Joined Cases C-57/00 P and C-61/00 P


Freistaat Sachsen
and
Volkswagen AG and Volkswagen Sachsen GmbH

v
Commission of the European Communities

«(State aid – Compensation for the economic disadvantages caused by the division of Germany – Serious disturbance in the economy of a Member State – Regional economic development – Community framework for State aid in the motor vehicle industry)»

Opinion of Advocate General Mischo delivered on 28 May 2002
    
Judgment of the Court, 30 September 2003
    

Summary of the Judgment

1..
State aid – Prohibited – Derogations – Aid for areas affected by the division of Germany – Scope of the derogation – Strict interpretation – Economic disadvantages caused by the isolation created by the frontier established between the two zones

(Art. 92(1) and (2)(c) of the EC Treaty (now, after amendment, Art. 87(1) and (2)(c) EC)

2..
Acts of the institutions – Statement of reasons – Obligation – Scope – Decision consistent with previous decisions – Permissibility of summary statement of reasons

(Art. 190 of the EC Treaty (now Art. 253 EC))

3..
Appeals – Grounds – Plea put forward for the first time in the appeal – Inadmissible

(Rules of Procedure of the Court, Arts. 42(2) and 118)

4..
State aid – Prohibited – Derogations – Aid which may be regarded as compatible with the common market – Aid to remedy serious disturbance in the economy of a Member State – Strict interpretation – Disturbance affecting the whole of the economy of the Member State concerned

(Art. 92(3)(a)(b) and (c) of the EC Treaty (now, after amendment, Art. 87(3)(a), (b) and (c) EC))

5..
Appeals – Grounds – Plea challenging the decision of the Court of First Instance on costs – Inadmissible where all other pleas rejected

(Statute of the Court, Art. 51, second para.)

1.
Article 92(2)(c) of the Treaty (now, after amendment, Article 87(2)(c) EC), under which ‘aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division’, is compatible with the common market, was not repealed either by the Treaty on European Union or by the Treaty of Amsterdam. In those circumstances, in the light of the objective scope of the rules of Community law, the authority and effectiveness of which must be safeguarded, it cannot be presumed that that provision has been devoid of purpose since the reunification of Germany. Article 92(2)(c) of the Treaty must, as a derogation from the principle that State aid is incompatible with the common market, be interpreted strictly. The economic disadvantages caused by the division of Germany can only mean the economic disadvantages caused in certain areas of Germany by the isolation which the establishment of a physical frontier entailed, such as the breaking of communication links or the loss of markets as a result of the breaking-off of commercial relations between the two parts of German territory. That provision cannot, on the other hand, without disregarding its nature as a derogation and its context and aims, be interpreted as permitting full compensation for the undeniable economic backwardness of the new Länder, a backwardness which is attributable to the outcome of the specific economic policy choices made by the German Democratic Republic. The economic disadvantages suffered by the new Länder as a whole were not directly caused by the geographical division of Germany within the meaning of Article 92(2)(c) of the Treaty. The differences in development between the original and the new Länder are therefore explained by causes other than the geographical rift caused by the division of Germany and in particular by the different politico-economic systems set up in each part of Germany. Article 92(2)(c) of the Treaty is thus not intended to overcome the special situation resulting from the political and economic division of Germany. The consequence of such an interpretation would be that the entire territory of the new Länder could benefit from aid of any kind. Regions of the former German Democratic Republic can be regarded as having suffered economic disadvantages caused by the geographical division of Germany only if the existence of the politico-economic frontier between the two parts of Germany constituted a barrier to their economic development in a way which distinguished them from the other regions of the former German Democratic Republic. see paras 23-25, 39-43

2.
The statement of reasons required by Article 190 of the Treaty (now Article 253 EC) must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question, so as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 190 of the Treaty must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. Where a decision has been adopted in a context with which the persons concerned are familiar and forms part of a consistent decision-making practice, it can be reasoned in a summary manner. see paras 76-77

3.
Under Article 118 of the Rules of Procedure of the Court of Justice, Article 42(2) of those rules, which prohibits generally the introduction of new pleas in law in the course of the procedure, applies to the procedure before the Court of Justice on appeal from a decision of the Court of First Instance. In an appeal, the Court's jurisdiction is thus confined to review of the findings on the pleas argued before the Court of First Instance. see para. 93

4.
Article 92(3)(b) of the Treaty (now, after amendment, Article 87(3)(b) EC), unlike subparagraphs (a) and (c) of that paragraph, requires that, for State aid to be capable of being considered compatible with the common market, it must be intended to remedy a serious disturbance in the whole economy of a Member State, not merely that of some regions or areas of that State. As a derogation, Article 92(3)(b) of the Treaty must be interpreted strictly. see paras 97-98

5.
Where all the other pleas put forward in an appeal have been rejected, any plea challenging the decision of the Court of First Instance on costs must be rejected as inadmissible by virtue of the second paragraph of Article 51 of the EC Statute of the Court of Justice, which provides that no appeal shall lie regarding only the amount of the costs or the party ordered to pay them. see para. 124




JUDGMENT OF THE COURT
30 September 2003 (1)


((State aid – Compensation for the economic disadvantages caused by the division of Germany – Serious disturbance in the economy of a Member State – Regional economic development – Community framework for State aid in the motor vehicle industry))

In Joined Cases C-57/00 P and C-61/00 P,

Freistaat Sachsen, represented by J. Sedemund, Rechtsanwalt, with an address for service in Luxembourg (C-57/00 P),Volkswagen AG and Volkswagen Sachsen GmbH, represented by M. Schütte, Rechtsanwalt, with an address for service in Luxembourg (C-61/00 P),

appellants,

APPEALS against the judgment of the Court of First Instance of the European Communities (Second Chamber, Extended Composition) of 15 December 1999 in Joined Cases T-132/96 and T-143/96 Freistaat Sachsen and Others v Commission [1999] ECR II-3663, seeking to have that judgment set aside,

the other parties to the proceedings being:

Commission of the European Communities, represented by K.-D. Borchardt, acting as Agent, and M. Núñez-Müller, Rechtsanwalt, with an address for service in Luxembourg,defendant at first instance, Federal Republic of Germany, represented by T. Oppermann, acting as Agent,andUnited Kingdom of Great Britain and Northern Ireland,

interveners at first instance,



THE COURT,,



composed of: G.C. Rodríguez Iglesias, President, J.-P. Puissochet, M. Wathelet, R. Schintgen and C.W.A. Timmermans (Presidents of Chambers), D.A.O. Edward, P. Jann, V. Skouris, F. Macken (Rapporteur), S. von Bahr and J.N. Cunha Rodrigues, Judges,

Advocate General: J. Mischo,
Registrar: H.A. Rühl, Principal Administrator,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 26 February 2002, at which the Freistaat Sachsen was represented by T. Lübbig, Rechtsanwalt, Volkswagen AG and Volkswagen Sachsen GmbH by M. Schütte, the Commission by K.-D. Borchardt and M. Núñez-Müller, and the Federal Republic of Germany by T. Oppermann and W.-D. Plessing, acting as Agent,

after hearing the Opinion of the Advocate General at the sitting on 28 May 2002,

gives the following



Judgment



1
By applications lodged at the Court Registry on 23 February 2000, the Freistaat Sachsen (Free State of Saxony), first, and Volkswagen AG ( Volkswagen) and Volkswagen Sachsen GmbH ( VW Sachsen), second, brought two appeals under Article 49 of the EC Statute of the Court of Justice against the judgment of the Court of First Instance of 15 December 1999 in Joined Cases T-132/96 and T-143/96 Freistaat Sachsen and Others v Commission [1999] ECR II-3663 ( the contested judgment), dismissing their actions for partial annulment of Commission Decision 96/666/EC of 26 June 1996 concerning aid granted by Germany to the Volkswagen Group in Mosel and Chemnitz (OJ 1996 L 308, p. 46, the contested decision).

