Report for the Hearing delivered in Case 63/87

I — Facts and procedure

In February 1984 the Commission, as a result of complaints by individuals, decided to request information from the Greek Government concerning interest rebates on export loans.

According to the information provided by the Greek Government, before April 1983 loans for the prefinancing and financing of exports were subject to an interest rate of 10.5%. As a result of the general reform of the Greek credit system in April 1983, the interest rates on bank loans were fixed from that date at 21.5% for loans to industry, 18.5% for loans to undertakings which exported processed agricultural products and 14% for loans to craft undertakings. In order to compensate for the increase in the rates it was decided to grant exporters from April 1983 a rebate of 6% in the case of loans granted at the rates of 21.5 and 18.5% and a rebate of 3% in the case of loans granted at the rate of 14%. The rebate was granted on the condition that exporters swiftly repatriated the sale proceeds and converted them into drachmas. The 6 or 3% rebate was applicable to exports of all Greek products except petroleum products.

The Commission decided to institute immediately the procedure provided for in Article 93 (2) of the EEC Treaty. After giving Greece and the other interested parties the opportunity to submit their comments, the Commission adopted Decision 86/187/EEC on 13 November 1985.

According to the statement of the reasons for the decision, the Greek authorities had failed to fulfil their obligations under Article 93 (3) of the EEC Treaty by failing to notify the measures in question to the Commission and by putting them into effect without allowing the Commission to adopt a position on the matter. According to the decision, the reimbursement of 6 or 3% constitutes a state aid in the form of an interest rebate which, by favouring Greek exporters, distorts competition and affects trade between Member States and hence is incompatible with Article 92 (1) of the Treaty. In addition, the decision lists the reasons why the Commission took the view that the derogations provided for in Article 92 (2) and (3) of the Treaty could not be applied.

Article 1 of the decision states that the aid granted in the form of an interest rebate of 6 or 3% to exporters of products other than petroleum products is incompatible with the common market under the terms of Article 92 of the Treaty and must be abolished.

Article 2 allows Greece a period of one month from the notification of the decision to inform the Commission of the measures which it has taken in order to comply therewith. The decision was notified to Greece on 23 December 1985.

On 26 February 1986 Greece brought an action before the Court under Article 173 of the Treaty for a declaration that the decision is void (Case 57/86, ECR 2855).

On 13 March 1986 Greece also submitted an application for suspension of the operation of the decision under Article 83 of the Court's Rules of Procedure. By order of 30 April 1986 the President of the Court delivered an interim decision rejecting that application and reserving the costs.

On 23 May 1986 the Commission sent Greece a telex message in which it again requested Greece to inform it, within a period of two weeks, of the measures which it had taken in order to comply with the decision. Greece did not reply officially to that telex message.

By Decision No 790 of 5 June 1986 the Bank of Greece reduced the rebate from 6 to 5%. By Decision No 936 of 29 January 1987 the Bank of Greece further reduced the rebate from 5 to 3% for the year 1987 and withdrew it definitively from 1 January 1988, on which date the system was entirely abolished.

The Commission took the view that Greece had failed to comply with Decision No 86/187/EEC within the prescribed period and therefore, by an application lodged on 27 February 1987, brought the present action under the second subparagraph of Article 93 (2) of the EEC Treaty.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. However, it called upon the Commission to reply to a question in writing.

II — Conclusions of the parties

The Commission claims that the Court should:

Greece contends that the Court should:

III — Submissions and arguments of the parties

The Commission observes that under Article 189 of the EEC Treaty a decision is binding in its entirety upon those to whom it is addressed. Moreover, Article 191 of the Treaty provides that decisions are to be notified to those to whom they are addressed and are to take effect upon such notification.

The period of one month from notification of Decision 86/187/EEC within which Greece was required to inform the Commission of the measures which it had taken in order to comply with the decision expired on 23 January 1986; by that date Greece had not informed the Commission officially of any national measure.

