COMPETENCE OF THE COMMISSION FOR AUTHORIZATION OF STATE AID
LexInter | August 13, 2004 | 0 Comments

COMPETENCE OF THE COMMISSION FOR AUTHORIZATION OF STATE AID

62002J0110
Judgment of the Court (plenary assembly) of 29 June 2004.
Commission of the European Communities v Council of the European Union.
Portuguese Government aid to pig farmers – Aid intended to allow reimbursement of aid declared incompatible with the common market – Council decision declaring such aid compatible with the common market – Illegality – Article 88 (2), third subparagraph, EC .
Case C-110/02.

Reports 2004 page 00000
Parties

In Case C-110/02,
Commission of the European Communities, represented by MM. F. Santaolalla Gadea, D. Triantafyllou and V. Di Bucci, acting as Agents, having taken up residence in Luxembourg,
applicant,
v
Council of the European Union, represented by MM. J. Carbery and F. Florindo Gijón, acting as Agents,
defendant,
supported by
République Portuguese, represented by ML Fernandes and Mme I. Palma, acting as Agents, having taken up residence in Luxembourg,
and by
and by
République French, represented by MM. G. de Bergues and F. Million, acting as Agents,
interveners,
for the annulment of Council Decision 2002/114 / EC of 21 January 2002 on the authorization to grant aid by the Government of Portugal to Portuguese pig farmers benefiting from the measures granted in 1994 and 1998 ( OJ L 43, p. 18),
THE COURT (plenary assembly),
composed of MV Skouris, president, MM. P. Jann, CWA Timmermans, A. Rosas, C. Gulmann, J.-P. Puissochet and JN Cunha Rodrigues, Presidents of Chambers, MM. A. La Pergola and R. Schintgen, Messrs F. Macken and N. Colneric, MM. S. von Bahr and K. Lenaerts (rapporteur), judges,
Advocate General: MFG Jacobs,
Registrar: MR Grass,
having regard to the report of the judge rapporteur,
having heard the Advocate General in his conclusions at the
December 11, 2003,
delivers this
Judgment
Grounds for the judgment

1. By application lodged at the Court Registry on 25 March 2002, the Commission of the European Communities, pursuant to Article 230 EC, requested the annulment of Council Decision 2002/114 / EC , of 21 January 2002, concerning the authorization by the Government of Portugal to grant aid to Portuguese pig breeders benefiting from the measures granted in 1994 and 1998 (OJ L 43, p. 18, hereinafter ‘the contested decision’ ).
2. By orders of the President of the Court of 16 and 19 September 2002, the Portuguese Republic and the French Republic were respectively granted leave to intervene in support of the conclusions of the Council, the latter being, however, only authorized to submit observations during’
The legal framework
3. Article 88 (2) and (3) EC provides:
“2. If, after giving the interested parties formal notice to submit their observations, the Commission finds that aid granted by a State or through State resources is not compatible with the common market under the terms of Article 87, or that this aid is applied in an abusive manner, it decides that the State concerned must withdraw or modify it within the time limit that it determines.
If the State in question does not comply with this decision within the time limit set, the Commission or any other interested State may apply directly to the Court of Justice, by way of derogation from Articles 226 and 227.
At the request of a Member State, the Council, acting unanimously, may decide that aid, instituted or to be instituted by that State, must be considered compatible with the common market, in derogation from the provisions of Article 87 or the regulations provided for in section 89, if exceptional circumstances justify such a decision. If, with regard to this aid, the Commission has initiated the procedure provided for in this first subparagraph of this paragraph, the request of the State concerned addressed to the Council shall have the effect of suspending the said procedure until the Council takes a position. .
However, if the Council has not taken a position within three months of the request, the Commission shall act.
3. The Commission shall be informed, in good time for submitting its observations, of plans to institute or modify aid. If it considers that a project is not compatible with the common market, under the terms of Article 87, it immediately initiates the procedure provided for in the preceding paragraph. The Member State concerned may not carry out the planned measures before this procedure has resulted in a final decision. ”
The contested decision and its context
4. By decreto-lei n ° 146/94, of 24 May 1994 (Diário da República I, series A, n ° 120, of 24 May 1994, hereinafter the “decree-law of 1994″), the Republic Portuguese has instituted an aid scheme creating, on the one hand, a line of credit for the deleveraging of companies in the intensive livestock sector and, on the other hand, a line of credit for the recovery pig activity. This aid scheme has not been notified to the Commission.
