Opinion of Mr Advocate General Van Gerven
Mr President,
Members of the Court,
1. In the action before the Court, the Italian Government is asking, in pursuance of Article 173 of the EEC Treaty, for a declaration that Commission Decision 90/224/EEC of 24 May 1989 on aid granted by the Italian Government to Alumínia and Comsal, two State-owned undertakings in the aluminium industry, (hereinafter referred to as the contested decision) is void. The contested decision is based on the first subparagraph of Article 93(2) of the EEC Treaty and reads as follows :
The background
2. With a view to the economic recovery of the insolvent State-owned aluminium industry, in the early part of the 1980s the Italian Government worked out a plan for restructuring the industry. This restructuring plan (hereinafter referred to as the aluminium plan) envisaged for the period 1983 to 1988 public aid amounting to LIT 1445000 million in the form of new capital, subsidies and interest-free loans. On 5 December 1984 and 20 November 1985 the Commission initiated the procedure under Article 93(2) of the EEC Treaty with regard to this aid. The Commission took the view inter alia that the amount of the aid proposed considerably exceeded the requirements of the aluminium plan. However, after the Italian Government had made a number of amendments to the aluminium plan, and in particular had agreed to reduce the aid envisaged in the form of new capital by LIT 200000 million, the Commission, by decision of 17 December 1986 (of which the Italian Government was notified by letter of 13 January 1987) decided to terminate the procedures it had initiated in 1984 and 1985. At the same time it approved aid, amounting to LIT 989000 million in the form of new capital and LIT 400000 million in the form of interest-free loans, for the activities of the public holding company EFIM in the aluminium sector. It also gave its approval to grants amounting to LIT 48100 million and an interest-free loan of LIT 7900 million to the State-owned aluminium smelter in Bolzano. The Commission, however, approved this aid envisaged in the aluminium plan (1983-88) only on the express condition laid down in the decision of 17 December 1986 that the Italian Government would provide no further aid in whatever form to the State-owned aluminium industry until the end of 1988.
3. On 18 September 1987 (by decision of the CIPE) the Italian Government instructed the public holding company EFIM to grant loans amounting to LIT 100000 million to two of its subsidiaries, Alumínia and Comsal, both State-owned aluminium undertakings.
4. On the basis of the information from this and public sources, the Commission decided in September 1988 to initiate the procedure under Article 93(2) in respect of the loans. The Commission took the view that the payment of all interest by the State constituted a clear case of State aid, and that the conversion of the two loans into equity capital constituted the provision of new capital which, in the light of the circumstances, might involve elements of State aid. On 24 May 1989 the procedure under Article 93(2) was concluded with the adoption of the decision contested in this action. As emerges from the portion of the contested decision already referred to, the Commission took the view that the loans in question did indeed constitute State aid incompatible with the common market because the Commission had not been informed of them in advance and because they constituted an infringement of the conditions laid down in the decision of 17 December 1986 and particularly of the condition that no further aid in whatever form was to be provided for the State-owned aluminium industry until the end of 1988. The Commission required the Italian Government to recover the aid granted to the recipient undertakings, Alumínia and Comsal, and expressly prohibited the conversion of the loans into equity capital.
Are the loans in question State aid within the meaning of Article 92(1) of the EEC Treaty?
5. In support of its application for a declaration that the contested decision is void, the Italian Government claims that the Commission's statement of the reasons on which its decision was based was incomplete and erroneous in contending that the interest-free loans to be converted into equity capital constituted State aid within the meaning of Article 92(1) of the EEC Treaty. The Italian Government points out in particular that in considering the loans in question the Commission took account only of the very critical financial and economic situation of the beneficiary undertakings in the period 1985 to 1987 and did not take into account the results recorded in 1988. The Italian Government also claims that in considering the loans in question the Commission took no account of the fact that they were not intended to cover losses suffered but to finance investments, as already stated. In the case of Aluminia those investments were meant for modernizing production and fell within the aluminium plan approved by the Commission. In the case of Comsal the investments were intended for modernization, extension and diversification of production and formed part of a restructuring plan specifically prepared for that undertaking.
6. In addition the Italian Government suggests that the criterion used by the Commission of determining to what extent the undertaking would be able to obtain the sums in question on the private capital markets is incompatible with the principle derived from Article 222 of the Treaty of equal treatment of private and public undertakings. The Italian Government points out that private undertakings belonging to a large group do not necessarily have to seek new resources on the capital market but may resort to the financial resources of the group. By the application of the abovementioned criterion public undertakings belonging to an important group are, according to the Italian Government, being subjected to a test to which private undertakings forming part of a large group are not subject, and the principle of equal treatment is not being observed.
