Opinion of Mr Advocate General Lenz
Mr President,
Members of the Court,
The key question in the case on which I am to deliver my Opinion today is whether the subscription of additional capital by State authorities to an industrial undertaking can be regarded as aid within the meaning of Article 92 of the EEC Treaty.
1. Meura SA, a mechanical engineering company, was founded in 1845 at Tournai (Belgium). Until it was declared insolvent in January 1986 Meura SA chiefly produced equipment for the food industry, in particular tanks for the storage of beer. In addition, the undertaking manufactured steam generators and other engineering products.
3. In its decision of 17 April 1984, which is contested in these proceedings, the Commission stated, in particular, that the aid granted by the Belgian Government in June 1982 to an undertaking manufacturing equipment for the food industry was incompatible with the common market within the meaning of Article 92 of the EEC Treaty and must therefore be abolished.
4. The Belgian Government considers the Commission's decision to be unlawful on several grounds.
5. At the Court's request, the Belgian Government produced further details concerning Meura's output in value terms and the distribution of its products with respect to the various markets. In addition, the Belgian Government produced a plan for the restructuring of the undertaking dating from 1982.
1. The question whether the contested capital holding constitutes an aid within the meaning of Article 92 of the EEC Treaty
Since, during the oral proceedings, the Belgian Government, on the basis of the judgment in Case 52/84, withdrew the argument that it was legally impossible for it to comply with the Commission's decision, the following three claims of the Belgian Government still have to be considered:
The contested holding does not constitute an aid within the meaning of Article 92 (1) of the EEC Treaty (the first claim);
The decision has an inadequate statement of reasons, in so far as it does not establish in what respect the contested capital holdings affect trade between the Member States and distort competition (the second claim);
Infringement of the right to a fair hearing in so far as the Commission did not give the Belgian Government access to the submissions of the Member States, the trade associations and the undertakings which took part in the administrative procedure (the fourth claim).
Furthermore, consideration should be given to whether the derogation provided for in Article 92 (3) of the EEC Treaty applies. The Belgian Government did not make an express claim to that effect but it can be inferred from its argument that it should also be considered whether the contested capital holding can be regarded as being compatible with the common market (the third claim).
1. The question whether the contested capital holding constitutes an aid within the meaning of Article 92 of the EEC Treaty
Before the Region of Wallonia first acquired a participation in the undertaking in 1979, its capital amounted to BFR 4 million; as a result of the acquisition of that holding the corporate capital was raised to BFR 44 million.
Against that, the undertaking's losses totalled about BFR 95 million. Further losses of BFR 95 million resulted in the undertaking's having an aggregate deficit of BFR 180 million by August 1980. It was only by revaluing the undertaking's immovable property and constituting reserves in the balance sheet in 1980 that the capital could be brought to BFR 180 million, which, however, was at the same time reduced to nil in order to offset the accumulated aggregate deficit.
In order to procure the working capital to allow the undertaking to continue in business, the public authorities subscribed additional new capital of BFR 150 million.
Consequently, the position of the undertaking on the first two occasions when the Belgian public authorities subscribed new capital was as follows:
The figures given show that in 1979 and 1980 alike the undertaking concerned was in a situation which should have led to its liquidation. Only the State measures, namely capital injections and guarantees, enabled it to survive.
Despite the State intervention further losses were incurred in 1980 to 1982 of BFR 20, 33 and 91 million respectively.
As a result the second injection of capital by the public authorities of BFR 150 million was also largely exhausted.
In that situation the public authorities decided to subscribe additional capital of BFR 145 million. It was at this point that the Commission became involved for the first time and found the increase in capital to be aid, on the ground that the undertaking's financial position constituted an impediment which made it improbable that it would have been able to procure the sums necessary for its continued existence on the private capital markets. The Commission supported this contention with details of the development of the undertaking's capital and of its operating results.
That picture is confirmed by the documents which the Belgian Government has produced at the Court's request. The Commission's conclusion that the undertaking would have been unable to procure the necessary finance on the private capital market is incontestable in view of the evolution of the undertaking's operating results. It follows that the Commission was entitled to regard the capital increase planned in 1982 as aid.
