Opinion of Mr Advocate General Tesauro delivered on 19 September 1989

1 Original language Italian

2 It should be pointed out that the question of the consequences of aid granted in breach of Article 93(3) being unlawful per se has been raised by the Commission in a series of applications. See, in particular, the judgments of 14 February 1990 in Case C-301/87 France v Commission [1990] ECR I-307, of 10 May 1990 in Case C-61/88 Commission v France, not yet published, of 4 July 1990 in Case C-162/88 Commission v France, not yet published, of 4 July 1990 in Case C-294/88 Commission v Poclain SA and Tenneco Europe, not yet published, and the order of 17 March 1990 in Case C-303/88 Italy v Commission, not yet published.

3 According to the information supplied by the Commission, more than 100 cases of aid granted in breach of Article 93(3) were identified in the period between 1984 and 1988.

4 To all of that must be added the risk that, confronted with public grants in aid not effectively opposed at Community level, the other Member States will decide to intervene directly by granting similar benefits to undertakings in their own country.

5 That procedure, as the Court will be aware, takes place in two stages. The first, preliminary in nature, consists of a summary examination of the aid project of which notice has been given and is intended to determine whether the project is, prima facie, compatible with the common market or if, on the contrary, there is at least a reasonable doubt as to its compatibility. In that case, the Commission is required to proceed to the next stage and initiate the procedure under Article 93(2) under which the audi alteram partem principle is respected. It should be pointed out that the preliminary stage necessarily presupposes that notice has been given of the project. Within two months of notice being given (in accordance with the judgment of 11 December 1973 in Case 170/73 Lorenz v Germany [1973] ECR 1471), one month if the aid is involved is individual aid, the Commission must decide whether the Article 93(2) procedure should be initiated. However, when the Commission considers that the preliminary examination is sufficient to conclude that the aid is compatible with the common market, it may close the procedure without adopting any formal decision. I would point out, finally, that even if there has been no preliminary examination (because the aid was not properly notified to the Commission), the Article 93(2) procedure can still be initiated, either of the Commission's own motion or on the initiative of any interested party who has complained to the Commission about the granting of the aid.

6 Judgment of 15 July 1964 in Case 6/64 CoiM v ENEL [1964] ECR 585

7 Judgment of 9 October 1984 in Joined Cases 91/83 and 127/83 Heineken Browenjen BV v Inspecteurs der Vennootschapsbelasting [1984] ECR 3435

8 Order of 20 September 1973 in Case 171/83 R Commune v French Republic [1983] ECR 2621 ; Judgment of 11 December 1973 in Case 120/73 Cebr. Lorenz GmbH v Gfrma7ry [1973] ECR 1471

9 Judgment of 19 June 1973 in Case 77/72 Capolongo v Maya [1973] ECR 611.

10 Judgments of 11 December 1973 in Case 120/73 Gebr. Lorenz GmbH v Germany [1973] ECR 1471, of 11 December 1973 ¡n Casc 121/73 Markmann KG v Germany [1973] ECR 1495, of 11 December 1973 in Case 122/73 Nordsee, Deutsche Hochseefischerei GmbH v Germany [1973] ECR 1511 and of 11 December 1973 in Case 141/73 Lohrey v Germany [1973] ECR 1527.

11 Judgment of 22 March 1977 in Case 78/76 Steinike and Weinlig v Germany [1977] ECR 595.

12 Those points were analysed in detail at the 12th FIDE Congress (Paris, 1986), to the proceedings of which reference should be made for more precise information.

13 See Reports to the FIDE Congress, cited above, pp 205 and 296, and E. H. Pinackcr Hordijk: Judicial protection of private interests under the EEC competition rules relating to State aids, in Legal ttitiei of European integration, 1985/1, p. 67 (in particular, pp. 74 to 78)

14 See FIDE Reports, cited above in footnote 11, pp. 79 and 299.

15 See FIDE Reports, supra, p. 78.

16 See FIDE Repons, supra, p. 183; see also the decision of 24 January 1989 of the Italian Council of State which expressly refuses to recognize the direct effect of a Commission decision under Article 93(2).