2
By order of the President of the Court of 18 May 2000, Cases C-57/00 P and C-61/00 P were joined for the purposes of the written and oral procedure and the judgment.

3
The contested judgment was delivered following applications lodged at the Registry of the Court of First Instance on 26 August 1996 by the Free State of Saxony and on 13 September 1996 by Volkswagen and VW Sachsen, seeking partial annulment of the contested decision.

4
By orders of 1 and 3 July 1998, the Federal Republic of Germany and the United Kingdom of Great Britain and Northern Ireland were granted leave by the Court of First Instance to intervene in support of the form of order sought by the applicants and the Commission respectively.

5
Parallel to the actions brought before the Court of First Instance, by application lodged at the Court Registry on 16 September 1996, the Federal Republic of Germany brought an action, registered as Case C-301/96, for partial annulment of the contested decision. The procedure in that case was suspended by the Court, by order of 4 February 1997, pending delivery of the contested judgment.

6
The legal background to the dispute was described as follows by the contested judgment:

1
By letter of 31 December 1988, the Commission informed Member States that, during its meeting of 22 December 1988 and following its decision of 19 July 1988 to establish a Community framework on State aid to the motor vehicle industry ( Community framework), based on Article 93(1) of the EC Treaty (now Article 88(1) EC), it had laid down the conditions for implementing that framework, reproduced in a document attached to the letter. It asked Member States to inform it of their acceptance of that framework within one month.

2
The Community framework was the subject of a notice (89/C 123/03) published in the Official Journal of the European Communities (OJ 1989 C 123, p. 3). Point 2.5 thereof provided that it was to enter into force on 1 January 1989 and to be valid for two years.

3
According to the fourth paragraph of Point 1, a major objective of the framework was to impose stricter discipline on the granting of aid in the motor vehicle industry in order to ensure that the competitiveness of the Community industry was not distorted by unfair competition. The Commission stated that it could operate an effective policy only if it were able to take a position on individual cases before aid was granted.

4
Under the first paragraph of Point 2.2 of the Community framework: All aid measures to be granted by public authorities within the scope of an approved aid scheme to (an) undertaking(s) operating in the motor vehicle sector as defined above, where the cost of the project to be aided exceeds ECU 12 million are subject to prior notification on the basis of Article 93(3) of the EEC Treaty. As regards aid to be granted outside the scope of an approved aid scheme, any such project, whatever its cost and aid intensity, is of course subject without exception to the obligation of notification pursuant to Article 93(3) of the EEC Treaty. Where aid is not directly linked to a particular project, all proposed aid must be notified, even if paid under schemes already approved by the Commission. Member States shall inform the Commission, in sufficient time to enable it to submit its comments, of any plan to grant or alter aid.

5
In Point 3 of the Community framework, concerning guidelines for the assessment of aid cases, the Commission stated, inter alia, as follows:

─
Regional Aid [...] The Commission acknowledges the valuable contribution to regional development which can be made by the implantation of new motor vehicle and component production facilities and/or the expansion of such existing activities in disadvantaged regions. For this reason the Commission has a generally positive attitude towards investment aid granted in order to help overcome structural handicaps in disadvantaged parts of the Community. [Such] aid is usually granted automatically in accordance with [detailed rules] previously approved by the Commission. By requiring prior notification of such aids in future, the Commission should give itself an opportunity to assess the regional development benefits (i.e. the promotion of a lasting development of the region by creating viable jobs, linkages into [the] local and Community economy) against possible adverse effects on the sector as a whole (such as the creation of [significant] overcapacity). Such an evaluation does not seek to deny the central importance of regional aid for the achievement of cohesion within the Community but rather to ensure that other aspects of Community interest such as the development of the Community's industry are also taken into account. [...]
Regional Aid [...] The Commission acknowledges the valuable contribution to regional development which can be made by the implantation of new motor vehicle and component production facilities and/or the expansion of such existing activities in disadvantaged regions. For this reason the Commission has a generally positive attitude towards investment aid granted in order to help overcome structural handicaps in disadvantaged parts of the Community. [Such] aid is usually granted automatically in accordance with [detailed rules] previously approved by the Commission. By requiring prior notification of such aids in future, the Commission should give itself an opportunity to assess the regional development benefits (i.e. the promotion of a lasting development of the region by creating viable jobs, linkages into [the] local and Community economy) against possible adverse effects on the sector as a whole (such as the creation of [significant] overcapacity). Such an evaluation does not seek to deny the central importance of regional aid for the achievement of cohesion within the Community but rather to ensure that other aspects of Community interest such as the development of the Community's industry are also taken into account. [...]

.

6
Since the German Government indicated to the Commission that it had decided not to apply the Community framework, the Commission adopted, in accordance with Article 93(2) of the Treaty, Decision 90/381/EEC of 21 February 1990 [amending] German aid schemes for the motor vehicle industry (OJ 1990 L 188, p. 55). Article 1 of that decision provides:

1.
From 1 May 1990, the Federal Republic of Germany shall notify to the Commission pursuant to Article 93(3) of the EEC Treaty all aid measures to be granted for projects costing more than ECU 12 million under the aid schemes set out in the Annex hereto to undertakings operating in the motor vehicle sector as defined in sub-section 2.1 of the Community framework for State aid to the motor vehicle industry. Such notification shall be effected in conformity with the requirements laid down in sub-sections 2.2 and 2.3. The Federal Republic of Germany shall, moreover, provide annual reports as required by the framework.

2.
Further to the list of aid schemes set out in the Annex to this Decision (which list is not exhaustive), the Federal Republic of Germany shall also comply with the obligations of Article 1(1) with regard to all other aid schemes capable of benefiting the motor vehicle industry.

3.
Aid to undertakings in the motor vehicle industry operating in Berlin which are granted under the Berlin Förderungsgesetz are excluded from the prior notification obligation provided for in the framework but shall be included in the annual reports required by that framework.

7
By letter of 2 October 1990 addressed to the German Government, the Commission approved the regional aid scheme laid down for 1991 by the Nineteenth Outline Plan adopted pursuant to the German Law of 6 October 1969 on the Joint Task [between the Federal Government and the Länder] of Improving the regional economic structure ( Gesetz über die Gemeinschaftsaufgabe Verbesserung der regionalen Wirtschaftsstruktur; hereinafter the Joint Task Law), whilst at the same time issuing a reminder of the need, when implementing the measures envisaged, to take account of the Community framework existing in certain sectors of industry. The Nineteenth Outline Plan itself indicates (Part I, point 9.3, p. 43) that the Commission: has taken decisions which prohibit the implementation of State aid granted in certain sectors even if it were granted in the context of approved programmes (regional aid for example), or which make its implementation subject to the need for prior authorisation of each of the projects which it is intended to benefit ... Such rules exist in the following areas: (a) ...

─
the motor-vehicle industry, in so far as the cost of an operation which it is intended to benefit exceeds 12 million ecus.
the motor-vehicle industry, in so far as the cost of an operation which it is intended to benefit exceeds 12 million ecus.

8
The political reunification of Germany was declared on 3 October 1990, entailing the accession to the Federal Republic of Germany of five new Länder from the former German Democratic Republic, including the Freistaat Sachsen (Free State of Saxony).

9
By letter of 31 December 1990, the Commission informed Member States that it considered it necessary to extend the Community framework.

10
That Commission decision also formed the subject-matter of a notice (91/C 81/05) published in the Official Journal of the European Communities (OJ 1991 C 81, p. 4). That notice stated, inter alia, as follows: [...] the Commission believes it necessary to renew the framework on State aid to the motor vehicle industry [...]. The only modification which the Commission has decided extends the prior notification obligation for the Federal Republic of Germany to Berlin (West) and the territory of the former GDR (Article 1(3) of the Commission's Decision of 21 February 1990, as published in OJ No L 188 of 20 July 1990, is no longer valid as from 1 January 1991). After two years the framework shall be reviewed by the Commission. If modifications appear necessary (or the possible repeal of the framework) these shall be decided upon by the Commission following consultation with the Member States.