The fact that Greece brought an action for annulment under Article 173 of the Treaty against the Commission's decision did not entitle it to refuse to comply with the decision within the period laid down by the decision, as is clear from Article 185 of the Treaty. Moreover, by order of 30 April 1986 the President of the Court dismissed the application for suspension of the operation of the decision.

The defendant was obliged to adopt the necessary measures no later than 23 January 1986 and to inform the Commission thereof forthwith. Decision No 790 of the Bank of Greece did not constitute an adequate implementing measure because it was not adopted within the prescribed period and, instead of entirely abolishing the state aid found to be incompatible with the common market, as required by Article 1 of the contested decision, it merely reduced the rate of the aid from 6 to 5% from 9 June 1986. Decision No 936 of the Governor of the Bank of Greece similarly did not constitute an adequate implementing measure because it merely further reduced the rate of the aid from 5 to 3% from 1 April 1987 and completely abolished the system only with effect from 1 January 1988. The complete abolition of the aid in question should have been achieved by 23 January 1986 and not nearly two years later.

In Case 52/83, the facts of which were similar to those of the present case, the Court held that France had failed to fulfil its obligations under the EEC Treaty by failing to comply with a Commission decision within the prescribed period.

Greece, while expressly reserving any rights and claims arising from the action brought against Commission Decision 86/187/EEC (Case 57/86, cited above), states that Decisions Nos 790 and 936 of the Bank of Greece abolished the interest rebate system to the extent necessary and in accordance with the terms of the Commission decision.

It was impossible for Greece to comply with the decision within the prescribed period since by its nature the rebate system was linked to export activities and procedures based on commitments which Greek exporters had entered into under medium-term and long-term agreements involving the execution of export orders.

The immediate abolition of the system would have had extremely disastrous and unforeseen consequences for the programmes established by the exporters and, by extension, for Greece's export policy and, more generally, monetary and economic policies. At all stages of the procedure preceding and following the adoption of the Commission's decision it was emphasized that it was possible to abolish immediately the interest rebate system only by simultaneously abolishing the entire monetary system applicable from April 1983. However, that solution, that is to say the drafting of new rules for the entire Greek monetary system, would have required some time, in order to allow the necessary appraisals and studies to be carried out.

In any event, if Greece had immediately abolished a single part of the system, namely the interest rebate, whilst maintaining in force interest rates for exports which had almost doubled from April 1983, this would have had adverse and unforeseen consequences on Greece's balance of payments and economic, social and political life.

Consequently, the Court should hold that, by adopting the measures which were absolutely necessary and in keeping with the particular circumstances in question, Greece performed its obligation under the EEC Treaty to comply with the Commission decision.

The Commission objects that all the arguments upon which the defendant relies in order to show that the immediate abolition of the unlawful state aid was impossible have already been advanced by the defendant in its application for suspension of the operation of the Commission decision. However, by order of 30 April 1986 the Court dismissed that application and those arguments. According to the Commission, the defendant cannot validly rely on those arguments in the present proceedings in order to justify its failure to comply with the decision within the prescribed period.

To accept the defendant's arguments would constitute a clear infringement of Article 93 (2) of the EEC Treaty, whose procedure the Commission has faithfully observed. Specifically, the Commission gave both the defendant and other interested parties the opportunity to submit their comments and, in its decision, it allowed the defendant the reasonable period of one month to comply with it. Consequently, the defendant was informed fully and in good time of the procedure instituted before the Commission which finally led to the adoption of the decision in question.

According to the case-law of the Court the only contention which the applicant might have put forward in these proceedings for a declaration that it failed to fulfil its Treaty obligations is that it was absolutely impossible for it to implement the decision in question properly.

That concept is interpreted very restrictively by the Court and, moreover, is not referred to in any of the arguments put forward by the defendant in this case. More specifically, the defendant does not deny, in principle, that the system of state aid which was found to be incompatible with the common market could have been abolished, as is moreover demonstrated by the measures taken by the Bank of Greece.

The argument that it was not possible to abolish the system of loans immediately because this would have had extremely adverse and unforeseeable effects on the exporters' planned activities does not demonstrate that it was absolutely impossible to implement the decision. That argument in fact does no more than repeat the effects which the abolition of illegal state aid will normally and logically have for the recipients thereof.