17 Corte costituzionale, 9 April 1963, No 49, Foro italiano, 1963, I, 859 and 8 July 1969, No 120, ibid., 1969, I, 2069.

18 The Constitutional Court decided that the regional legislative bodies had exceeded the limits of the powers granted to them by failing to take account of the procedural requirements of Article 93(3) of the Treaty, which had been properly specified by the competent organs of the State.

19 See the note by J. Flynn: Can misapplication of a fiscal measure constitute State aid?1, in Eur. Law Rev., 1986, p. 232.

20 Reference may be made, by way of example, to administrative legal proceedings in Italy concerning certain provisions of Law No 64 of 1 March 1986 (laying down the basic rules on special intervention measures in the Mezzogiorno), which has given rise to various preliminary references currently pending before the Court of Justice. See also, in particular Lazio Tar, Sez. Ill, 22 January 1985, in Foro amministrativo, 1985, p. 941.

21 Judgment of 2 July 1974 in Case 173/73 Italy v Commission [1974] ECR 709

22 The Court pointed out in particular that the means of recourse open to the Commission are not restricted to the more complicated procedure under Article 169.

23 Sec A- Dashwood: Control of State aids in the EEC. prevention and cure under Article 93, CMLR, Vol 12, 1975

24 That application was granted by the Court by order of 20 September 1983, cued above (the Commission was subsequently able to withdraw its main application).

25 Judgment of 10 July 1986 in Case 234/84 Belgium v Commission [1986] ECR 2263; order of 6 February 1986 in Case 310/85 R Deufil GmbH & Co. KG v Commission [1986] ECR 537; judgment of 2 February 1989 in Case 94/87 Commission v Federal Republic of Germany [19891 ECR 175.

26 In both of those communications, the Commission specifically referred to the judgment in Capolongo on the direct effect of Article 93(3).

27 See the communication of 24 November 1983, cited above; The Commission therefore wishes to inform potential recipients of State aid of the risk attaching to any aid granted them illegally, in that any recipient of an aid granted illegally, i.e. without the Commission having reached a final decision, may have to refund the aia Whenever it becomes aware that aid measures have been adopted by a Member State without the obligations under Article 93(3) having been fulfilled, the Commission will publish a specific notice in the Official Journal warning potential aid recipients of the risk involved. It was stated (see the Commission's answer to Written Question No 181/88, Official Journal C 151, 19.6.1989, p. 9) that the total amount of aid illegally granted which the Commission required the Member States to recover was of the order of ECU 5 million in 1985, ECU 11 million in 1986 and ECU 747 million in 1987 (the latter figure includes the recovery of ECU 210 million which Tubemeuse was requested to repay).

28 Judgment of 12 July 1973 in Case 70/72 Commission v Federal Republic oj Germany [1973] ECR 813.

29 See, in that regard, the Repons to the FIDE congress mentioned above in footnote II, in which it 15 observed, at p. 559, that the longer the gap between grant and recovery, the less effective recovery is, adding, however, that the gap is further lengthened by the Commission's dilatonness in enforcing recovery orders when Member States refuse to comply with them

30 The existence of a specific duty of cooperation in that regard, which is a particular expression of the general duty under Article 5 of the Treaty, is emphasized by Smit and Herzog: The Law of the EEC, 1982, Vol. 3, p. 414 et seq., which states the following: Article 93(1) obligates the Member States to cooperate with the Commission in its investigation and to supply it with ali necessary data. This obligation receives furtner support from Article 5, paragraph 1.