11
By letters to the German Government of 5 December 1990 and 11 April 1991, the Commission approved the application of the Joint Task Law to the new Länder, whilst reiterating the need, when implementing the measures in question, to take account of the Community framework existing in certain sectors of industry. Similarly, by letter of 9 January 1991, it approved the extension of existing regional aid schemes to the new Länder, stating that the provisions of the Community framework had to be complied with.

12
On 23 December 1992, the Commission decided that the [Community] framework will not be modified, and that it would remain valid until a subsequent review to be organised by the Commission. That decision formed the subject-matter of a notice (93/C 36/06) published in the Official Journal of the European Communities (OJ 1993 C 36, p. 17).

13
In its judgment of 29 June 1995 in Case C-135/93 Spain v Commission [1995] ECR I-1651, at paragraph 39, the Court of Justice held that that decision should be interpreted as having extended the framework only until its next review, which, like the previous ones, had to take place at the end of a further period of application of two years, expiring on 31 December 1994.

14
Following the delivery of that judgment, by letter of 6 July 1995, the Commission informed Member States that, in the Community interest, it had decided on 5 July 1995 to prolong retroactively from 1 January 1995 its decision of 23 December 1992, thereby making the Community framework apply without interruption. The Commission stated that that prolongation would come to an end once the procedure under Article 93(1) of the Treaty, which it had simultaneously decided to open, had concluded (see paragraph 15 below). That decision, which formed the subject-matter of a notice (95/C 284/03) published in the Official Journal of the European Communities (OJ 1995 C 284, p. 3), was annulled by the judgment of the Court of Justice of 15 April 1997 in Case C-292/95 Spain v Commission [1997] ECR I-1931.

15
By a second letter of 6 July 1995, the Commission further informed the Member States of its decision of 5 July 1995 to propose to them, in the light of the judgment in Spain v Commission, to reintroduce the Community framework for a period of two years whilst making a number of amendments thereto, in particular the raising of the notification threshold to 17 million ecus (see Notice 95/C 284/03, cited above). The new text of the proposed Community framework provided, at Point 2.5, that: The appropriate measures shall enter into force when all Member States have signalled their agreement or at the latest by 1 January 1996. All aid projects, which have not yet received a final approval by the competent authority by that date, shall be subject to prior notification. The German Government gave its approval to that reintroduction of the Community framework by letter of 15 August 1995.

7
The contested judgment described the facts of the dispute as follows:

16
The entry into force of the economic, monetary and social union between the Federal Republic of Germany and the German Democratic Republic on 1 July 1990 brought with it the collapse of demand for, and production of, Trabant vehicles in Saxony. In order to safeguard the motor-vehicle industry in that region, Volkswagen AG ... entered into negotiations with the Treuhandanstalt ( THA), the public-law body entrusted with restructuring the businesses of the former German Democratic Republic, which led to an agreement in principle in October 1990. That agreement provided, inter alia:

─
for the joint creation of Sächsische Automobilbau GmbH ( SAB), a company entrusted with the responsibility for maintaining jobs ( Beschäftigungsgesellschaft), 87.5% of whose capital was initially held by the THA and 12.5% by Volkswagen;

─
for the [takeover] by SAB of the existing paint workshop (then under construction) and the final assembly workshop on the Mosel site ( Mosel I);

─
for the [takeover] by Volkswagen Sachsen GmbH ..., a wholly-owned subsidiary of Volkswagen, of an existing [engine] production plant on the Chemnitz site ( Chemnitz I);

─
for the [takeover] by VW Sachsen of cylinder-head production at the Eisenach site; and

─
for the creation by VW Sachsen of a new motor vehicle construction plant in Mosel, comprising the four main activities of manufacture, namely metal pressing, skeleton bodywork, painting and final assembly ( Mosel II) and a new [engine] production plant in Chemnitz ( Chemnitz II).

17
It was initially agreed that the reopening and restructuring of Mosel I and Chemnitz I constituted a temporary solution, designed to avoid unemployment of the existing workforce, pending the entry into service of Mosel II and Chemnitz II, scheduled for 1994.

18
By letter of 19 September 1990, the Commission asked the German Government to notify it, in accordance with the Community framework, of State aid for those investment projects. By letters of 14 December 1990 and 14 March 1991, the Commission insisted that that aid could not be put into effect without having been notified to the Commission and received its approval. That question was also entered on the agenda of two bilateral meetings held in Bonn on 31 January and 7 February 1991.

19
On 22 March 1991, on the basis of the Joint Task Law, the Saxon Ministry of the Economy and Employment adopted two [decisions] providing for the grant of certain investment grants to VW Sachsen in relation to Mosel II and Chemnitz II ( the 1991 [decisions]). The amount envisaged for those grants totalled DEM 757 million for Mosel II, with payments spread out between 1991 and 1994, and DEM 147 million for Chemnitz II, with payments spread out between 1991 and 1996.

20
On 18 March 1991, the Finanzamt (Tax Office) Zwickau-Land addressed a decision to VW Sachsen providing for the grant of certain investment allowances in accordance with the German law on investment allowances (Investitionszulagengesetz) of 1991.

21
The Volkswagen group also sought the possibility of making special depreciation write-offs, in accordance with the German Assisted Areas Law (Fördergebietsgesetz) of 1991.

22
By letter of 25 March 1991, the German authorities supplied the Commission with certain information concerning the aid referred to in paragraphs 19 to 21 above, whilst indicating that they did not yet have more precise information and that it was intended to grant it in the context of the aid schemes approved by the Commission for the new Länder. By letter of 17 April 1991, the Commission indicated that the letter from the German authorities of 25 March 1991 constituted a notification pursuant to Article 93(3) of the Treaty, but that further information was necessary.

23
By letter of 29 May 1991, the German authorities argued, inter alia, that the Community framework was not applicable to the new Länder between 1 January and 31 March 1991. In the submission of those authorities, since the aid in question had been approved before 31 March 1991, the various files related thereto could henceforth be examined by the Commission only by reference to the regional aids scheme (see paragraph 7 above). The Commission rejected the arguments of the German authorities at a meeting on 10 July 1991 and requested further detailed information by letter of 16 July 1991. Following the reply of the German Government of 17 September 1991, the Commission raised a new series of questions by letter of 27 November 1991.

24
In October and December 1991, the Volkswagen group received investment grants amounting to DEM 360.8 million and investment allowances amounting to DEM 10.6 million in relation to Mosel II and Chemnitz II.

25
By decision of 18 December 1991 (OJ 1992 C 68, p. 14 ...), notified to the German Government on 14 January 1992, the Commission opened the procedure under Article 93(2) of the Treaty for reviewing the compatibility of the various aids for financing the investments in Mosel I and II, Chemnitz I and II and the Eisenach factory with the common market.

26
In that decision, the Commission concluded, inter alia: [...] the aids proposed by [the German] authorities give rise to major concern for the following reasons.

─
they have not been properly notified to the Commission according to the procedure of Article 93(3) of the EEC Treaty;
they have not been properly notified to the Commission according to the procedure of Article 93(3) of the EEC Treaty;

─
the apparent high aid intensity proposed to a plan involving significant expansion of capacity within the European car market could give rise to unfair distortion of competition;
the apparent high aid intensity proposed to a plan involving significant expansion of capacity within the European car market could give rise to unfair distortion of competition;

─
not enough evidence has been presented to date which justifies the combination of the relatively high intensity of regional aid, the granting of indirect investment aid by the THA and the granting of a temporary operating aid also by THA by reference to the structural and economic problems which VW undoubtedly faces in the new Länder; on the contrary, the global aid intensity could be disproportionately high and incompatible with the criteria of the Community framework on State aid to the sector.
not enough evidence has been presented to date which justifies the combination of the relatively high intensity of regional aid, the granting of indirect investment aid by the THA and the granting of a temporary operating aid also by THA by reference to the structural and economic problems which VW undoubtedly faces in the new Länder; on the contrary, the global aid intensity could be disproportionately high and incompatible with the criteria of the Community framework on State aid to the sector.