5. Acting on the basis of the first subparagraph of Article 88 (2) EC, the Commission adopted Decision 2000/200 / EC of 25 November 1999 on the aid scheme implemented by Portugal for the deleveraging of companies in the intensive breeding sector and the revival of pig activity (OJ 2000, L 66, p. 20). Under the terms of Article 1 (1) thereof, the credit line for the deleveraging of intensive farming undertakings is declared incompatible with the common market in cases where the subsidy equivalent of this credit line , combined with the investment aid received, exceeds 35% in non-disadvantaged agricultural areas. Paragraph 2 of the same provision declares the line of credit for the revival of pig activity incompatible with the common market. The recovery of aid already illegally made available to beneficiaries, together with interest on these sums, is ordered under Article 3 of that decision.
6. The Portuguese Republic has also established, by decreto-lei n ° 4/99, of January 4, 1999 (Diário da República I, series A, n ° 2, of January 4, 1999 hereinafter the “decree-law of 1999 ‘), a moratorium extending by one year the repayment period for certain loans contracted by pig farms engaged in closed-cycle production, fattening and finishing, as well as short-term financing in favor of the said operations through subsidized loans. Although notified to the Commission, these measures were implemented before the latter pronounced on them.
7. This aid was declared incompatible with the common market and its recovery ordered by Commission Decision 2001/86 / EC of 4 October 2000 concerning the aid scheme implemented by Portugal in the pig sector ( OJ 2001, L 29, p. 49).
8. On 23 November 2001, the Portuguese Republic invited the Council of the European Union to adopt, on the basis of the third subparagraph of Article 88 (2) EC, a “decision authorizing it to grant aid to Portuguese pig farmers who must repay the aid received in 1994 and 1998 and [declaring] this aid compatible with the common market ‘.
9. Granting that request, the Council adopted the contested decision, Article 1 of which is worded as follows:
‘An extraordinary aid from the Portuguese government to the Portuguese pig sector consisting of granting aid to the beneficiaries referred to in the Commission decisions of 25 November 1999 and of 4 October 2000, for a maximum amount of 16 , EUR 3 million equivalent to the amounts that these beneficiaries will have to return by virtue of these decisions. ”
10. After having indicated the specific circumstances and the characteristics of the Portuguese pig sector which led the Portuguese Republic to adopt the decree-laws of 1994 and 1999, the grounds for the contested decision state, in point 9, that the aid instituted in by virtue of the said decree-laws, “[…] as the evolution of trade proves, did not have any particular impact on intra-community trade and, consequently, did not lead to any distortion of competition . ”
11. Under points 12 to 14 of the grounds for the contested decision:
‘(12) The Commission considered, in its decisions of 25 November 1999 and 4 October 2000, that the measures in question were not compatible with the common market. Pursuant to these decisions, a procedure to recover the aid granted was launched by the Portuguese authorities.
(13) However, the reimbursement of the aid granted compromises the economic viability of a good number of beneficiaries and would have a very negative social impact in certain regions, for example, 50% of pigs are concentrated in less than 5% of the territory.
(14) There are therefore exceptional circumstances which make it possible to consider this aid, by way of derogation and to the extent strictly necessary to redress the situation of imbalance observed, as compatible with the common market, under the conditions provided for in this Decision. ”
The action
12. The Commission puts forward five pleas in support of its action, alleging respectively the lack of jurisdiction of the Council, misuse of powers and procedure, breach of the EC Treaty and various general principles, manifest error assessment and lack of reasoning for the contested decision.
The first plea
Arguments of the parties
13. By its first plea, the Commission maintains that the Council did not have the power to adopt the contested decision. The reasoning it develops in this regard involves two stages.
