Opinion of Mr Advocate General Lenz

Mr President,

Members of the Court,

The action on which I am giving my views today centres on the question whether the Kingdom of Belgium has failed to fulfil an obligation under the EEC Treaty by not complying with Commission Decision No 83/130/EEC of 16 February 1983 on aid granted by the Belgian Government to a firm manufacturing ceramic sanitary ware.

1. Since 1979 a public regional holding company in Wallonia (Belgium) has been the main shareholder of Boch SA, a firm manufacturing ceramic sanitary ware. On 3 August 1981 the region decided to take a share amounting to BFR 475 million in a new capital issue. This investment of capital by a public body in an undertaking which had been operating at a heavy loss over a number of years and which consequently found itself in serious financial difficulties was designed to assist it in reconstituting its capital and reserves and to enable it to continue operating until a reconstruction plan for the ceramics industry had been formulated.

2. The applicant claims that the Court should:

3. (a) The applicant observes that, in the course of the procedure under Article 93 (2) of the EEC Treaty, it established that the contested aid was incompatible with the common market within the meaning of Article 92. It was therefore obliged, in accordance with the first paragraph of Article 93 (2), to require the Kingdom of Belgium to abolish or alter the aid within a period to be determined by the Commission. The applicant adds that under Article 189 of the EEC Treaty a decision is binding in its entirety upon those to whom it is addressed. By the date on which the action was brought the defendant had still not complied with the decision communicated to it by letter of 24 February 1983, and at no time had it indicated the slightest intention of doing so. It had on the contrary granted the undertaking in question further aid in 1983 without notifying the applicant. Furthermore, a Member State to which the Commission has addressed a decision pursuant to Article 93 (2) of the Treaty is precluded from challenging the validity of such a decision in legal proceedings instituted by the Commission under the second subparagraph of Article 93 (2) of the Treaty if that State has allowed the period permitted under the third paragraph of Article 173 to elapse without contesting the legality of the decision in the manner prescribed by that provision. The applicant observes that the defendant may not plead provisions, practices or circumstances existing in its internal legal system in order to justify a failure to observe obligations arising from Community decisions. According to the applicant, the content of the defendant's obligations is entirely clear, and the aid whose abolition is demanded by the Commission is readily identifiable since it involves a specific grant of BFR 475 million in the form of the acquisition of a holding in the capital of the undertaking in question by a public body. (b) The defendant reaffirms that it was not in breach of its obligations under Article 93 (2) of the EEC Treaty by failing to give effect to Article 1 of the decision of 16 February 1983.

1. Is the decision of 16 February 1983 sufficiently specific?

In setting out my views on this case I consider it appropriate to begin by clarifying the precise subject-matter of this dispute.

Since the defendant did not challenge the applicant's decision of 16 February 1983 within the period prescribed by the third paragraph of Article 173 of the Treaty, the decision became unassailable. It is clear from the previous decisions of the Court that the defendant may not thereafter challenge the legality of the applicant's decision. The defendant's submissions as to (a) whether the acquisition by a State of a holding in a company's capital constitutes aid; (b) whether the applicant should have been informed before the holding was acquired; and (c) whether such aid could have been regarded as compatible with the common market under Article 92 (3) of the Treaty, can no longer be considered in the present proceedings; the defendant's arguments on those points must therefore be disregarded.

All that remains to be considered is whether the applicant's decision was sufficiently specific to be complied with, and whether it was legally possible for the defendant to take the action required by the decision.

Of course, there are undoubtedly arguments which could be used to show that those two questions should have been raised by the defendant in legal proceedings for a review of the legality of the applicant's decision of 16 February 1983. However, in its judgments of 12 July 1973 in Case 70/72 and 15 November 1983 in Case 52/83, the Court of Justice considered whether the relevant Commission decisions were sufficiently specific even though, in each case, the decision had not been disputed by the defendant.

In his Opinion in Case 52/83, Mr Advocate General Mancini described the Court as having, in its judgment of 12 July 1973 in Case 70/72, treated the imprecision of the applicant's decision as providing exonerating circumstances which dispensed the defendant from compliance therewith.

I, too, am familiar with the legal concept of a void administrative act, since that concept also exists in German administrative law. Unlike a merely unlawful administrative act, which must be challenged if it is not to be complied with, such an act need not be contested, because, being void, it is without legal effect.