2. The question whether the contested aid affects trade between Member States and distorts competition
Since the granting of aid, in particular in the form of the acquisition of holdings by the State or public bodies, cannot be viewed as being automatically contrary to the Treaty, it must now be examined whether the aid in question conflicts with Article 92 (1) of the Treaty. In particular, it must be considered whether the aid distorts or threatens to distort competition and whether it affects trade between Member States.
No evidence is given of the market share of the undertaking in question and of trade patterns in the products concerned.
Although the Commission certainly was not obliged to set out in its decision all the details bearing on its finding, it was under a duty to provide the main reasons for its decision. The Commission has fulfilled this requirement by providing the minimum permissible amount of information.
The parties agree that the undertaking in question exported a substantial proportion of its output. The Belgian Government referred to that fact in order to substantiate its restructuring plan.
The Commission considered it proven that the undertaking in question exported 40% of its products to other Member States of the Community. As a result, it was entitled to assume that artificially keeping Meura SA in existence was in itself bound to distort competition and affect trade between Member States. Since the granting of the aid resulted in a diminution of the financial burden on the undertaking and hence gave it an advantage over its competitors it must be assumed in case of doubt that that was liable to distort competition. Had the undertaking concerned not been kept in existence artificially, its competitors, which had received no comparable aid, would have been able to take over its market share both in Belgium and in other Member States.
The Commission's decision would certainly have been clearer and plainer had it included particulars of the volume of business conducted by Meura SA in absolute terms and of its market share in Belgium and in the Community. However, I do not consider such particulars to have been absolutely essential in order to reach the finding made in the contested decision. Unlike in the case of the Commission's two decisions of 22 July 1982 which resulted in the judgments of the Court of 14 November 1984 and 13 March 1985 (Case 323/82 and Joined Cases 296 and 318/82, respectively), the Commission did at least set out in the decision contested in these proceedings the undertaking's share of intra-Community trade. Where an undertaking participating in intra-Community trade receives aid not received by competitors, it is possible to conclude as a result that intra-Community trade is affected and competition distorted by that aid.
That the undertaking concerned is relatively small does not alter that basic finding. Admittedly, the principle of perceptibility was employed in the Court's previous decisions on cartel law. According to those decisions, the prohibition laid down in Article 85 of the EEC Treaty cannot apply, despite the presence of the factual criteria laid down in Article 85, where, having regard to the weak position of the parties concerned, their cartel agreement cannot be detrimental to the aims of a single market between Member States.
To date, the Court has not recognized the existence of such a principle in the sector of State aid. In my view, to adopt such a principle in the context of the aid review procedure would not be appropriate, since State aid disrupts the system of undistorted competition which is sought by the Treaty (Article 3 (f) of the EEC Treaty). Given, in addition, that under Article 5 of the EEC Treaty the Member States are obliged to facilitate the achievement of the Community's tasks, there are, in principle, good grounds for subjecting their conduct to a stricter standard than the conduct of undertakings. Furthermore, there is nothing in the wording of Article 92 of the EEC Treaty to suggest that minor distortions of competition should not be subject to the incompatibility rule. Also in the light of the extensive derogations from the prohibition on aid which are set out in Article 92 (2) to (4) of the EEC Treaty it appears appropriate to treat all distortions of competition as relevant irrespective of their degree.
Since aid consists in the granting of advantages to which the recipient undertaking would normally have no claim, it must be assumed in case of doubt that they improve the competitiveness of the recipient undertaking vis-à-vis competitors which receive no similar grants, and hence distort competition. Since, as a result, aid artificially improves the situation of the recipient undertaking, it must further be assumed in case of doubt that they also affect trade between Member States. In view of this very strong presumption, excessively strict requirements should not be placed on the Commission with regard to its duty to provide explanations and reasons, once it is found that an aid has been granted.
In the result, therefore, I consider that the Commission has provided sufficient evidence and reasons for its decision that the contested aid distorts competition and affects trade between Member States.
Although, in view of its contention that the contested capital holding does not constitute aid, the Belgian Government did not expressly argue that Article 92 (3) of the EEC Treaty had been infringed, I consider it to be necessary to examine that derogation.
