433. liquidation or upon insolvency.

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place'. The Commission appears to rule out and its subsidiary M D & D had the possibility of such circumvention only benefited from the aid illegally granted where the beneficiary company's assets are to SMI; sold at market price and also in a single lot under an unconditional procedure open to all the company's competitors: only in such a case, it appears to me, would the purchasers not be required to repay the aid. — on 28 June 1999, when the Commis- sion was about to adopt an adverse decision, together with an order for recovery, M D & D was sold to Megaxess and to three of its own employees;

69. The position thus having been described in general terms, the Commission points out in respect of this case that:

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Assessment recovered from the purchaser, irrespective of whether the corresponding amounts were or were not taken into account in the conditions of sale'. 35

71. In examining the present complaint, it is first appropriate to note that the con- tested decision analyses the aid granted to SiMI 32 differently from that granted to SMI. 33Forthe sake of clarity and simpli- 73. Faced with a typical instance of a share city, the same order will be followed. deal, the Commission thus held that the aid must be repaid by the firm which had acquired the shares of the beneficiary company, without any assessment as to the selling price. In the contested decision, the C o m m i s s i o n t h e r e f o r e used an approach different from that subsequently adopted in its written pleadings, where — as we have seen — it is maintained that in similar instances the obligation to repay remains with the beneficiary company (i) Recovery of the aid granted to SiMI whether or not that obligation has been taken into consideration in the conditions of sale. The Cerman Covernment also states its view regarding the latter position, criticising the contested decision and con- tending that any aid granted to SiMI must be repaid by that company.

72. First, the aid granted to SiMI: as has been seen, the contested decision notes simply that 'its shares were sold to MD & D on 14 July 1999' and that, '[t]herefore, this aid must be recovered from MD & D ' . 34 T h a t a u t o m a t i c c o n c l u s i o n is explained by reference to a general principle set out earlier in that decision, that 'aid 74. Thus, in assessing the solution adopted must be recovered from the firm which in the contested decision, we must consider actually received it. Where the beneficiary the disputed matter of recovering the aid has subsequently been sold, aid must be when the beneficiary company's shares are sold, and seek to identify which of the parties involved (seller, beneficiary com-

77. Further guidance on the point at issue 75. Here, guidance is offered by the judg- is to be found in the later judgment in ment in ENI-Lanerossi, 36 which seems to Banks, 40 where the Court gave a prelimin- show that the aid granted to four firms ary ruling on the problem of recovering aid owned by Lanerossi (itself owned by the following privatisation of the beneficiary public holding corporation ENI) was companies. required to be recovered from those firms even after Lanerossi had disposed of them to private investors, 37 regardless of the fact that the debt associated with repayment of the aid had not been taken into considera- tion in the conditions of sale. 38 78. In that ruling, the Court refused to accept in particular that, in that instance, the purchaser firms could be required to repay the aid, noting that '[t]he fact that the State companies which succeeded British Coal [that is, the beneficiary companies] were acquired subsequently in the context 76. However, that pronouncement appears of an open and competitive tendering to be contradicted by the Court's judgment procedure under market conditions sug¬ in the action which the Commission gest[ed] that the element of aid enjoyed by brought for failure to recover the aid British Coal and those State companies (ENI-Lanerossi II) 39 In that second judg- [did] not exist in relation to the private ment, the Court described SNAM (the undertakings which won tenders, such as successor to Lanerossi) as beneficiary of RJB. Since those undertakings [had] bought the aid and held that recovery had been the companies in question under non- duly effected through the repayment of aid discriminatory competitive conditions and, by that company. Thus essentially the by definition, at the market price, that is to Court agreed that the aid could be repaid say at the highest price which a private by the ex-owner of the four firms that had investor acting under normal competitive received it (the seller), not requiring that the conditions was ready to pay for those companies in the situation they were in, in particular after having enjoyed State aid, the aid element [had been] assessed at the 36 — Case C-303/88 Italy v Commission, cited above. market price and included in the purchase 37 — It appears that the sale occurred after initiation of the procedure under Article 88(2) EC and a few months before the Commission adopted the decision ordering recovery. 38 — In particular, see paragraphs 56-60. 39 — Case C-350/93 Commission v Italy [1995] ECR I-699. 40 — Case C-390/98 Banks [2001] ECR I-6117.