27
By letter of 29 January 1992, the German Government declared itself willing to suspend all aid payments until the review procedure was terminated.

28
By letter of 24 April 1992, the Commission asked the German authorities, the THA and Volkswagen for further information. Further to a meeting of 28 April 1992 and the Commission's letters of 14 May, 5 June, 21 August and 17 November 1992, the German authorities provided additional information by letters of 20 May, 3 and 12 June, 20 and 29 July, 8 and 25 September, 16 and 21 October, and 4 and 25 November 1992; Volkswagen gave additional information by letters of 15 June and 30 October 1992, and 12 and 20 June 1993. The parties also met on 16 June, 9 September, 12 and 16 October and 3 December 1992, and on 8 and 11 June 1993.

29
On 13 January 1993, Volkswagen decided to postpone a large part of the investments initially intended for the Mosel and Chemnitz factories. The paint workshop and final assembly line of Mosel II were henceforth to become operational only in 1997, and the [engine] production unit at Chemnitz II was not to enter into service until 1996. The Commission agreed to review its assessment on the basis of Volkswagen's new investment projects.

30
On 30 March 1993, the Saxon Ministry of the Economy and Employment adopted two [decisions] amending the 1991 [decisions] ( the 1993 [decisions]). The total amount of the investment grants thenceforth envisaged amounted to DEM 708 million for Mosel II, with payments spread between 1991 and 1997, and DEM 195 million for Chemnitz II, with payments spread between 1992 and 1997.

31
Certain details of Volkswagen's new investment projects were submitted to the Commission during an interview which took place on 5 May 1993. By letter of 6 June 1993, Germany also communicated certain information on those projects, which Volkswagen supplemented by letters of 24 June and 6 July 1993 and a fax message of 10 November 1993. That new information was also examined during interviews which took place on 18 May, 10 June, 2 and 22 July 1993. Fresh information [on] the production capacities envisaged by Volkswagen was supplied in a letter from the German Government of 15 February and a fax message of 25 February 1994.

32
The Commission also collected new information on those projects on a visit to the sites at the beginning of April 1994 and during interviews which took place on 11 May and 2, 7 and 24 June 1994. In addition, documents were submitted to it on the occasion of those interviews and others were sent to it by the German authorities and by Volkswagen on 10 May, 30 June and 4 and 12 July 1994.

33
On 24 May 1994, the Saxon Ministry of the Economy and Employment adopted two [decisions] amending the 1991 and 1993 [decisions] ( the 1994 [decisions]). The total amount of the investment grants thenceforth envisaged amounted to DEM 648 million for Mosel II, with payments spread between 1991 and 1997, and DEM 167 million for Chemnitz II, with payments spread between 1992 and 1997.

34
By an agreement of 21 June 1994, supplemented by an annex of 1 November 1994, Volkswagen acquired from the THA the 87.5% of the shares in SAB which it did not already own.

35
On 27 July 1994, the Commission adopted Decision 94/1068/EC of 27 July 1994 concerning aid granted to the Volkswagen Group for investments in the new German Länder (OJ 1994 L 385, p. 1; the Mosel I decision). In that decision, the Commission found, inter alia, as follows (Point IV, fourth paragraph, of the recitals): On opening the procedure the Commission had regarded all Volkswagen's investment plans in Saxony as a single project and therefore intended to decide on all elements of State aid together. Even after its decision in 1993 to postpone investment in the new plants, Volkswagen initially argued that this did not affect the production technology, the labour input and other crucial variables. This year, however, on the basis of information collected during a site visit and through new expert advice, it became obvious that this view could no longer be maintained. Volkswagen also acknowledged to the Commission that their former plans had become obsolete and that they were being reworked. The new plans for the new car and engine plants Mosel II and Chemnitz II will now be closely linked to the development of the Golf A4 that will be put into production at the same time as Mosel II is now planned to come on stream, i.e. in 1997. A final version of the new plans will only be available at the end of 1994. On the basis of current information these new plans will include significant changes in technology and production structure. Under these circumstances it is obvious that the original link between the investment projects in the existing former THA plants and the new greenfield projects has been severed. The Commission has therefore decided to limit its current decision to the restructuring aid for the existing plants, on which it can form a clear opinion on the basis of the available information, and to postpone the decision on the aid to the greenfield projects until Volkswagen and Germany are able to present their definitive investment and aid plans.

36
The Mosel I decision shows that the paint and final assembly workshops of Mosel I were modernised and altered in accordance with the agreement concluded with the THA (see paragraph 16 above). In an initial period to 1992, Mosel I was used for the final assembly of the VW Polo and Golf A2 models, the parts for which were manufactured elsewhere by other plants of the Volkswagen group and delivered to Mosel in separate pieces. From July 1992, the combined use of the paint and final assembly workshops of Mosel I, the alteration of which had just been completed, and of the new body workshop of Mosel II, which had just come into service, allowed the production launch of the Golf A3 model at Mosel, pressing work being carried out elsewhere. As a result, logistics were transferred from the Wolfsburg site to Mosel I in January 1993, and new supplier undertakings, capable of supplying the necessary parts to Mosel I and Chemnitz I, were established in the proximity. The new press shop of Mosel II started to function in March 1994, close to Mosel I.

37
It was in those circumstances that, in Article 1 of the Mosel I decision, the Commission declared various aids granted up to the end of 1993 (the date on which the restructuring was to be completed), and amounting to DEM 487.3 million for Mosel I and DEM 84.8 million for Chemnitz I, compatible with the common market. However, certain aid granted subsequently was declared incompatible with the common market, particularly that categorised as aid for replacement and modernisation investments, which according to the Mosel I decision could not be authorised under the Community framework (see the Mosel I decision, Points IX and X).

38
Subsequently, the German Government verbally informed the Commission, a number of times, of delays occurring in the creation of Mosel II and Chemnitz II. In a letter of 12 April 1995, the Commission reminded the German authorities that they were required to notify it of Volkswagen's projects for those new plants, so that it could carry out a review of the aids concerned. That letter received no reply. By letter of 4 August 1995, the Commission requested that the necessary information be communicated to it as soon as possible, stating that, if Germany did not comply with that request, it would adopt a provisional decision, followed by a definitive one, on the basis of the information it already had. In reply to that letter, the German Government informed the Commission, by letter of 22 August 1995, that Volkswagen's investment projects were still not finalised.

39
On 31 October 1995, the Commission adopted Decision 96/179/EC, enjoining the German Government to provide all documentation, information and data on the new investment projects of the Volkswagen Group in the new German Länder and on the aid to be granted to them (OJ 1996 L 53, p. 50).

40
Following that decision, certain information concerning those projects and on the subject of production capacity was communicated to the Commission during an interview on 20 November 1995. That information was confirmed by letter of 13 December 1995 and clarified on a visit to the sites on 21 and 22 December 1995. On 15 January 1996, the Commission put other questions to the German authorities. After an interview on 23 January 1996, most of the missing information was communicated to the Commission by letters of 1 and 12 February 1996.

41
On 21 February 1996, the Saxon Ministry of the Economy and Employment adopted two [decisions] amending the 1991, 1993 and 1994 [decisions] ( the 1996 [decisions]). The total amount of the investment grants thenceforth envisaged amounted to DEM 499 million for Mosel II, with payments spread between 1991 and 1997, and DEM 109 million for Chemnitz II, with payments spread between 1992 and 1997.

42
By letter of 23 February 1996, the Commission reminded the German authorities that it still lacked certain information. That information was communicated to it at an interview on 25 March 1996 and was subsequently discussed on 2 and 11 April 1996. A further interview took place on 29 May 1996.