Elsewhere in the decision the Commission stated that the Belgian Government has been unable to give, or the Commission to discover, any justification for a finding that the aid in question fell within one of the categories of exemptions provided for in Article 92 (3).
That explanation might make it seem possible to draw the conclusion — which the Belgian Government draws with reference to the judgment of the Court of 13 March 1985 in Joined Cases 296 and 318/82 — that the Commission failed to take sufficiently into account an important factor which might possibly have led to a different assessment, that is to say that the aid in question was related to the restructuring of the recipient undertaking.
In the event that this should be the case the contested decision would have to be declared void in the same way as the decision which resulted in the judgment of 13 March 1985 in Joined Cases 296 and 318/82.
Although the Belgian Government did notify the Commission of the existence of the restructuring plan in 1982 it did not provide any further details. During the procedure before the Court the plan was explained in somewhat more detail for the first time in a footnote to the reply, and it was only at the Court's express request that it was finally produced. That circumstance itself, in conjunction with the undertaking's actual record of repeated losses and, eventually, insolvency, suggests that the so-called restructuring programme cannot have been a viable concept. If a closer look is taken at the 1982 plan it can be seen that in fact it consists mainly of declarations of intent, wishes for the future development of the undertaking and its market situation, and appeals to the management and staff.
However, where the plan does contain concrete data it dwells mainly on the undertaking's need for more capital. In the report on the planned measures which was submitted by the SRIW to the Region of Wallonia it is stated that in normal circumstances the implementation of the restructuring plan would require the active collaboration of a capable industrial partner, who would have to enter into a substantial commitment, particularly from the financial point of view. Nevertheless, owing to social conditions and the magnitude of the Region of Wallonia's commitment to the undertaking it was not possible to prepare for such a step in time; consequently, the plan put forward by the undertaking — involving the subscription of capital by the public authorities — should be supported. Negotiations were being conducted with various undertakings with a view to achieving a joint marketing strategy; however, given Meura SA's current situation, negotiations with one of those undertakings with a view to its acquiring a financial stake in the undertaking offered no prospect of success.
However, in my view it is unnecessary to examine this plan in more detail since the Belgian Government has not seriously contested the Commission's assessment that the plan contains no viable restructuring concept.
The Commission was therefore entitled to conclude that the aid granted by the Belgian Government could not be regarded as being compatible with the common market within the meaning of Article 92 (3) of the EEC Treaty. That finding is not altered by the fact that the Commission did not have knowledge of the details of the plan drawn up in 1982 until the Court proceedings and therefore could not take account of the details of the plan in its decision.
The Belgian Government failed to inform the Commission of the aid in accordance with Article 93 (3) and subsequently to submit the plan spontaneously. Accordingly, it failed to fulfil its duties under the aid-review procedure. If the Commission, although lacking full information, took a substantively correct decision, it cannot be reproached with having failed to take account in its decision of documents which were withheld from it. Since, moreover, Article 92 (3) of the EEC Treaty constitutes an exception to the principle that aid is not permissible, it can properly be argued that the party wishing to invoke that exception — the Belgian Government in this case — must, even at the stage of the administrative procedure, make extensive notification of all the details which might warrant the application of the derogation.
Consequently, there are no grounds casting doubt on the lawfulness of the Commission's finding that the aid granted by authorities of the Belgian State could not be regarded as compatible with the common market under Article 92 (3) of the EEC Treaty.
4. Infringement of the right to a fair hearing
However, it does not follow that the Member State concerned has in every case the right to examine the submissions made to the Commission. In fact, in the event the Commission may be debarred from disclosing certain communications on the ground of confidentiality pursuant to the principle of official secrecy laid down in Article 214 of the EEC Treaty. However, the corollary of that is simply that the Commission cannot rely on such communications in the administrative procedure and that since they were not disclosed to the persons concerned they cannot be used as grounds for its decision.
The Commission's contention that in the absence of legislation governing the right to inspect documents in the context of the aid procedure there can be no such right is certainly not correct at that level of generality, since the right to information about the subject-matter of the charge arises simply out of the right to a fair hearing. The Belgian Government stated in the course of the oral proceedings that it was treated worse than a nonmember country would be treated under Regulation No 2176/84 (antidumping or anti-subsidy procedure). Consequently the question of the application of that regulation by analogy might arise.