price. In such circumstances, the under­ have to repay (at least in part) the aid takings to which the tenders were granted received 45 since, in that case, the value of [could not] be regarded as having benefited the aid might not be entirely included in the from an advantage in relation to other selling price. market operators (...). Private undertakings such as RJB, to which tenders were awarded, could not therefore be asked to repay the aid element in question'. 41 Having so noted as regards the position of the purchasing companies, the Court then stated, more generally, that 'in principle, where a company which has benefited from aid has been sold at the market price, the purchase price reflects the consequences of the previous aid, and it is the seller of that company that keeps the benefit of the aid. In that case, the previous situation is to be 80. Lastly, further (although not very clear) restored primarily through repayment of guidance on the point at issue is to be found the aid by the seller'. 42 in the recent judgment of the Court in Multimedia, 46 where the issues included determining whether the sale by the com­ pany Selečo of 66% of the shares in its subsidiary Multimedia to third parties might remove the latter's (presumed) liabi­ lity to repay certain aid, 47 transferring that liability to Selečo (that is, to the seller). 4 8 The Court pointed out that 'the sale of shares in a company which is the bene­ 79. By that ruling, the terms of which were ficiary of unlawful aid by a shareholder to a later reproduced in the Falck judgment, 43 third party does not affect the requirement the Court therefore made it clear that, for recovery' and then noted that 'the where a beneficiary company is sold at a situation at issue here [was] different from price reflecting its market value after the that case. It involve [d] the sale of Multi­ granting of aid, and therefore at a price media shares by Selečo, which [had] created which in a way includes the value of the aid, that company, and whose assets benefitted] the aid must be repaid by the seller. 44 In the from the sales price of the shares. There­ Court's view, that solution might not apply, fore, it [could not] be excluded that Selečo however, where the selling price was determined taking into account the possi­ bility that the beneficiary company might 45 — That might, for example, occur where the shares are sold during a procedure initiated by the Commission under Article 88{2) EC. 46 — Joined Cases C-328/99 and C-399/00 SIM Multimedia [2003] ECR I-4035. 41 — Paragraph 77. 47 — According to the Commission decision contested in that 42 — Paragraph 78. case (Decision 2000/536/EC of 2 June 1999, 43 — Joined Cases C-74/00 P and C-75/00 P Falck [2002] ECR OJ 2000 L 227, p. 24), Multimedia bore subsidiary I-7869, paragraphs 180 and 181. liability for the repayment of certain aid granted to Selečo 44 — However, it is not clear whether, in stating that the since, during the investigation procedure, the latter had previous situation is to be restored 'primarily' through transferred a particular branch of the undertaking to repayment of the aid by the seller, the Court intended to Multimedia. imply that other persons bore any subsidiary liability. 48 — In particular, see paragraph 60.

82. The above brief examination of the case-law shows essentially that, on the issue of recovering aid where the beneficiary company's shares are sold, the Court vacillates between two positions: the view that the aid must in every case be repaid by the beneficiary company and the view that, if the shares are sold at a price which reflects the market value of the company after the aid is granted, it is to be repaid by the seller. But in no precedent has the Court 81. As indicated, no clear position can be imposed the obligation to repay on the inferred from that judgment as to the p u r c h a s e r , w h o s e liability is indeed recovery of aid in a share deal. Having expressly ruled out where the sale is at stated that 'the sale of shares in a company market price (Banks judgment). which is the beneficiary of unlawful aid by a shareholder to a third party does not affect the requirement for recovery', the Court appears to have taken the view that in every case recovery must be made from the company which received the aid. How- ever, that interpretation seems to be contra- dicted by the subsequent passage, in which, referring to the Banks judgment, the Court essentially holds that selling the shares at 83. In that connection, I must point out the market price might give the benefit of that the first of those positions adopted by the aid to the seller. Thus we are left to the Court appears clearly preferable since it understand that, when the shares are sold at is more closely in line with the principles the market price, it might be the seller who governing the recovery of aid. I consider that, if the company that has received aid is not wound up and remains active in the market, the distortion of competition 49 — Paragraph 83, which also cites paragraphs 77 and 78 of the caused by the aid can be removed (or at Banks judgment. 50 — Paragraph 85. least reduced) only by placing the obliga-

85. In addition, the view that recovery must in every case be effected from the beneficiary company appears preferable inter alia because it means that traders can be afforded greater certainty. The opposite view, namely that in specific circumstances aid must be recovered from the seller, 84. Furthermore, although it is true that creates considerable uncertainty, because it any person selling the shares of the bene- is often difficult to establish whether the ficiary company at a price which reflects selling price fully reflects the market value their market value after the grant of aid of the beneficiary company after aid has gains an advantage from the revaluation of been granted and in no way discounts the the company, it is nonetheless clear that any risk that the company will have to repay at such advantage does not remove that which least part of the aid. And that is without the beneficiary company secures over its mentioning the enormous confusion and competitors. And indeed, it is this latter considerable practical difficulties which advantage which causes distortions of might arise from acceptance of the view competition and which therefore needs to criticised here. If the position were thus, it be removed by recovery of the aid, whilst would be very complicated to recover aid the financial advantage obtained from sale granted to a major company quoted on the of the shares may even not have an effect on stock exchange, whose shares are the the competitive operation of the markets, subject of a large number of selling or since the person selling the shares will not buying transactions every day: every trans- necessarily be an economic operator. How- action could bring a financial benefit to the ever, if it were made clear once and for all seller and create a corresponding obligation that, even if its shares are sold at the market to repay. price, the beneficiary company is still under an obligation to repay the aid received, the seller's opportunities for speculation would be considerably reduced (and in practice would become part of the normal risks of business), since any possible loss caused by the recovery of the aid would normally