For the same reason the arguments to the effect that the abolition of the interest rebates would have had unforeseeable effects on the balance of payments and on Greece's political, social and economic life must also be rejected as unfounded.

In addition, the defendant cannot now rely on the fact that it acted illegally in the past by failing to notify the national aid programme in time and by implementing the programme before the Commission had commented on it, contrary to Article 93 (3) of the Treaty. Consequently, the defendant cannot now argue that the immediate abolition of the unlawful state aid would have required the abolition of the entire monetray system instituted in April 1983 and that it would have had unforeseeable consequences, since those supposed consequences are the normal and logical result of its previous illegal conduct, which was found to be contrary to Article 93 (3) and Article 92 (1) of the Treaty.

Finally, the Court has consistently held that a Member State may not plead provisions, practices or circumstances existing within its internal legal system in order to justify a failure to fulfil its obligations under Community law.

In its rejoinder Greece states that the majority of the arguments put forward by the Commission concern, in substance, Case 57/86, which is pending before the Court; those arguments may not be put forward in the present proceedings, whose essential object is to establish whether Greece has failed to fulfil its obligation to implement the Commission decision.

It was absolutely impossible for Greece to comply immediately with the decision since the system of export loans applied in Greece from April 1983 was linked to the new monetary and credit policy which began to be applied at the same time.

The Commission's argument that none of the arguments put forward by Greece in this case shows that it was absolutely impossible to implement the decision is wholly arbitrary and unjustified. The Commission does not explain why it was not absolutely impossible for Greece to implement the Commission decision and puts forward no argument which refutes the three valid, serious and exceptionally important reasons put forward by Greece.

The Commission's argument that Greece is not entitled to rely on those reasons in these proceedings because they were rejected when it put forward those reasons in the proceedings relating to the application for suspension of the operation of the decision is unfounded and inadmissible. The Court dismissed that application because urgency had not been established and not because it considered Greece's arguments to be unfounded in substance. On the contrary, the Court reserved its decision on the substance of the case, which will be given in the main proceedings relating to Greece's application for a declaration that the Commission decision in question is void.

The Commission is attempting, both in the proceedings relating to the application for the suspension of the decision and in the present proceedings, to prejudge the Court's decision on the substance of the case. Since the question whether Greece's conduct was illegal has not yet been settled by the Court, the Commission is not entitled to prejudge the Court's decision; consequently, Greece asks the Court to reject the arbitrary and unfounded arguments put forward by the Commission on this point.

The Commission does not reply to the essential question of whether or not Greece was in a position to comply fully with the Commission decision. The Commission does not seek to refute the undeniable fact that, in the course of the formal and informal negotiations conducted with a view to the approval of the measures for stabilizing the Greek economy adopted under Article 108 of the EEC Treaty, Greece informed the Commission of all the reasons which made it absolutely impossible for it to comply immediately and fully with the decision and that the Commission showed itself to be very understanding.

IV — Reply to the question put by the Court

The Court requested the Commission to comment on Greece's claim that in the course of the formal and informal negotiations conducted with a view to the approval of the measures for the stabilization of the Greek economy adopted under Article 108 of the EEC Treaty, Greece informed the Commission — which showed itself to be extremely understanding — of all the reasons which made it absolutely impossible for it to comply immediately and fully with Decision 86/187/EEC.

In reply to the question put, the Commission stated the following:

1 Language of the Case: Greek.

2 OJ L 136, 23.5.1986, p. 61.

3 Judgment of 15 November 1983 in Case 52/83 Commission v France [1983] ECR 3707 et seq.

4 Judgment of 15 January 1986 in Case 52/84 Commission v Belgium [1986] ECR 89, at paragraph 14.

5 Judgment of 15 January 1986 in Case 52/84 Commission v Belgium [1986] ECR 89, at paragraph 14.

6 See also the recent judgment of 12 February 1987 in Case 69/86 Commission v Italy [1987] ECR 773.