In the result, however, I consider that it is not necessary to resolve this issue definitively even if reliance is not placed on the fact that, as the Belgian Government itself admitted during the oral proceedings, it never applied to the Commission to examine the documents in question.
The Commission decision refers to the submissions of the other parties involved in the procedure only in so far as it states that the latter share the Commission's reservations about the aid. The fact that some of the participants shared the Commission's reservations is certainly not a matter on which the Belgian Government should have been heard. Rather, it constitutes an assessment of facts of which the Belgian Government was in any case aware.
As a result, the contested decision is not based on the views submitted to the Commission by the other participants mentioned. The participants' submissions were of significance, at most, in so far as they may have reinforced the Commission's view with regard to the legal assessment of the conduct of the Belgian Government. However, it is not apparent that the Belgian Government's interests were adversely affected by the withholding of the participants' submissions, since the facts on which the Commission's decision were based were fully known to the Belgian Government: the export business of Meura SA, Meura SA's losses and the fact that those losses were offset by State authorities.
In the light of the foregoing I propose that the Court should dismiss the application and order the applicant to pay the Commission's costs.
1 Translated from the German.
2 Official Journal 1984, L 276, p. 34.
3 This footnote in the original text of the Advocate General's Opinion solely concerns the wording of the German version of the Commission decision. It is not relevant to the English version of the decision.
4 Judgment of 15 January 1986 in Case 52/84 Commission v Belgium, [1986] ECR 89.
5 Judgment of 14 November 1984 in Case 323/82 SA Intermillsv Commission [1984] ECR 3809.
6 Judgment of 23 February 1961 in Cast 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v High Authority of the European Coal and Steel Community [1961] ECR 1, at p. 19.
7 Judgment of of 22 March 1977 in Case 78/76 Firma Steinike und Weinlig v Federal Republic of Germanym [1977] ECR 595.
8 Judgment of 2 July 1974 in Case 173/73 Italian Government v Co mmission of the European Communities [1974] ECR 709.
9 Commission Directive of 25 June 1980 on the transparency of financial relations between Member States and public undertakings, Official Journal 1980, L 195, p. 35.
10 Judgment of 6 July 1982 in Joined Cases 188 to 190/80 French Republic, Italian Republic and United Kingdom of Great Britain and Northern Ireland v Commission of the European Communities [1982] ECR 2545.
11 Judgment of 2 July 1974 in Case 173/73 loc. cit., paragraph
12 These figures— including the calculations — are taken from the 1982 restructuring plan.
13 Judgment of 14 November 1984 in Case 323/82 SA Intermills v Commission [1984] ECR 3809.
14 Judgment of 13 March 1985 in Joined Cases 296 and 318/82 Kingdom of the Netherlands and Leeuwarder Papierwarenfabrik BVw Commission [1985] ECR 809.
15 See for example the judgment of 9 July 1969 in Case 5/69 Franz Võik w SPRL Etablissements J- Vervaecke [i969] ECR 295, and the judgment of 6 May 1971 in Case 1/71 SA Cadillon v Firma Hass Maschinenbau KG [1971] ECR 351.
16 Judgment of 17 September 1980 in Case 730/79 Philip Morris Holland BV v Commission [1980] ECR 2671, at p. 2691 et seq.
17 Council Regulation (EEC) No 2176/84 of 23 July 1984 on protection against dumped or subsidized imports from countries not members of the European Economic Community, Official Journal 1984, L 201, p. 1.
18 Judgment of 13 February 1979 in Case 85/76 Hojfinann-La Roche & Co. AG v Commission of the European Commitniliet [1979] ECR 461, at p. 510 et seq. (competition procedure).
19 Jugment of 20 March 1985 in Case 264/82 Tmex Corporation and Others v Council and Commission [1985] ECR 849 (antidumping procedure).
20 See my Opinion of 22 January 1986 in Case 53/85 AKZO Chemie v Commission [1986] ECR 1965.
21 See the judgment of 13 February 1979 in Case 85/76 loc. cit., at p. 512 et seq. (paragraph 14).