88. Regarding recovery of the aid granted to SMI, I will begin by noting that it is 90. And since 'Megaxess and the other stated, in the contested decision, that 'SMI's buyers of MD & D, and of course MD & D assets were sold to MD & D together with itself, were perfectly aware of the existence SIMI's shares. The assets sale was necessary of the present procedure and should, in any in order to allow MD & D to take over case, have taken it into account, the SIMI's activities since SIMI had always Commission therefore concluded that 'the made use of SMI'S assets, thereby benefit- term "the recipient" encompasse[d] not ing from the aid granted formally to SMI. only SIMI and SMI but also MD & D The assets sale took place shortly after 28 and any other firm to which SMI's, SIMI's June 1999, when the same administrator or MD & D's assets [had] been or [would]

52 — See, in particular, paragraph 77 of the Banks judgment. 53 —Points 50 and 51.

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GERMANY v COMMISSION

92. As regards SiMI, it appears that its liability stems simply from the fact that it 'had always made use of SMI'S assets, thereby benefiting from the aid granted formally to SMI'. 5 5Before the Court, as has been seen, the Commission also stated 95. As to the liability of MD & D, as we that, not having obtained information have seen, the Commission took as its basis enabling it to assess whether the price paid the fact that, immediately after selling that by SiMI to SMI to lease its assets was in company to third parties, the insolvency accordance with market conditions, it could administrator sold it SMI's assets and only take as its starting point the fact that, SiMI's shares. Without making any assess- between June/July 1997 and June/July ment of the price paid for the three 1999, SiMI had benefited from the aid transactions, the Commission held that they illegally granted to SMI. were 'closely connected and that they amount[ed| to a transfer of all the assets owned by SMI and used by SIMI to 54 — Point 5 2 . MD & D's new shareholders, in such a 55 — Point 5 0 . way as to shelter them from the recovery of

I - 3959

OPINION OF MR TIZZANO — CASE C-277/00

99. Furthermore, the Commission has not suggested that, in this case, any actions 97. Here I would observe, first, that SMI's were performed which defrauded the cred- assets certainly cannot escape the obligation itors and may have reduced the assets of the of recovery by reason of the sale of SiMI's insolvent company, nor has it maintained shares, because that company only made that, in the context of the insolvency use of those assets under a leasing contract. procedure, there was any breach of the And since, as the German Government has principle of the equal ranking of creditors, claimed without being contradicted by the to the detriment of the public creditors. In Commission, SiMI's shares were sold at such a situation, I believe that, if the claims market price, that operation did not remove in respect of recovery of the aid were resources from the insolvency assets which properly listed among the liabilities of the were still subject to the public claim in insolvency, the sale of SMI's assets at respect of recovery of the aid. market price cannot have led to any form

I - 3960

GERMANY v COMMISSION

of circumvention of the obligation to States company; and that no competitor of repay. 56 SMI was found to have complained of any lack of transparency in the operation.

101. In fact those arguments can easily be countered by the fact that, in the contested decision, M D & D's liability was not based upon that assumption: no passage in the decision maintains that the sale of SMI's assets as a single lot did not take place in an open and transparent procedure or that in that way some of SMI's competitors were prevented from acquiring the assets which the company used to pursue the grant- (iii) Conclusions assisted business. The contested decision and the documents before the Court reveal various details which suggest precisely the opposite, such as for example the fact that the sale concerned came about within the context of a court-supervised insolvency procedure; that the sale did not occur 103. On the basis of the foregoing, I immediately but was preceded by unsuc- consider that this complaint must be upheld cessful negotiations with another United and that, as a consequence, the contested decision must be annulled to the extent to which it ordered recovery of aid from firms other than SMI, without there being any 56 — In that connection, see i n particular Case C-142/87 need to consider the other complaints Belgium v Commission (the Tubemeuse case) [19 9 0] ECR I-959, paragraph 62. relating to that aspect.

I - 3961

OPINION OF MR TIZZANO — CASE C-277/00

Costs under Article 69(3) of the Rules of Proce- dure, if each party succeeds on some and fails on other heads, the Court may divide the costs or decide that the parties are to bear their own costs. Since, as has been Under Article 69(2) of the Rules of Proce- seen, I consider that both Germany and the dure, the unsuccessful party is to be ordered Commission must be partially unsuccessful, to pay the costs if the are applied for in the it seems fair to propose that each should successful party's pleadings. However, bear its own costs.