31 Judgment of 10 July 1986 in Case 234/84 Kingdom of Belgium v Commission [1986] ECR 2263.

32 With regard to the scope of the duty of cooperation in the procedure provided for in Article 93(2) see, in particular, Smit and Herzog, cited above in footnote 29, p. 415: Although the Member State wishing to grant an aid does not have the burden of proof in the technical sense, it must supply the Commission with those facts and data which the Commission cannot conveniently obtain itself.

33 Moreover, following the Commission's argument to its conclusion, the illegality stemming from the infringement of Article 93(3) would completely exclude the examination of compatibility under Article 92(3), since it is impossible to infer — on the basis of correct legal construction — any discretionary power on the part of the Commission (or on the part of the Court, as the Commission states itself in its pleading).

34 The basis of the power to declare aid unlawful could at first sight also be found in the provisions of Article 93(2) on the basis of which the Commission may decide that aid should be abolished if it is being misused However, it seems preferable to consider that mat expression refers not to aid granted in breach of Article 93(3) but to aid which has proved to be incompatible with tlie common market only at the implementation stage. In such cases, therefore, the Commission will adopt a decision on the substantive compatibility of the aid and not a decision on unlawfulness.

35 See, in particular, the judgments in Cases 171/83, 173/73, 234/84 and 94/87, cited above.

36 It seems that the Court's case-law confirms that the initiation or pursuit of the procedure under Article 93(2) is required even when there are merely doubts as to the compatibility of aid. An indication to that effect is to found in the judgment of 20 March 1984 in Case 84/82 Federal Republic of Germany v Commission [1984] ECR 1451 m which the Court granted the Federal Republic's application for a declaration that the Commission had infringed its obligations under Article 93(2) by failing to initiate the verification procedure in regard to compatibility In particular, the Court decided that one of the main characteristics distinguishing the examination under Article 93(2) from the preliminary examination under Article 93(3) resides in the fact that the Commission is under no obligation at the preliminary stage to give notice to the parties concerned to submit their comments However, such a procedure, which guarantees the other Member States and the sectors concerned an opportunity to make their views known and allows the Commission to be fully informed of all the facts of the case before taking us decision, is essential whenever the Commission has serious difficulties in determining whether a plan to grant aid is compatible with the common market(paragraph 13) Although that case was concerned with an aid project of which proper notice had been given, the Court's observations on the nature and scope of the examination of compatibility arc of general application and, for that reason, tne initiation of the relevant procedure is required even if the Commission has received notice of aid unlawfully granted.

37 In regard to the unitary and binding character of the verification of compatibility, see, in particular Smit and Herzog, cited above, p. 415: When investigating the incompatibility of an aid with the common market, the Commission should also examine on its own motion whether any of the exceptions of Article 92(2) or 92(3) are applicable, in particular if the facts and the arguments advanced indicate that an exception may be applicable.

38 See, in particular, the judgments of 14 November 1984 in Case 323/82 Intermilis v Commission [1984] ECR 3809, of 13 March 1985 in Joined Cases 296 and 318/82 Leeuwarder Papierwarenjabriek v Commission [1985] ECR 809, and of 10 July 1986 in Case 234/84 Belgium v Commission [1986] ECR 2281.

39 See, for example, Smit and Herzog, cited above in footnote 29, p. 397.

40 Those principles, laid down by the Court in the context of the interpretation of Articles 85 and 86 (see, in particular, the ludgment of 31 May 1979 in Case 22/78 Hugm v Commission [19791 ECR 1869) also concern Article 92, the condition concerning the effect on Community trade obviously having the same function in the context of all three provisions, which all form part of the chapter of the Treaty concerned with rules on competition.

41 Sec the judgment of 10 July 1986 in Case 234/84 Belgium v Commitsion [ 19861 ECR 2263, paragraph 23

42 See, on that subject, J. Mcgret: Le droit de la Communauté économique européenne. Vol 4, p. 384.

43 See, most recently, the judgment of 2 February 1989 in Case 94/87 Commission v Federal Republic of Germany [1989] ECR 175, in particular paragraphs 8 and 9 (footnote 24 above).