61987C0102

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Mr President,

Members of the Court,

A - Facts

1 . The case which I am to consider today concerns the question whether the Commission of the European Communities, the defendant, is correct in its view that the granting by the French Republic, the applicant, of an investment loan on special conditions constitutes State aid incompatible with the common market and whether the Commission was entitled to order its recovery .

2 . In 1984 the French Republic granted to the société européenne de brasserie, through the fonds industriel de modernisation ( Industrial Modernization Fund, hereinafter referred to as "FIM "), a loan of FF 40 million towards an investment of FF 181.05 million at an interest rate of 9.25% over a period of seven years .

3 . The function of the FIM was to encourage the modernization of French industry . For that purpose it granted loans to support financing programmes likely to encourage technical innovation . FIM was financed from the yield of the comptes de développement industriel ( Codevi ) ( industrial development accounts ) which were short-term savings accounts set up by the State at a fixed rate of interest lower than the market rate . The incentive to investors to place their funds at the State' s disposal at low interest rates was that income from the Codevi was not subject to tax . The State was thus forgoing a portion of its tax revenue .

4 . In a decision of 19 December 1984 ( 1 ) addressed to the French Republic, the Commission found that the FIM' s loans constituted aid but did not raise any objection to the grant of the aid so long as the French Republic, in accordance with Article 93 ( 3 ) of the EEC Treaty, informed the Commission before significant cases of aid awards so that it could examine their compatibility with Article 92 of the EEC Treaty .

5 . In a letter of 25 February 1985 the French Republic disputed the designation of the FIM' s loans as aid, but it did not bring proceedings against the decision of 19 December 1984 . In fact, complying with the duty imposed in the decision to submit information, in April 1985 it forwarded to the Commission several files relating to undertakings which had received loans from the Fund, including that relating to the société européenne de brasserie .

6 . On 18 December 1985 the Commission formally initiated the review procedure in respect of State aid in accordance with Article 93 ( 2 ) of the EEC Treaty .

7 . On 14 January 1987, in its final decision under that procedure,(2 ) the Commission observed :

"Article 1

The FIM loan of FF 40 million, containing elements of aid within the meaning of Article 92 ( 1 ) of the EEC Treaty in view of the interest subsidy of 4.75 percentage points, granted to a brewery and notified to the Commission by letter dated 30 April 1985, was granted unlawfully in infringement of Article 93 ( 3 ) of the Treaty and is incompatible with the common market within the meaning of Article 92 of the Treaty .

Article 2

The aid in question must be recovered ...."

8 . In the preamble to the decision, the Commission explained that the FIM loan comprised elements of aid - interest rates fixed below market rates ( 3 ) - within the meaning of Article 92 ( 1 ) of the EEC Treaty, because it relieved the recipient, through State resources, of part of the cost of the investment which it would normally have had to bear .

9 . Furthermore, the Commission described the situation in the beer market in the Community as follows : consumption of beer in the Member States was either stagnating or falling slightly . External trade between Member States accounted for about 4% of all beer sales in the Community . The market in France accounted for approximately 9% of all sales in the Member States of the Community ( minus Greece ). France imported just over 10% of its requirements from the other Member States . French exports to other Member States represented about 1.5% of French production .

10 . According to the Commission, the undertaking in receipt of the FIM loan was wholly owned by a French group whose beer production accounted for over 50% of total French production and which participated in intra-Community trade in beer . The brewery itself held about 20% of the French market .

11 . In view of the above considerations, the Commission considered that the aid was likely to affect trade between Member States and distort competition within the meaning of Article 92 ( 1 ) of the EEC Treaty by favouring the undertaking in question and the production of French beer .

12 . No explanation of how the interest subsidy of 4.75 percentage points was ascertained is to be found in the Commission' s decision .

13 . The French Republic considers that the Commission' s decision is unlawful . It claims that the conditions of Article 92 ( 1 ) are not satisfied, because the loan at issue cannot be regarded as aid incompatible with the common market . The State' s role in the FIM system is limited; the forgoing of tax revenue can be disregarded . In view of the minimal amount of the aid, it cannot affect trade between Member States .

14 . Furthermore, the duty to state reasons as laid down in Article 190 of the EEC Treaty has not been complied with, because the Commission makes no mention of the amount of the société européenne' s exports to other Member States and gives no explanation as to the alleged interest subsidy of 4.75 percentage points .

15 . The provision in Article 2 of the decision that the aid in question must be recovered infringes the general principle of legal certainty, because it is not clear . That provision does not enable the French Republic to determine the actual amount of the aid declared illegal which is to be recovered .