14. First, the Commission maintains that the contested decision has effects identical to those which would be produced by revocation or annulment of Decisions 2000/200 and 2001/86, by which it declared the aid paid in under the decree-laws of 1994 and 1999 and ordered their recovery.
15. By authorizing the payment to the Portuguese breeders concerned of aid of an amount equivalent to that which they are required to repay by virtue of those Commission decisions, the contested decision nullified the effects of those decisions. It would have prevented the effective abolition of aid declared incompatible by the Commission, as well as the return to the status quo required by the first subparagraph of Article 88 (2) EC, in order to preserve the market from distortions of competition.
16. According to the Commission, the contested decision actually amounts to authorizing the initial aid, previously declared incompatible by that institution.
17. In the second place, the Commission maintains that it follows from the wording of Article 88 EC which the Treaty intended to confer on it, as a monopoly, the tasks of controlling and managing State aid. This is explained by the fact that only a body totally independent of the Member States is able to examine the aid measures adopted by them with the required objectivity and impartiality and to ensure that competition does not is not distorted to an extent contrary to the common interest.
18. As regards the power conferred on the Council by virtue of Article 88 (2) EC, it is of an exceptional nature, exorbitant from ordinary law. This is evidenced by both the wording of the third paragraph of that provision, which refers to ‘exceptional circumstances’, and that of its fourth paragraph, which provides for a period during which the request of the Member State suspends the procedure initiated before the Commission, period at the end of which the latter recovers its power to “rule”, that is to say to decide definitively on the aid concerned. Granting the Council such decision-making power, which, for a limited period of time, takes precedence over that of the Commission, would moreover be meaningless if the Council’s decision could,
19. According to the Commission, it follows that the Council does not have the power to adopt a decision on the basis of the third subparagraph of Article 88 (2) EC, where aid has been declared incompatible with the market common by a Commission decision. To that extent, the Council is also not competent to nullify the effects of such a decision, by authorizing the granting of aid intended to compensate, on the part of the beneficiaries of the aid thus declared incompatible, the reimbursement to which they are required by virtue of this decision.
20. The Council maintains, first, that the Commission’s reasoning is based entirely on the premiss that the contested decision annulled or revoked Decisions 2000/200 and 2001/86. However, the contested decision does not call into question the reimbursement obligations arising from those decisions, since it would, on the contrary, be within the framework of the full implementation of those decisions, and taking into account the economic and social consequences engendered by that decision. execution, which the Council has decided to authorize the new aid which the Portuguese Republic proposed to grant.
21. The classification as new aid depends in fact on formal and objective considerations. However, the aid authorized by the contested decision does indeed consist of a new payment, resulting from a national provision other than the decree-laws of 1994 and 1999, meeting eligibility and payment conditions different from those applicable to aid granted on the basis of these decree-laws.
22. According to the Council, the fact that the aid authorized by the contested decision constitutes new aid is also apparent from the definition of ‘new aid’ contained in Article 1 of Regulation (EC) No 659/1999 of Council of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 83, p. 1), a provision which in this regard refers to “any aid scheme or any individual aid which is not is not an existing aid, including any modification of an existing aid ‘. The concept of ‘existing’ aid implies that the aid in question has already been authorized, which is precisely not the case with the aid to which the contested decision relates.
23. Furthermore, the third subparagraph of Article 11 (2) of Regulation No 659/1999, which provides for the possibility of authorizing the Member State to accompany the repayment of illegal aid with the payment of aid rescue of the company concerned, would also confirm the possibility of adopting divergent decisions concerning State aid granted successively to the same operators. The same would apply to Community case law, which implicitly accepted that the Commission may make the payment of new aid declared compatible subject to the recovery of earlier aid declared incompatible (judgment of the General Court of 13 September 1995, TWD v Commission, T244 / 93 and T486 / 93, Rec. P. II2265, and judgment of the Court of 15 May 1997, TWD / Commission, C355 / 95 P, Rec. p. I2549).