7. That objection, in my opinion, is based on an erroneous interpretation of that criterion. As the Court has already stated in clear terms in its judgments in Meurd and Boch II, and has confirmed in subsequent judgments, the criterion of the extent to which the undertaking would be able to obtain the sums in question on the private capital markets means that the test is, in particular, whether in similar circumstances [to those in which the authority has provided new capital] a private shareholder ... would have subscribed the capital in question. The criterion mentioned above therefore coincides with the criterion of the private shareholder. In its recent judgment in Case C-305/89 Italy v Commission [1991] ECR I-1603 (Alfa Romeo), the Court elucidated this criterion of the private shareholder. The conduct of the private shareholder with which the authority's conduct is to be compared is actually that of a private holding company or group of undertakings similar in scale to the relevant public holding company, pursuing a structural, global or sectoral policy and guided by longer-term prospects of profitability (paragraphs 19 and 20). The Court states expressly that in applying that criterion the Commission is not infringing Article 222 of the EEC Treaty (paragraph 24).
8. Contrary to the Italian Government's argument and as the Commission rightly observes, for a decision as to whether the loans in question constitute State aid it is not in itself important whether these loans are intended to finance investments or form part of a restructuring plan. What counts is whether a private investor would have been ready to subscribe new capital — in this case in the form of interest-free loans to be converted into equity capital — account being taken of all information allowing him to assess the economic and financial situation of the undertaking (including possibly the existence of a credible restructuring plan). It is obvious that the answer to that question must be given in the light of the economic and financial situation of the beneficiary undertakings at the time the aid is granted. Let us try to reconstitute the position at that time.
9. When, in September 1987, EFIM granted the loans to aluminium and Comsal, the economic and financial situation of both undertakings was critical. It appears from the contested decision that Alumínia suffered losses of LIT 77800 million in 1985, LIT 57500 million in 1986 and LIT 98300 million in 1987. Over the same years total indebtedness was LIT 943300 million, or 155% of turnover, in 1985; LIT 989300 million, amounting to 153% of turnover, in 1986; and LIT 1189800 million or 133% of turnover, in 1987. Comsal had losses of LIT 14200 million in 1985, LIT 10200 million in 1986 and LIT 9400 million in 1987. Total indebtedness amounted to LIT 53100 million, or 125% of turnover, in 1985, LIT 68200 million, or 156% of turnover, in 1986 and LIT 72800 million, or 142% of turnover, in 1987.
10. However, the Italian Government claims that the better (or less unfavourable) results for 1988 could already be foreseen in September 1987, that is, at the time the loan was granted, and that, as has been recognized by both the Commission and the Court on several occasions, in decisions about the subscription of capital a private investor will be guided above all by the undertaking's future prospects and the expected profitability of the funds subscribed.
11. In assessing the legality of aid which has already been granted, it is naturally difficult to prove subsequently what could and what could not be foreseen at the time the aid was granted. That difficulty would not have arisen if the Italian Government had given notice of the aid at the right time and had provided the Commission with all information which would have allowed it to appraise at the appropriate time the future prospects of Alumínia and Comsal. In a case of this kind where the Member State has not given notice of the aid, and although the Commission is not thereby absolved from a basic investigation of the aid — which it did indeed effect in this case — the burden of proof as regards the foreseeability, at the time the aid was granted, of any favourable future prospects rests upon the Member State itself.
12. From the documents before the Court it cannot be seen that at the time of the procedure under Article 93(2) the Italian Government gave the Commission information about the foreseeability of favourable future prospects which might have justified the provision of aid from the point of view of a private investor. From the contested decision it appears only that the applicant informed the Commission in letters of 31 January and 17 March 1989 that the State aluminium industry, with the exception of Comsal, was expected — for the first time for many years — to record a profit of 3000 million for 1988, whilst the expected result for Comsal for that year would show a loss of LIT 4600 million. However, it is not stated whether these results could already be foreseen in September 1987. Neither in its application nor in its reply does the Italian Government claim that it did actually make available to the Commission at the time of the procedure under Article 93(2) specific information with regard to the improved prospects for the future. It is true that at the hearing the Italian Government stated that in 1987 clear signs of a coming recovery in the aluminium sector could be seen. However, that was denied by the Commission and the Italian Government has provided no information showing the accuracy of its statement.
13. On the basis of the foregoing considerations I come to the conclusion that the Italian Government has not shown that the Commission wrongly failed to take account of the improvement in the performance of Alumínia and Comsal which, according to the Italian Government, could already be foreseen in 1987, and that the Commission therefore rightly concluded that the loans to be converted into equity capital constituted state aid within the meaning of Article 92(1) of the EEC Treaty.
Ought the Commission to have considered whether Article 92(3)(c) of the EEC Treaty is applicable in this case?
14. In support of its application for a declaration that the contested decision is void, the Italian Government further claims that the statement of the reasons on which the decision is based is defective because the Commission did not consider whether the aid granted was justified on the basis of Article 92(3)(c) of the EEC Treaty. The Italian Government points out that the aid envisaged under the aluminium plan had been justified by the Commission on the basis of Article 92(3)(c) of the EEC Treaty and in that regard the Commission had stated in its decision of 17 December 1986 that the aluminium plan contributed to the general restructuring of the aluminium sector. But the Italian Government observes that the aid to Comsal and Alumínia was part of that restructuring effort. Yet the Commission, after coming to the conclusion that the aid in question exceeded the maximum of the aid already approved, did not consider whether the loan to Comsal and Alumínia, just like the aid envisaged under the aluminium plan, might still be justified on the basis of Article 92(3)(c) of the EEC Treaty. The Italian Government admits that the decision of 17 December 1986 contained by implication an unfavourable assessment of the permissibility of further aid, but takes the view that the Commission should nevertheless have examined the aid in question in the light of Article 92(3)(c) of the EEC Treaty. It puts forward three arguments on this point.