43
On 26 June 1996, the Commission adopted [the contested decision], the operative part of which reads as follows: Article 1 The following aid proposed by Germany for the various investment projects of Volkswagen ... in Saxony is compatible with Article 92(3)(c) of the EC Treaty and Article 61(3)(c) of the [Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3, the EEA Agreement)]:

─
aid granted by Germany to [the Volkswagen group] for [its] investment projects in Mosel (Mosel II) and Chemnitz (Chemnitz II) in the form of investment grants (Investitionszuschüsse) of up to DEM 418.7 million,
aid granted by Germany to [the Volkswagen group] for [its] investment projects in Mosel (Mosel II) and Chemnitz (Chemnitz II) in the form of investment grants (Investitionszuschüsse) of up to DEM 418.7 million,

─
aid granted by Germany to [the Volkswagen group] for [its] investment projects in Mosel (Mosel II) and Chemnitz (Chemnitz II) in the form of investment allowances (Investitionszulagen) of up to DEM 120.4 million. Article 2 The following aid proposed by Germany for the various investment projects of Volkswagen ... in Saxony is incompatible with Article 92(3)(c) of the EC Treaty and Article 61(3)(c) of the EEA Agreement and may not be granted:
aid granted by Germany to [the Volkswagen group] for [its] investment projects in Mosel (Mosel II) and Chemnitz (Chemnitz II) in the form of investment allowances (Investitionszulagen) of up to DEM 120.4 million. Article 2 The following aid proposed by Germany for the various investment projects of Volkswagen ... in Saxony is incompatible with Article 92(3)(c) of the EC Treaty and Article 61(3)(c) of the EEA Agreement and may not be granted:

─
the proposed investment aid for [the Volkswagen group] for [its] investment projects in Mosel II and Chemnitz II in the form of special depreciation on investment under the Assisted Areas Law (Fördergebietsgesetz) with a nominal value of DEM 51.67 million,
the proposed investment aid for [the Volkswagen group] for [its] investment projects in Mosel II and Chemnitz II in the form of special depreciation on investment under the Assisted Areas Law (Fördergebietsgesetz) with a nominal value of DEM 51.67 million,

─
the proposed investment aid to [the Volkswagen group] for [its] investment project in Mosel II in the form of investment grants (Investitionszuschüsse) in excess of the amount specified in the first indent of Article 1 and constituting an additional DEM 189.1 million. Article 3 Germany shall ensure that the capacity of the Mosel plants in 1997 does not exceed a level of 432 units per day [...] Furthermore, Germany shall send to, and discuss with, the Commission an annual report on the realisation on the DEM 2 654.1 million of eligible investments in Mosel II and Chemnitz II and the actual payments of aid so as to ensure that the combined effective aid intensity expressed in gross grant equivalent does not exceed 22.3% for Mosel II and 20.8% for Chemnitz II [...] Article 4 Germany shall inform the Commission within one month of the notification of this Decision of the measures taken to comply herewith. Article 5 This Decision is addressed to the Federal Republic of Germany.
the proposed investment aid to [the Volkswagen group] for [its] investment project in Mosel II in the form of investment grants (Investitionszuschüsse) in excess of the amount specified in the first indent of Article 1 and constituting an additional DEM 189.1 million. Article 3 Germany shall ensure that the capacity of the Mosel plants in 1997 does not exceed a level of 432 units per day [...] Furthermore, Germany shall send to, and discuss with, the Commission an annual report on the realisation on the DEM 2 654.1 million of eligible investments in Mosel II and Chemnitz II and the actual payments of aid so as to ensure that the combined effective aid intensity expressed in gross grant equivalent does not exceed 22.3% for Mosel II and 20.8% for Chemnitz II [...] Article 4 Germany shall inform the Commission within one month of the notification of this Decision of the measures taken to comply herewith. Article 5 This Decision is addressed to the Federal Republic of Germany.

44
Following a letter sent by the chairman of Volkswagen to the first minister of the Free State of Saxony on 8 July 1996, the Free State of Saxony paid Volkswagen, in July 1996, DEM 90.7 million in investment grants which the Commission had declared in [the contested decision] to be incompatible with the common market.

The contested judgment

8
It is apparent from paragraph 97 of the contested judgment that the Court of First Instance considered the pleas in law and arguments adduced by the appellants under three main headings, concerning the alleged infringements, first, of Article 92(2)(c) of the EC Treaty (now, after amendment, Article 87(2)(c) EC), next, of Article 92(3) of the EC Treaty, and, finally, of the principle of the protection of legitimate expectations. The Court of First Instance further decided that the complaints concerning distortion of the facts and the plea alleging defects in the reasoning for the contested decision could in any event be exhaustively examined while at the same time being formally attached to one or other of those three headings.

9
By the contested judgment, the Court of First Instance dismissed the appellants' actions and ordered them to pay the costs.

10
In support of the appeals brought against the contested judgment, the appellants put forward five pleas in law: first, breach of Article 92(2)(c) of the Treaty; second, breach of Article 190 of the EC Treaty (now Article 253 EC); third, breach of Article 92(3)(b) of the Treaty; fourth, breach of Articles 92(3) and 93 of the Treaty; and fifth, the finding of a partial discontinuance.

First plea in law: breach of Article 92(2)(c) of the Treaty

11
The Court of First Instance held as follows in the contested judgment:

129
Under Article 92(2)(c) of the Treaty, aid compatible with the common market includes aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division.

130
Far from being implicitly repealed following German reunification, that provision was retained by both the Maastricht Treaty concluded on 7 February 1992 and the Amsterdam Treaty concluded on 2 October 1997. Moreover, an identical provision was inserted into Article 61(2)(c) of the [EEA Agreement].

131
Having regard to the objective scope of the rules of Community law, the authority and effectiveness of which must be preserved, it cannot therefore be assumed that that provision has become devoid of purpose since the reunification of Germany, as the Commission maintained at the hearing, contradicting its own administrative practice (see, in particular, the Daimler-Benz and Tettau decisions).

132
It should, nevertheless, be emphasised that, since it is a derogation from the general principle laid down in Article 92(1) of the Treaty that State aid is incompatible with the common market, Article 92(2)(c) of the Treaty must be interpreted narrowly.

133
Moreover, as the Court of Justice has emphasised, in interpreting a provision of Community law it is necessary to consider not only its wording but also the context in which it occurs and the aims of the rules of which it forms part (Case 292/[82] Merck v Hauptzollamt Hamburg-Jonas [1983] ECR 3781, 3792; Case 337/82 St. Nikolaus Brennerei v Hauptzollamt Krefeld [1984] ECR 1051, 1062).

134
In this case, the phrase division of Germany refers historically to the establishment of the dividing line between the two zones in 1948. Therefore, the economic disadvantages caused by that division can only mean the economic disadvantages caused by the isolation which the establishment or maintenance of that frontier entailed, such as, for example, the encirclement of certain areas (see the Daimler-Benz decision), the breaking of communication links (see the Tettau decision), or the loss of the natural markets of certain undertakings, which therefore need support, either to be able to adapt to new conditions or to be able to survive that disadvantage (on that point, but in relation to the fourth paragraph of Article 70 of the ECSC Treaty, see [Joined Cases 3/58 to 18/58, 25/58 and 26/58 Barbara Erzbergbau and Others [1960] ECR 173, at p. 195]).

135
By contrast, the conception of the applicants and the German Government, according to which Article 92(2)(c) of the Treaty permits full compensation for the undeniable economic backwardness suffered by the new Länder, until such time as they reach a level of development comparable with that of the original Länder, disregards both the nature of that provision as a derogation and its context and aims.

136
The economic disadvantages suffered by the new Länder as a whole have not been caused by the division of Germany within the meaning of Article 92(2)(c) of the Treaty. As such, the division of Germany has had only marginal consequences on the economic development of either zone, which, moreover, it affected equally at the outset, and it has not prevented the economies of the original Länder from developing favourably thereafter.

137
It follows that the differences in development between the original and the new Länder are explained by causes other than the division of Germany as such, and in particular by the different politico-economic systems established in each State on either side of the frontier.