24. Finally, the Council argues that neither the decisions of the Commission declaring aid incompatible with the common market nor any other text prohibit the recipients of such aid from receiving other aid in the a more or less near future. The principle of the individual examination of each successive aid should be respected in all circumstances (judgment of 23 November 2000, Wirtschaftsvereinigung Stahl and Others / Commission, C441 / 97 P, ECR I10293, paragraph 55). If the contested decision had not been taken, the aid which it authorized, which, moreover, would have been notified to the Commission by the Portuguese Republic, should have been examined by that institution and given rise to a decision by the latter. .
25. As regards, secondly, the scope of Article 88 (2) EC, the Council considers that the three-month period mentioned in the fourth subparagraph of that provision is provided for simple purposes of suspension. It follows that the Council would remain free to authorize the aid concerned notwithstanding the expiry of that period.
26. As regards the conflict likely to arise in this regard between an earlier Commission decision finding aid incompatible with the common market and a subsequent Council decision authorizing that aid, the latter maintains that the applicable principle in the presence of incompatible standards is, in the absence of a hierarchy between them,
27. The Portuguese Republic essentially shares the Council’s analysis. The aid authorized by the contested decision is new aid, distinct from that instituted by the decree-laws of 1994 and 1999, having been notified to the Commission in this regard. That Member State adds that the fact that the third subparagraph of Article 88 (2) EC vests the Council with the power to rule not only on aid ‘to be instituted’, but also on aid ‘instituted’, confirms that that The latter is empowered to authorize aid even though the Commission has already pronounced on it. It follows from paragraph 3 of the same article that any grant or “institution” of aid requires a prior examination of it by the Commission, so that the
Findings of the Court
28. In order to rule on the first plea put forward by the Commission in support of its action, it is necessary, first of all, to determine whether, as the Commission maintains, Article 88 (2), EC must be interpreted as meaning that, once the Commission has adopted a decision finding that State aid is incompatible with the common market, the Council is no longer authorized to decide, on the basis of the third paragraph of that provision, that the aid must be regarded as compatible with the common market.
29. In this regard, it should first of all be recalled that the Treaty, by organizing by Article 88 EC the permanent examination and control of aid by that institution, intends that the recognition of the possible incompatibility aid with the common market results, under the supervision of the General Court and the Court, from an appropriate procedure the implementation of which is the responsibility of the Commission. Articles 87 EC and 88 EC thus reserve for the latter a central role in the recognition of the possible incompatibility of aid (see, in particular, judgment of 21 November 1991, National Federation of Foreign Trade in Food Products and National Union of salmon traders and processors, C354 / 90, Rec. p. I-5505, points 9 and 14).
30. Next, it should be noted that, as is apparent from the actual wording of the third subparagraph of Article 88 (2) EC, that provision relates to an exceptional and particular case (judgment of 12 October 1978, Commission / Belgium, 156/77, ECR 1881, point 16). According to that provision, in fact, the Council, acting unanimously “at the request of a Member State”, may decide that aid, instituted or to be instituted by that State, must be regarded as compatible with the common market. “Notwithstanding the provisions of section 87 or the regulations provided for in section 89”, if “exceptional circumstances” justify such a decision.
31. It follows that the power vested in the Council by the third subparagraph of Article 88 (2) EC is clearly, as the Commission rightly submits, of an exceptional nature.
32. In such a context, it must be accepted that the details appearing in Article 88 (2), third and fourth subparagraphs, according to which, on the one hand, referral to the Council by a Member State suspends the examination in progress at the within the Commission for a period of three months and, on the other hand, in the absence of a decision by the Council within this period, the Commission shall act, indicate that, when the said period has expired, the Council is no longer competent to adopt a decision under the said third subparagraph with regard to the aid concerned. Decision-making, the device of which would prove to be contradictory, is thus avoided.
33. The enactment of such a temporal limitation on the competence of the Council when the Commission has already initiated the procedure referred to in the first subparagraph of Article 88 (2) EC, without however having yet adopted a decision declaring the aid incompatible with the common market, and the fact that the Commission alone retains, at the end of the three-month period referred to in the fourth paragraph of that provision, the power to rule on the aid concerned, also indicate that, if no request is made was sent to the Council by the Member State concerned, on the basis of the third subparagraph of Article 88 (2) EC, before the Commission declared theaid in question incompatible with the common market and thus terminates the procedure referred to in the first paragraph of the same provision, the Council is no longer authorized to exercise the exceptional power conferred on it by the said third paragraph for the purposes of declaring such aid compatible with the common market.