Further to those considerations I do not, in any event, consider it inconceivable that a State should refuse to comply with an unassailable decision of a Community institution (such as this one) on the ground that it is not sufficiently specific to be complied with or requires action which is legally impossible. The result of that would be that void decisions of that nature would have no legal effect despite not having been contested within the two-month period provided by the third paragraph of Article 173 of the EEC Treaty.

1. Is the decision of 16 February 1983 sufficiently specific?

In the authentic language versions, Article 1 of the decision of 16 February 1983 reads as follows :

The first paragraph of Article 93 (2) of the EEC Treaty provides as follows:

In its decision of 16 February 1983 the applicant found that certain specificially identified aid was incompatible with the common market and ordered one of the two courses of action prescribed by the EEC Treaty. The particular measure which the applicant regards as a prohibited form of aid is unequivocally identified in the decision. Equally unequivocal is the course of action prescribed by the applicant, namely the withdrawal of the capital injected into the undertaking in breach of both the substantive and the procedural provisions on aid in the EEC Treaty.

The finding that the holding constitutes aid which is incompatible with the common market is part of the unassailable decision adopted by the applicant and may thus no longer be contested. Merely as a reminder, however, it should be pointed out that the Court of Justice, in its judgment of 14 November 1984 in Case 323/82, confirmed that the acquisition of a holding in the capital of an undertaking may be regarded as aid. In paragraph 31 of the decision the Court held as follows:

It should also be remembered that the applicant is, at the very least, authorized to order that the illegal aid be reclaimed, and I would go so far as to say that it is obliged to do so. As long ago as 12 July 1973, in its judgment in Case 70/72 (cited earlier), the Court confirmed that principle and held, in paragraph 13 of the judgment, that:

Since the defendant has also cited that judgment as support for its assertion that it is not required to comply with the applicant's decision, it should further be stated that the Commission Decision of 17 February 1971, which is the subject of that judgment, is not comparable with the Commission Decision of 16 February 1983.

Article 1 of the decision of 17 February 1971 regarding the subsidies granted under Article 32 of the Law on the Adaptation and Rationalization of the German Mining Industry and Mining Regions required the Federal Republic of Germany to take without delay all necessary measures to put an end to the awarding of investment grants on a nonselective basis.

That decision was indeed ill-defined, in the sense that all necessary measures had to be taken to put an end to the awarding of investment grants on a nonselective basis. The applicant had failed to explain what measures had to be adopted and what was meant by the award of grants on a nonselective basis. For those reasons the Court in its judgment concluded that, in viewof the uncertainty over one of the essential points of the prohibition issued by the Commission, the German authorities could not be criticized for having taken account of the legitimate interests of investors — even in areas which later became ineligible for aid.

The circumstances of the present case, however, are quite different, because the particular measure which is to be revoked is clearly defined, and because the abolition of the aid can only mean the return to the investor of the capital unlawfully invested.

The fact that in other cases cited by the defendant the abolition of the aid took a different form does nothing to change that conclusion. In those other cases — unlike the present one — the defendant had negotiated an agreement with the applicant on the abolition arrangements.

The defendant's final submission is that the applicant merely required the aid to be abolished; it did not call for the closure of the undertaking which had received the aid. Since, however, the abolition of the aid would necessarily result in the closure of the undertaking, the defendant claims that the applicant cannot have been contemplating the return of the invested capital to the investor.

It is certainly corrrect that the applicant did not order the closure of the undertaking; indeed it was not authorized to do so.

The defendant's objection can therefore only be construed as meaning that the applicant was not aware of the economic consequences which the implementation of its decision would entail.

However, those consequences had been perfectly apparent to the applicant, as may be inferred from the preamble to its decision. There, the applicant makes the following statement:

The principle that, in an economic situation characterized by overcapacity, those undertakings which cannot survive in free-market conditions and cannot legitimately qualify for aid must, if need be, close down is precisely what underlies the EEC Treaty's general prohibition on aid.

In conclusion, I am of the opinion that it is not possible to uphold the defendant's objection that the applicant's decision of 16 February 1983 was not sufficiently specific and thus could not be complied with.

2. Was it legally impossible to give effect to the decision of 16 February 1983 ?

The defendant has submitted that it would be legally impossible to withdraw the State's capital holding in the undertaking in question by securing repayment of the capital to its investor. That is — it argues — precluded by the provisions of both domestic (Belgian) and Community law. Under both systems, distributions to shareholders may be made only from an undertaking's profits, of which there are none in this case.