15. Before this argument is considered it must be stated here that at no time during the administrative procedure under Article 93(2) of the EEC Treaty did the Italian Government claim that the aid to Alumínia and Comsal should be examined in the light of Article 92(3)(c) of the EEC Treaty. Nor did it then advance any facts which might be relevant or helpful for that purpose. According to the Court's consistent case-law the legality of a contested decision is to be assessed in the light of the information available to the Commission when the decision was adopted. That is in itself sufficient to conclude that this argument cannot lead to a declaration that the contested decision is void.
16. Nevertheless, I shall still discuss the Italian Government's arguments briefly and associate myself with a number of observations made by the Commission.
Conclusion
17. I propose that the Court should dismiss the application for a declaration that the contested decision is void and order the Italian Government to pay the costs.
1 Original language: Dutch.
2 OJ 1990 L 118, p. 42.
3 Contested decision, Part I, first paragraph.
4 See Iulian Government telex of 21 November 1986, annex II of the statement of defence.
5 An abbreviation for Ente Participazioni e Finanziamenti Industrie Manifatturiere.
6 Contested decision, Part I, second and third paragraphs.
7 An abbreviauon for Comitato Interministeriale per la Programmazione Economica.
8 Contested decision, Part I, eighth paragraph; see also Annex I to the application.
9 Contested decision, Part II, second paragraph.
10 Contested decision. Part II, third paragraph.
11 Contested decision, Part IV, second paragraph.
12 Contested decision, Part IV, third, fourth and fifth paragraphs.
13 First paragraph of Article 1 of the contested decision.
14 Second paragraph of Article 1 of the contested decision.
15 Third paragraph of Article 1 of the contested decision.
16 In 1988 Alumínia recorded a profit, whilst Comsal halved its losses as compared with those suffered in 1987. See also footnote 21 infra.
17 Application, pages 7 and 8.
18 Judgment in Case 234/84 Belgium v Commission [19861 ECR 2263 (Meuraļ, paragraph 14; see also the recent judgment in Case C-142/87 Belgium v Commission [1990] ECR I-959 CTubemeuse'l paragraph 29.
19 See also my Opinion of 10 January 1991 in that case, paragraphs 11 and 12 [(1991] ECR I-1616).
20 See for example the judgments already cited in Mettra, paragraphs 15 and 16, Tubemeuse, paragraphs 26 (and 29), and Alfa Romeo, paragraphs 19 and 20, and the judgments in Case C-301/87 France v Commission [1990] ECR I-307 (Boussacļ, paragraphs 39 and 40, and Case C-303/88 Italy v Commission [1991] ECR I-1433 (ENI-Lanerossi), I-1433 paragraphs 20 and 24.
21 Contested decision, Part IV, fourth paragraph.
22 It appears from the contested decision that at the time of the procedure under Article 93(2), that is, at the beginning of 1989 (see infra paragraph 12), the Iulian Government had informed the Commission that it was expected that in 1988 the State aluminium industry, with the exception of Comsal, would show a profit of LIT 3000 million, whereas the result expected for Comsal for that year would be a loss of LIT 4600 million (contested decision, Pan III, second paragraph). In its application and reply the Iulian Government confined itself to mentioning that in 1988 the Sute aluminium industry as a whole, including Alumínia, made a profit and that Comsal more than halved its toss (application p. 16 and reply p. 14). Other or more precise information about the recovery of the two underukings is lacking. The Italian Government stated at the hearing that in 1988 Alumínia had made a profit of 7 to 8000 million.
23 In the Alfa Romeo case too, in assessing aid granted in 1985 and 1986, the Court did not uke into account the remarkable recovery of the motor-vehicle industry in subsequent years.
24 See inter alia the contested decision, Part IV, third paragraph, and the Commission Communication to the Member Sutes of 17 September 1984, Bulletin of the EC, No 9-1984, point 2.5.1.
25 See for example the Meura judgment, paragraph 14, already cited in footnote 17.
26 Contested decision, Part III, second paragraph.
27 Nor did it appear subsequently that the recovery announced by the Italian Government did in fact lead in subsequent years to a lastinge recovery of Alumínia and Comsal. As already stated in footnote 21, the Iulian Government stated at the hearing that in 1988 Alumínia made LIT 8000 million profit, which is not impressive when it is realized that in the period 1982-87 that undertaking made a loss of almost 1000000 million and a loss of 98300 million for 1987 alone.
28 Eleventh paragraph of the decision of 17 December 1986, Annex II to the defence.
29 See for example the Meura judgment, paragraph 16, already cited in footnote 17.
30 See the judgment in Case 47/69 France v Commission [1970] ECR 487, paragraph 7.