16 . The applicant therefore claims that :

( 1 ) The Commission Decision of 14 January 1987 on an FIM loan to a brewery should be declared void;

( 2 ) The defendant should be ordered to pay the costs .

17 . The defendant contends that :

The action should be dismissed as unfounded and the applicant ordered to pay the costs .

18 . The Commission considers that its decision is, in principle, legally valid . It states in addition that the loan was made at an interest rate of 9.25%, whereas the market rate for a comparable loan was 14 %. That represented an interest subsidy of 4.75 percentage points . The market rate used for the calculation was that of the crédit national for plant and equipment loans, which, with the agreement of the French Republic, was fixed as the reference rate in the Commission' s Communication on the principles of coordination of regional aid systems.(4 ) The Commission thus used data which were familiar to the French authorities .

19 . I shall give further details of the facts as related by the parties where necessary in the course of my analysis .

B - Analysis

20 . In accordance with the form in which the case is pleaded in the application, I shall examine in turn the applicant' s three complaints : the question whether aid is involved which infringes Article 92 of the EEC Treaty; infringement of essential procedural requirements; breach of the principle of legal certainty .

1 . The question whether aid is involved which infringes Article 92 ( 1 ) of the EEC Treaty

21 . The applicant does not accept that the FIM loan should be regarded as aid which infringes Article 92 ( 1 ) of the EEC Treaty because both the State contribution involved - the forgoing of tax on the Codevi - and the extent of the advantage conferred on the borrower undertaking are insignificant and therefore cannot affect trade between the Member States .

22 . Here it should be observed that, in accordance with the Court' s case-law, aid granted by a State or through State resources of whatever kind is to be judged by its effects.(5 ) The question is not therefore whether a specific undertaking has been favoured directly through State resources, but whether, on the basis of a State system, that undertaking has received an advantage .

23 . That is precisely what happened in this case because, by the French Republic' s forgoing of tax revenue, which benefits the Codevi account holders, the FIM is put in a position to grant credit to certain undertakings on preferential conditions .

24 . State aid is therefore involved, as the Commission stated in principle in its Decision of 19 December 1984 .

25 . In respect of the second part of the French Republic' s argument - that the aid is insignificant, of no appreciable effect and therefore not such as to distort competition - it must be observed that the criterion of appreciable effect has played a role in the applicability of Article 85 of the EEC Treaty in the Commission' s practice, which has been approved by the Court . Nevertheless, it would seem inappropriate to extend that principle of appreciable effect to the prohibition on aid in Article 92 of the EEC Treaty . It cannot be inferred either from the wording of the relevant provisions or from the case-law of the Court of Justice ( 6 ) that there should be such an exception to the fundamental prohibition on State aids . Since State aid undermines the system of undistorted competition envisaged by the Treaty and since, under Article 5 of the EEC Treaty, Member States are under an obligation to facilitate the achievement of the Community' s tasks, it is in principle justified to apply a stricter standard as regards the conduct of Member States than as regards the conduct of undertakings . Article 92 ( 2 ) and ( 3 ), moreover, sets out more differentiated provisions on exceptions than, for instance, Article 85 ( 3 ) of the EEC Treaty . Thus, under Article 92 ( 2 ) certain kinds of aid are, in principle, compatible with the common market, and certain other kinds of aid may, under Article 92 ( 3 ) ( a ) to ( c ), be considered by the Commission to be compatible with the common market . Furthermore, under Article 92 ( 2 ) ( d ) the Council may, on a proposal from the Commission, decide that other kinds of aid are permissible, which in principle do not comply with the basic provisions of Article 92 of the EEC Treaty .

26 . In the light of those extensive exceptions contained in the aforementioned provisions, it cannot be assumed that there should be further unwritten exceptions to the prohibition of aid . Therefore the argument that minor hindrances to competition and intra-Community trade should be allowed within the framework of Article 92 of the EEC Treaty cannot be upheld .

27 . Since the Commission has, moreover, described the situation in the beer sector in detail and has shown that the different beer producers in the Community are in competition with each other, I must agree with the Commission that the aid at issue is likely to affect trade between Member States and distort competition within the meaning of Article 92 ( 1 ) of the EEC Treaty by favouring the undertaking in question and the production of French beer .

28 . From the finding that aid has been granted contrary to Article 92 of the EEC Treaty it follows that there was also an infringement of Article 93 ( 3 ) of the EEC Treaty, because the aid was awarded before the French Republic had informed the Commission of the grant of aid .

2 . Infringement of essential procedural requirements - Breach of Article 190 of the EEC Treaty

29 . In this connection the French Republic claims that the Commission, in its contested decision, did not state the volume of the borrower undertaking' s exports to other Member States or establish that there was excess capacity in the beer-brewing sector, nor did it explain at all how it ascertained the interest subsidy of 4.75 percentage points .