34. It can be observed in this last regard that, in the case which gave rise to the judgment of 29 February 1996, Commission / Council (C122 / 94, ECR I881), the contested decision of the Council did not not following a Commission decision declaring aid incompatible with the common market, the latter having in this case confined itself to taking the view, on the basis of Article 88 (3) EC, that the proposed aid in question was not compatible with the common market and to initiate the procedure provided for in the first subparagraph of paragraph 2 of that article.
35. Finally, it may be noted that the interpretation adopted in paragraphs 32 and 33 of this judgment, which makes it possible to prevent the same State aid from being the subject of contrary decisions taken successively by the Commission and the Council, contributes, as the Commission has rightly argued, to legal certainty. Indeed, it is particularly important to recall in this regard that the final character of an administrative decision, acquired at the expiration of reasonable appeal periods or by the exhaustion of the means of appeal, contributes to said security (judgment of 13 January 2004, Kühne & Heitz, C453 / 00, not yet published in the Reports, point 24).
36. As regards the Portuguese Government’s argument based on the fact that the third subparagraph of Article 88 (2) EC also authorizes the Council to rule on aid ‘instituted’, whereas it follows from the paragraph 3 of this article that any “institution” of aid would require precisely that the Commission has ruled on it beforehand, so that the Council would have the power to rule on aid which has been the subject of aid. a previous Commission decision, it must be held that it stems from a contradiction in terms. It cannot be argued concomitantly that aid ‘instituted’ within the meaning of the third subparagraph of Article 88 (2),
37. Secondly, it is for the Court to verify whether the fact that the Council does not have the power to rule on the compatibility with the common market of aid on which the Commission has already given a final ruling implies, as the latter maintains, that the Council also has no jurisdiction to rule on aid the object of which is to grant to the beneficiaries of unlawful aid previously declared incompatible by a Commission decision, an amount intended to compensate the reimbursements to which they are required in application of this decision.
38. In that regard, it should be noted, first of all, that, contrary to what the Council maintains, it cannot be inferred from the case-law of the Court that, in the presence of such aid, the Community institutions retain full freedom to rule without being required to have due regard to the Commission’s previous decision establishing the incompatibility of the aid initially granted to those concerned.
39. On the contrary, the Court held that, when the Commission examines the compatibility of State aid with the common market, that institution must take into account all the relevant elements, including, appropriate, the context already assessed in a previous decision as well as the obligations which that decision may have imposed on a Member State (see, in particular, judgments of 3 October 1991, Italy / Commission, C261 / 89, ECR I4437, point 20, and TWD / Commission, cited above, paragraph 26). The Court deduced from this in particular that, when no new evidence was presented to the Commission enabling it to assess whether the aid in question could benefit from a derogation under the Treaty, that derogation is justified. its decision on the assessments that
40. The Court has similarly held that a transitional scheme maintaining the effects of a State aid scheme not notified to the Commission and declared incompatible with Community law by a decision of the latter – without, however, that this institution demanded the recovery of the aid concerned – should, as far as possible, be interpreted in a way that ensures its compatibility with this decision, that is to say in the sense that a such transitional regime does not authorize the granting of new state aid after the repeal of the aid scheme sanctioned by the said Commission decision (order of 24 July 2003, Sicilcassa and others, C297 / 01, Rec. p . I7849, point 44).
41. Next, it should be recalled that, according to settled case-law, the withdrawal of State aid, unlawfully granted, by way of recovery is the logical consequence of the finding of its illegality (see, in particular, judgments of the 21 March 1990, Belgium / Commission, known as “Tubemeuse”, C142 / 87, ECR I959, point 66, and of 7 March 2002, Italy / Commission, C310 / 99, ECR I2289, point 98).