138
It also follows from the above that the Commission did not make any error of law by stating generally, in the third paragraph of Point X of the [contested decision], that the derogation laid down in Article 92(2)(c) of the Treaty should not be applied to regional aid for new investment projects and that the derogations provided for in Article 92(3)(a) and (c) of the Treaty and the Community framework were sufficient to deal with the problems faced by the new Länder.

139
In that respect, the applicants are wrong to accuse the Commission of contradictory reasoning in its description of the disputed investments at other points in the [contested decision] as extensions of existing capacity. The expression regional aid for new investment projects is used in reply to a general argument raised by the German Government (see Point V, first paragraph, subparagraph 1 of the [contested decision]) and thus concerns not aid to Volkswagen's investment plans at Mosel II and Chemnitz II specifically, but the whole of the aid intended to promote general economic development of the new Länder.

140
Moreover, as regards the question whether, apart from its character as aid for the economic development of the Free State of Saxony, the aid in question is specifically designed to compensate for the disadvantages caused by the division of Germany, it should be borne in mind that a Member State which seeks to be allowed to grant aid by way of derogation from the Treaty rules has a duty to collaborate with the Commission, requiring it in particular to provide all the information to enable the Commission to verify that the conditions for the derogation sought are fulfilled ([Case C-364/90 Italy v Commission [1993] ECR I-2097], paragraph 20).

141
On that point, there is nothing in the documents before the Court to show that the German Government or the applicants put forward specific arguments during the administrative procedure in order to prove a causal link between the situation of the motor-vehicle industry in Saxony after German reunification and the division of Germany.

142
The Commission is therefore right in maintaining that the parties have not put forward specific evidence capable of justifying the application of Article 92(2)(c) of the Treaty to this case.

143
Before the Court, the applicants, and the German Government, which refers on those questions to its written submissions in Case C-301/96, have argued that proof of the economic disadvantages caused to Saxony by the division of Germany arose from a comparison between German motor-vehicle production carried on in that region before 1939 and that achieved in 1990. According to those parties, the relative decline of the motor-vehicle industry in Saxony, compared with that of West Germany in general, was caused in particular by the partition of the German market and the corresponding loss of that industry's traditional outlets to the West, following that partition.

144
In so far as that argument is capable of being raised before the Court of First Instance, given that it was not raised during the administrative procedure (see Joined Cases C-278/92, C-279/[92] and C-280/[92] Spain v Commission [1994] ECR I-4103, paragraph 31; Case T-37/97 Forges de Clabecq v Commission [1999] ECR II-859, paragraph 93), it must be rejected.

145
Even if there were obstacles to inter-German trade, entailing the loss of traditional outlets for the motor-vehicle industry in Saxony, that would not automatically mean that the poor economic situation of that industry in 1990 was a direct consequence of that loss of outlets caused, ex hypothesi, by the division of Germany in 1948. The difficulties referred to by the applicants are primarily the result of the different economic organisation of the East German regime itself, which was not caused by the division of Germany within the meaning of Article 92(2)(c) of the Treaty.

146
A comparison between the position of the motor-vehicle industry in Saxony before 1939 and that in 1990 is not therefore in itself enough to establish the existence of a sufficiently direct link between the economic disadvantages suffered by that industry at the time of the granting of the aid in dispute and the division of Germany within the meaning of Article 92(2)(c).

147
As for [the Commission decision of 11 December 1964 concerning aids designed to facilitate the integration of the Saarland into the economy of the Federal Republic of Germany ( Bulletin of the European Economic Community No 2-1965, p. 33, the Saarland decision)], none of the parties have produced or requested it in these proceedings. The applicants have failed to show that the latter decision reflected a different approach by the Commission in the past and that such an approach, if it were established, would call into question the validity of the legal assessments made in 1996.

148
In those circumstances, the applicants and the Federal Republic of Germany have not adduced sufficient evidence to support the conclusion that the Commission exceeded the limits of its discretion by holding that the aid in question did not comply with the conditions for benefiting from the derogation laid down in Article 92(2)(c) of the Treaty.

First part of the plea

12
By the first part of the first plea in law, the appellants and the German Government allege that the interpretation of Article 92(2)(c) of the Treaty adopted by the Court of First Instance is incompatible with the wording, history, effectiveness and scheme of that provision.

The wording of Article 92(2)(c) of the Treaty

─ Arguments of the parties

13
As regards the wording of Article 92(2)(c) of the Treaty, the appellants and the German Government claim that the Court of First Instance erred in law and that the expression division of Germany in that provision refers to the consequences flowing from the coexistence of two different economic and political systems and not to physical criteria or criteria relating to transport.

14
In support of their argument, the appellants and the German Government submit, first, that the Community institutions, in the context of the protocol on German internal trade, used the expression division of Germany as synonymous with the differentiation between opposing economic systems; next, that the Court, in its judgment in Case C-432/92 Anastasiou and Others [1994] ECR I-3087, concerning Cyprus, used as a synonym of division the word partition; and finally, that the Community institutions used the expression division of Europe in the context of the separation of Europe into two blocks in the answer to written question No 2654/85 from Mr Pordea, Member of the European Parliament (OJ 1988 C 236, p. 4). That shows that the expression division of Germany refers not to the mere physical establishment of the frontier between east and west, but the politico-economic separation of the European continent.

15
The German Government adds that the expression division of Germany within the meaning of Article 92(2)(c) of the Treaty cannot, as was done by the Court of First Instance without reasoning and in a historically inaccurate manner, be related exclusively to the year 1948. That expression can only be understood as referring to a process which developed and intensified continuously from 1945 to 1990. Since the Court of First Instance drew important consequences from that finding for the understanding of the provision on division, it committed an error of law which must entail the annulment of the contested judgment.

16
The government contests the Court of First Instance's assertion that Article 92(2)(c) of the Treaty should be interpreted narrowly, since such an interpretation leads to a result which is contrary to the wording and spirit of that provision.

17
According to the Commission, by contrast, none of the German, French and English versions of the provision supports the interpretation that the term division designates not only a division of the State but also, and above all, a division between two different political, social and economic systems.

18
As to the argument relating to the protocol on German internal trade, it is either inadmissible, in so far as it was not raised before the Court of First Instance, or unfounded, in so far as it does not imply that the expression division of Germany designates the partition of a previously unitary economic territory into two different politico-economic systems.

19
Moreover, the reference to the de facto partition of Cyprus is immaterial, since that has not been recognised internationally. As to the answer to Mr Pordea's written question, that is political and therefore has no binding effect.

─ Findings of the Court

20
First of all, with respect to the plea of inadmissibility raised by the Commission pursuant to Articles 42(2) and 118 of the Rules of Procedure of the Court against the argument of the appellants and the German Government based on the protocol on German internal trade, it must be said that that argument does not constitute a new plea but an argument in support of a plea already raised at first instance. In those circumstances, the plea of inadmissibility must be rejected.

21
As regards the interpretation of Article 92(2)(c) of the Treaty, the Court of First Instance was right to hold, in paragraph 134 of the contested judgment, that the expression division of Germany in that provision refers to the disadvantages caused by the isolation entailed by the establishment or maintenance of the inter-German frontier.

22
Such an interpretation by the Court of First Instance corresponds to that adopted by the Court in Case C-156/98 Germany v Commission [2000] ECR I-6857 and Case C-334/99 Germany v Commission [2003] ECR I-1139.

23
After noting, in paragraph 49 of the judgment in Case C-156/98 Germany v Commission, that Article 92(2)(c) of the Treaty must, as a derogation from the general principle that State aid is incompatible with the common market, be interpreted narrowly, the Court held, in paragraph 52, that the economic disadvantages caused by the division of Germany could only mean the economic disadvantages caused in certain areas of Germany by the isolation which the establishment of a physical frontier entailed, such as the breaking of communication links or the loss of markets as a result of the breaking-off of commercial relations between the two parts of German territory.