30 . I shall deal briefly with the two subsidiary points . The Commission stated that consumption of beer in the Community was stagnating and went on to describe intra-Community trade in beer . However, it was not necessary to show that the borrower undertaking was actually engaged in intra-Community trade since intra-Community trade and thus intra-Community competition can also be affected if aid is given to an undertaking which, although not exporting to other Member States, is nevertheless in competition in its domestic market with products from other Member States .

31 . If there was any excess capacity in the beer-brewing sector in the Community, that would have been an additional ground for not permitting the contested aid . There was, however, no need to prove excess capacity, since the EEC Treaty proceeds on the principle of a fundamental prohibition of aid which is not confined to cases where there is excess capacity in the relevant sector .

32 . It is more difficult to deal with the argument that the Commission did not indicate how it actually ascertained the amount of the interest subsidy . There is in fact no indication of the method of calculation in the Commission' s Decision of 14 January 1987 . Indeed, it was in the proceedings before the Court that the Commission first indicated that it ascertained the level of the interest subsidy by comparing the actual level of the FIM loan interest of 9.75% with the interest rate applying at the material time for plant and equipment loans made by the crédit national of 14 %. At the suggestion of the French Republic, that interest rate was incorporated in the Commission' s Communication on Regional Aid Systems of 21 December 1978.(7 ) That is the only available reference rate and the French Republic has had notice of it since 1978 .

33 . It would certainly have been expedient to state the method of ascertaining the interest subsidy in the contested decision . However, I do not believe that the absence of such explanations can be regarded as an infringement of essential procedural requirements . According to the Court' s case-law, the statement of reasons for a decision adversely affecting an undertaking must be such as to allow the Court to review the legality of the decision and to provide the undertaking concerned with the information necessary to enable it to ascertain whether or not the decision was well founded . In principle the duty to state reasons must be assessed having regard to the context of the decision and what was raised by the parties in the administrative proceedings.(8 ) In view, in particular, of the fact that the banking system in France is in large measure nationalized, the French Republic was best placed to obtain information regarding normal and preferential interest rates and since it had itself suggested the inclusion of the crédit national' s interest rate in the Commission' s 1978 Communication and moreover it is not contested that in the administrative proceedings before the Commission the French Republic did not raise the question of different interest rates, there does not seem to me to be any mandatory requirement that the Commission should provide information with which the French Republic was in the best position to be familiar . It suffices, in my view, that in the proceedings before the Court the Commission explained how it calculated the figure using data of which the French Republic was aware .

34 . Nor can there be any objection to the fact that the Commission used a reference rate which was to be applicable only in the context of regional aids, but not other kinds of aid . The Commission correctly pointed out that the prohibition on aid in Article 92 of the EEC Treaty is essentially based on a uniform concept of aid and distinctions are drawn only as regards derogations under paragraphs 2 and 3 . If, in order to determine whether a particular interest rate is to be regarded as entailing an interest subsidy and thus an aid within the meaning of Article 92 ( 1 ) of the EEC Treaty, a specific reference rate has been established, it seems justifiable to use it even if it was originally intended only to be applied in the framework of certain derogation provisions .

35 . Since the French Republic itself put the reference rate to the defendant and did not quote any other interest rates in the aid review proceedings, it cannot object to use of that reference rate . It can be left undecided whether the borrower undertaking could have contested the reference rate had the actual benefit amounted to less than 4.75 percentage points .

3 . Breach of the general principle of legal certainty

36 . The French Republic claims that the operative part of the decision is not clear, in particular with regard to the obligation to recover "the aid in question ". It does not enable the applicant to identify the actual amount of the aid declared illegal which is to be recovered .

37 . That argument also seems to me to be unconvincing . When Article 2 of the contested decision orders that the aid in question be recovered, that has to be read in conjunction with Article 1, which speaks of a loan of FF 40 million, originally granted with an interest subsidy of 4.75 percentage points . It thus follows from the decision that the plaintiff was to recover the interest subsidy from the recipient undertaking on the respective amounts of the loan outstanding from time to time - the loan was repayable in instalments . If, during the further period of the loan the original interest subsidy was reduced, then the French Republic would need to make allowance for that fact when carrying out the measures laid down in Article 2 of the decision in order to comply therewith . After all, only the aid actually granted - the interest subsidy - can be recovered in accordance with Article 93 of the EEC Treaty; at the time of the decision that amounted to 4.75 percentage points but the Commission cannot foresee how it may change in the future .

C - Conclusion

38 . In conclusion I propose that the Court should dismiss the application and order the French Republic to pay the costs of the proceedings .