42. The obligation for the Member State to abolish aid considered by the Commission to be incompatible with the common market is in fact aimed at restoring the previous situation and this objective is achieved as soon as the aid in question, increased if necessary by default interest, have been returned by the beneficiary. By this refund, the latter loses the advantage which it had enjoyed on the market over its competitors and the situation prior to the payment of the aid is re-established (see, in particular, judgments of 4 April 1995, Commission / Italy, C350 / 93, ECR I699, points 21 and 22, and of 7 March 2002, Italy / Commission, cited above, points 98 and 99).
43. In these circumstances, accept that a Member State may grant to the beneficiaries of illegal aid, previously declared incompatible with the common market by a Commission decision, new aid of an amount equivalent to that of the aid unlawful act, intended to neutralize the impact of the reimbursements to which the latter are required pursuant to that decision, would clearly undermine the effectiveness of the decisions taken by the Commission under Articles 87 EC and 88 EC (see , by analogy, judgments of 20 September 1990, Commission / Germany, C5 / 89, ECR I3437, paragraph 17, and of 7 March 2002, Italy / Commission, cited above, paragraph 104).
44. Finally, it should be recalled that, as is apparent from paragraphs 33 and 35 of this judgment, since a decision finding aid incompatible with the common market was adopted by the Commission, the Conseil cannot paralyze the effectiveness of that decision by itself declaring the aid compatible with the common market on the basis of the third subparagraph of Article 88 (2) EC.
45. It follows that the Council cannot undermine the effectiveness of such a decision either by declaring compatible with the common market, under that provision, aid intended to compensate, for the benefit of the beneficiaries of the unlawful aid declared incompatible by the Commission,
46. ​​Moreover, it must be admitted that, in such circumstances, the aid granted in the second place is so inextricably linked to that whose incompatibility with the common market was previously found by the Commission that it appears largely artificial to claim to make a distinction between that aid for the purposes of the application of Article 88 (2) EC.
47. It follows from all the foregoing considerations that the third subparagraph of Article 88 (2) EC must be interpreted as meaning that the Council cannot, on the basis of that provision, validly declare compatible with the market common aid the object of which is to grant to the beneficiaries of illegal aid previously declared incompatible with the common market by a Commission decision, an amount intended to compensate for the repayments to which they are required pursuant to that decision.
48. As regards the present case, it is common ground that the Portuguese Republic has not referred to the Council a request, submitted on the basis of the third subparagraph of Article 88 (2) EC, for the purposes of ” obtain that the aid instituted by the decree-laws of 1994 and 1999 be declared compatible with the common market. It is also common ground that that aid was declared incompatible with the common market and that their recovery was ordered by Decisions 2000/200 and 2001/86.
49. As regards the contested decision, it must be observed that it is clear from the very terms of its title and from those of Article 1 that the aid which it intended to declare compatible with the common market had the specific object of grant beneficiaries of aid previously declared incompatible with the said market, by decisions 2000/200 and 2001/86, an amount intended to enable them to meet the repayments to which they are required under these two decisions.
50. As is apparent from paragraph 47 of this judgment, the Council could not validly adopt a decision such as the one contested.
51. It follows that the first plea in law put forward by the Commission in support of its action, alleging that the Council lacks competence to adopt the contested decision, is well founded and that it must, therefore, be annulled.
The second, third, fourth and fifth pleas
52. Since the Commission’s first plea has been upheld and the contested decision must be annulled on that head, it is not necessary to examine the other pleas relied on by the Commission in support of his appeal.
Decision on costs

Costs
53. Under Article 69 (2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs, if they are applied for. Since the Commission has applied for order against the Council and the Council has failed in its submissions, it must be ordered to pay the costs. In accordance with the first subparagraph of Article 69 (4) of the same regulations, the Portuguese Republic and the French Republic are to bear their own costs.
Operative part

For these reasons,
THE COURT (plenary assembly)
hereby declares and adopts:
1) Council Decision 2002/114 / EC of 21 January 2002 concerning the authorization to grant aid by the Government of Portugal to pig farmers Portuguese beneficiaries of the measures granted in 1994 and 1998, is canceled.
2) The Council of the European Union is ordered to pay the costs.
3. Orders the Portuguese Republic and the French Republic to bear their own costs.

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