24
That provision cannot, on the other hand, be interpreted, as the appellants and the German Government submit, as permitting full compensation for the undeniable economic backwardness of the new Länder, a backwardness which is attributable to the outcome of the specific economic policy choices made by the German Democratic Republic.

25
The Court has already held in paragraph 54 of the judgment in Case C-156/98 Germany v Commission that the economic disadvantages suffered by the new Länder as a whole were not directly caused by the geographical division of Germany within the meaning of Article 92(2)(c) of the Treaty and, in paragraph 55 of that judgment, that the differences in development between the original and the new Länder are therefore explained by causes other than the geographical rift caused by the division of Germany and in particular by the different politico-economic systems set up in each part of Germany.

26
The protocol on German internal trade of 1957, relied on by the appellants and the German Government, cannot affect that conclusion, since its object was not to remedy the existence of two different political and economic systems but to avoid the establishment of the customs frontier exterior to Community territory from obstructing trade between the two economic zones disproportionately as regards the free movement of goods.

27
As to the Anastasiou and Others judgment relating to the partition of the territory of Cyprus and the answer to Mr Pordea's written question, they are not material in the present case, since they do not constitute an interpretation of the expression division of Germany in Article 92(2)(c) of the Treaty.

The history and effectiveness of Article 92(2)(c) of the Treaty

─ Arguments of the parties

28
As regards the history and effectiveness of the provisions of Article 92(2)(c) of the Treaty, the appellants and the German Government point out that those provisions, which already appeared in the EEC Treaty, were maintained, even after German reunification, in the Treaty on European Union and the Treaty of Amsterdam, which demonstrates that the Member States understood that derogation as intended to overcome the special situation resulting from the political and economic division of Germany.

29
In this respect, the interpretation adopted by the Court of First Instance in paragraph 134 of the contested judgment is, according to the appellants and the German Government, incompatible with the maintenance of those provisions after German reunification. They cannot therefore, without losing their effect, apply solely to the disadvantages caused by the encirclement of certain areas, the breaking of communication links or the loss of markets on the other side of the inter-German frontier.

30
Moreover, Article 92(2)(c) of the Treaty was applied by the Commission in the Saarland decision.

31
On this point, the procedural objection raised by the Court of First Instance in paragraph 147 of the contested judgment constitutes, in their view, a breach, in particular, of Article 64 of the Rules of Procedure of the Court of First Instance.

32
According to the appellants, it was not until the stage of the rejoinder that the Commission called its own previous decision into question by submitting that the Saarland decision had been adopted under Article 92(2)(b) of the Treaty, whereas, in its defence, it had acknowledged that that decision was based on Article 92(2)(c) of the Treaty. The Court of First Instance should therefore have made use of its powers under Article 64 of the Rules of Procedure and ordered that decision to be produced.

33
Moreover, the provisions of Article 92(2)(c) of the Treaty were not applied in the past solely to the regions immediately adjacent to the frontier, since over a third of German territory benefited from the application of that provision. Furthermore, according to the appellants, aids to the regions bordering on eastern Germany were not made subject to the condition that specific disadvantages resulting from the physical course of the frontier between the German States were proved, but could be granted in order to preserve sound industrial structures.

34
In this respect, while the Commission acknowledges that the provisions of Article 92(2)(c) were still in force at the material time, it disputes that the conditions for their application were satisfied in the present case. It notes, moreover, that it applied those provisions in Commission Decision 92/465/EEC of 14 April 1992 concerning aid granted by the Land of Berlin to Daimler-Benz AG Germany (OJ 1992 L 263, p. 15, the Daimler-Benz decision) and in the decision of 13 April 1994 concerning aid to producers of glass containers and porcelain established in Tettau (OJ 1994 C 178, p. 24, the Tettau decision), but always refused to apply them in the new Länder to State aid which was not related to the inter-German frontier.

35
As to the argument concerning the Saarland decision, this is inadmissible, in that the appellants did not ask the Court of First Instance to order that decision to be produced, nor did they raise an objection at the proper time.

36
In the alternative, even if the Court of First Instance infringed Article 64 of its Rules of Procedure, this argument is of no relevance. First, that infringement cannot entail the annulment of the contested judgment, inasmuch as the alleged infringement did not cause the appellants any detriment. Second, even if the aids granted in the context defined by the Saarland decision were granted under Article 92(2)(c) of the Treaty, that is of no consequence, since the Court of First Instance observed in paragraph 147 of the contested judgment that the appellants had not shown that that approach, if it were established, would call into question the validity of the legal assessments made in 1996. They have not demonstrated this in the context of their appeals either.

37
As regards aid to regions bordering on eastern Germany, the Commission states not only that, in order to benefit from aid on that basis, the old Länder had to show the existence of a specific disadvantage caused by the inter-German frontier, but also that that aid could not benefit regions a long way away from that frontier. Volkswagen's plants in Saxony are more than 100 km from that frontier.

38
As regards the maintenance of the provisions of Article 92(2)(c) of the Treaty in the Treaty on European Union and the Treaty of Amsterdam, the Commission says that it was only because of the rule of unanimity applicable in the matter and the insistence of the Federal Republic of Germany that those provisions were maintained. As to the EEA Agreement, although similar provisions are found there, that is because of the need to respect the Community acquis.

─ Findings of the Court

39
It is common ground that the provisions of Article 92(2)(c) of the Treaty were not repealed by either the Treaty on European Union or the Treaty of Amsterdam. In those circumstances, in the light of the objective scope of the rules of Community law, the authority and effectiveness of which must be safeguarded, it cannot be presumed that those provisions have been devoid of purpose since the reunification of Germany (see Case C-156/98 Germany v Commission, paragraphs 47 and 48).

40
However, it is not arguable that, contrary to the view taken by the Court of First Instance in paragraph 134 of the contested judgment, Article 92(2)(c) of the Treaty is intended to overcome the special situation resulting from the political and economic division of Germany.

41
The consequence of such an interpretation would be that the entire territory of the new Länder could benefit from aid of any kind.

42
Article 92(2)(c) of the Treaty cannot, without disregarding both the nature of that provision as a derogation and its content and objectives, permit full compensation for the undeniable economic backwardness suffered by the new Länder (see paragraph 24 above and Case C-156/98 Germany v Commission, paragraph 53).

43
In this respect, as the Advocate General rightly observes in points 46 and 47 of his Opinion, the Mosel and Chemnitz regions could be regarded as having suffered economic disadvantages caused by the geographical division of Germany only if the existence of the politico-economic frontier between the two parts of Germany constituted a barrier to their economic development in a way which distinguished them from the other regions of the former German Democratic Republic.

44
The Mosel and Chemnitz regions are situated more than 100 km from the former inter-German frontier and, as the German Government has moreover acknowledged, after the period from 1945 to 1949 they enjoyed a remarkable recovery within the framework of the conditions of the communist economic system.

45
The Saarland decision relied on by the appellants and the German Government cannot alter that conclusion.

46
On this point, it must be stated at the outset that the Court of First Instance did not infringe Article 64(1) and (2) of its Rules of Procedure by failing to order the Commission to produce a copy of that decision.

47
The Court of First Instance is the sole judge of whether the information available to it concerning the cases before it needs to be supplemented (Case C-315/99 P Ismeri Europa v Court of Auditors [2001] ECR I-5281, paragraph 19). Moreover, since neither the appellants nor the German Government asked the Court of First Instance for measures of organisation of the procedure consisting in the production of the Saarland decision, their argument that that Court should have ordered it to be produced must be rejected.

48
It follows that the Court of First Instance was right to hold, in paragraph 147 of the contested judgment, that the appellants and the German Government had failed to show that that decision reflected a different approach by the Commission in the past.