The first observation to be made on that argument is that the introduction of capital into the undertaking was not only a procedural infringement of Article 93 (3) of the EEC Treaty but also a substantive infringement of Article 92 thereof.

Under Article 93 (3) even the proposal to grant the aid should have been notified to the applicant, and the proposal should not have been put into effect before the applicant had issued a final decision. The defendant was in breach of both obligations, with the result that the capital was introduced illegally.

Moreover, the aid was illegal on substantive grounds, because it was not compatible with the common market within the meaning of Article 92 of the Treaty. As has been explained on several occasions, that point is established by the unassailable Commission Decision of 16 February 1983.

As far as the recovery of the aid is concerned, the defendant invokes the Second Council Directive of 13 December 1976.

The defendant's line of argument does not carry conviction, however. It is true that the directive — particularly Articles 15 et seq. and 32 et seq. thereof — contains provisions for the protection of creditors of public limited liability companies. Thus, Article 15 prohibits distributions to shareholders if net assets would thereby fall below the amount of the subscribed capital. Under Article 32, in the event of a reduction in capital creditors must receive security for claims which have not fallen due, and no payment may be made to shareholders until the creditors have obtained satisfaction.

Those two provisions are undoubtedly based on the principle that the share capital of a public limited liability company has to serve as security for the creditors of the company, and therefore may not be reduced to their detriment. That rule does not, however, operate in the present case.

Article 15 governs distributions to shareholders, which may be paid only out of company profits. Since the undertaking concerned unquestionably has no profits at its disposal, there is no possibility of repaying the illegal capital holding by way of a distribution.

Article 32 cannot operate either, because the provisions on the reduction of capital can only refer to lawfully subscribed capital. However, since the present case concerns the recovery of capital unlawfully introduced, those provisions cannot operate in favour of the creditors of the company, because they are not entitled to demand the retention of unlawfully subscribed share capital as a security for their claims on the company.

The Second Council Directive admits of no other interpretation. A contrary interpretation would cast doubt on the validity of the directive, because it would then run counter to the provisions of Articles 92 and 93 of the EEC Treaty; Community institutions are prohibited from issuing rules of law which contradict the Treaty provisions or even impair their practical efficacy.

The defendant may not therefore plead the Second Council Directive of 13 December 1976 in order to evade the obligations incumbent upon it under Articles 92 and 93 of the Treaty.

The same is true of the submission that domestic law does not allow the aid to be recovered. In successive judgments the Court of Justice has held that a Member State may not plead provisions, practices or circumstances existing in its internal legal system in order to justify a failure to comply with its obligations arising under Community law.

The general plea of protecting innocent third parties — that is, the creditors of the undertaking — is equally unconvincing. The notion of protection may not be adduced in order to justify ex post facto an aid schemeadopted in breach of Community law. Should third parties have been harmed by the unlawful conduct of the Belgian authorities, they should be referred to the national courts and to the national provisions governing the liability of public bodies for unlawful acts.

I therefore propose that the Court should decide as follows:

1 Translated from the German.

2 Official Journal 1983, L 91, p. 32.

3 One of those aids is the subject of Case 40/85 Kingdom of Belgium v Commission.

4 ECSC, EEC and EAEC Commission: Second Report on Competition Policy (Annex to the Sixth General Report on the Activities of the European Communities) Brussels and Luxembourg, April 1973, paragraph 122 et seq.

5 Seventh Report on Competition, paragraph 232.

6 Official Journal 1977, L 26, p. 1.

7 Commissions Germany [1973] ECR 813.

8 See judgments of 15 November 1983 in Case 52/83 Commission v French Republic [1983] ECR 3707, and of 12 October 1978 in Case 156/77 Commission v Kingdom of Belgium [1978] ECR 1881.

9 Judgment of 14 November 1984, Case 323/82 Intermills SA v Commission [1984] ECR 3809.

10 Journal Officiel L 57, p. 19.

11 Second Council Directive No 77/91/EEC of 13 December 1976 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the. maintenance and alteration of their capital, with a view to making such safeguards equivalent (Official Journal 1977, L 26, p. 1).

12 See, for example, the judgment of 28 March 1985, Case 215/83 Commission v Kingdom of Belgium [1985] ECR 1045.