49
In any event, the Saarland decision does not permit a different conclusion.

50
It is apparent from that decision that the Commission, either under Article 92(2)(b) or under Article 92(2)(c) of the Treaty, authorised certain aid in favour, first, of expellees, refugees and victims of the war or of dismantling of plants, second, the regions adjoining the Soviet zone, third, Berlin, because of its special situation, and, finally, the Saarland, in order to promote its integration into the Federal Republic of Germany.

51
However, contrary to the German Government's argument, that aid was not granted solely for the benefit of the Saarland and, in particular, the legal basis relied on by the Commission in authorising the aid granted to that Land is not clearly stated. As the Advocate General observes in point 71 of his Opinion, Article 92(2)(b) and Article 92(2)(c) of the Treaty are mentioned as alternatives, and, since the Saarland decision relates also to aid in favour of regions adjoining the Soviet zone and of Berlin, it is not possible to deduce from the reference to Article 92(2)(c) of the Treaty that that reference was made solely in respect of the Saarland, as it could have been made only in respect of the regions adjoining the Soviet zone and Berlin.

52
In any event, whatever the interpretation given by the Commission to Article 92(2)(c) of the Treaty in the past, that cannot affect the correctness of the Commission's interpretation of that provision in the contested decision and hence its validity.

53
It is only in the context of Article 92(2)(c) of the Treaty that the validity of the contested decision must be examined, not by reference to an alleged earlier practice.

The scheme of Article 92(2)(c) of the Treaty

─ Arguments of the parties

54
With respect to the scheme of Article 92(2)(c) of the Treaty, the appellants and the German Government state that compensation, in the transport field, for the disadvantages linked with the division of Germany is the subject of a special provision of the Treaty, in Title IV of Part Three on transport policy, namely Article 82 of the EC Treaty (now Article 78 EC). Measures specific to transport taken by Germany to overcome its former division come primarily under that provision.

55
The Commission submits that the reference to Article 82 of the Treaty is irrelevant. The Court of First Instance did not limit the disadvantages caused by the division of Germany solely to the consequences for transport. Furthermore, that provision does not concern State aid.

─ Findings of the Court

56
On this point, it suffices to state that, contrary to the argument of the appellants and the German Government, the Court of First Instance did not intend, in paragraph 134 of the contested judgment, to limit the application of Article 92(2)(c) of the Treaty solely to the consequences affecting transport links, which were moreover mentioned only as an illustration, since other consequences are also referred to, such as the encirclement of certain regions or the loss of natural markets.

57
Moreover, while Article 82 of the Treaty permits the German authorities to maintain or introduce national measures relating to transport policy which derogate from the common transport policy, such measures cannot, on the other hand, derogate from the rules governing public aid to transport infrastructure.

58
Accordingly, the first part of the first plea must be rejected.

Second part of the plea

Arguments of the parties

59
By the second part of the first plea, Volkswagen and VW Sachsen claim that, in paragraph 136 of the contested judgment, the Court of First Instance interfered with the institutional balance provided for in the Treaty by making findings of its own as regards the causes of the economic disadvantages of the new Länder which the Commission had not made in the contested decision. It is primarily for the Commission to examine whether aid proposed by a Member State under Article 92(2)(c) of the Treaty satisfies the conditions for the application of that provision. The Court of First Instance cannot substitute its own findings for those of the Commission.

60
Thus, by finding that Article 92(2)(c) of the Treaty was not applicable, on the ground that the economic disadvantages had not been caused by the division of Germany, the Court of First Instance went beyond an interpretation of that concept of division to apply that provision in the specific case. Under the rules laid down both in that provision and in Article 93 of the Treaty, such an application is reserved, in the first place, to the Member State and, in the second place, by means of a review aimed at detecting possible abuses, to the Commission.

61
The Commission says that it fails to understand how the contested judgment could interfere with the balance between the Community institutions such that it infringed the Treaty. The Commission submits that, contrary to the assertions of Volkswagen and VW Sachsen, the Court of First Instance did not supplement the reasoning of the contested decision, but confirmed that put forward by the Commission. Moreover, in this field, the Commission's role is not limited to ascertaining whether the discretionary decisions of the Member States contain abuses.

Findings of the Court

62
In this respect, the Court of First Instance confined itself to repeating, in paragraph 136 of the contested judgment, an argument adduced by the Commission, namely that the general poor economic situation of the new Länder was a direct consequence not of the division of Germany but of the political system of the German Democratic Republic.

63
The fact that that argument is not set out exhaustively in the contested decision cannot have the effect of preventing the Court of First Instance from answering the appellants' argument that the finding of backwardness in the economic development of the new Länder suffices to make Article 92(2)(c) of the Treaty applicable by stating that there was no direct causal link between that situation and the division of Germany.

64
The second part of the first plea must therefore be rejected.

65
In those circumstances, the Court of First Instance did not make an error of law with respect to the interpretation of Article 92(2)(c) of the Treaty, and the first plea in law must therefore be rejected in its entirety.

Second plea: breach of Article 190 of the Treaty

66
The Court of First Instance held as follows in the contested judgment:

149
As for the complaint of insufficient reasoning, it should be recalled that the statement of reasons required by Article 190 of the ... Treaty ... must clearly and unequivocally show the reasoning of the institution which adopted the measure, so as to enable the Community judicature to exercise its power of review and the persons concerned to know the grounds on which the measure was adopted (see, for example, Case T-84/96 Cipeke v Commission [1997] ECR II-2081, paragraph 46).

150
In this case, the [contested decision] contains only a brief summary of the grounds for the Commission's refusal to apply the derogation in Article 92(2)(c) of the Treaty to the facts of the case.

151
Nevertheless, the [contested decision] was adopted in a context that was well known to the German Government and the applicants and forms part of a consistent line of decision-making practice, particularly in relation to those parties. Such a decision may be supported by a summary statement of reasons (Case 73/74 Papiers Peints v Commission [1975] ECR 1491, paragraph 31; Case T-34/92 Fiatagri and New Holland Ford v Commission [1994] ECR II-905, paragraph 35).

152
Since 1990, in its relations with the Commission, the German Government has referred many times to Article 92(2)(c) of the Treaty, insisting on the importance of that provision for the recovery of the former East Germany (see, in particular, the letter from Chancellor Kohl to President Delors of 9 December 1992 ...).

153
The arguments put forward by the German Government in that regard were rejected in various letters or decisions of the Commission [see, in particular, the Commission notice pursuant to Article 93(2) of the EEC Treaty to other Member States and other parties concerned regarding the proposal by the German Government to award State aid to the Opel group in support of its investment plans in the new Länder (OJ 1993 C 43, p. 14); the Commission notice pursuant to Article 93(2) of the EEC Treaty to other Member States and interested parties concerning aid which Germany proposes to grant Rhône-Poulenc Rhotex GmbH (OJ 1993 C 210, p. 11); Commission Decision 94/266/EC of 21 December 1993 on the proposal to award aid to SST-Garngesellschaft mbH, Thüringen (OJ 1994 L 114, p. 21); the Mosel I decision; and Commission Decision 94/1074/EC of 5 December 1994 on the German authorities' proposal to award aid to Textilwerke Deggendorf GmbH, Thüringen (OJ 1994 L 386, p. 13)].

154
In that respect, particular importance should be accorded to the Mosel I decision, in which the Commission declared some of the aid in question, amounting to DEM 125.2 million, incompatible with the common market after excluding, on grounds identical to those used in the [contested decision], the possibility that that aid might be covered by Article 92(2)(c) of the Treaty. It should be noted, moreover, that neither the applicants nor the German authorities have brought any action against that earlier decision.

155
Even though, between the adoption of the Mosel I decision and the adoption of the [contested decision], the Commission, the German authorities and the applicants have had numerous contacts revealing their continuing differences of opinion concerning the applicability of Article 92(2)(c) of the Treaty to the aid in question (see Points V and VI of the [contested decision]), it should also be noted that no specific or new argument has been put forward in that context, particularly as to the existence of a causal link between the position of the motor-vehicle industry in Saxony after German reunification and the division of Germany (see paragraph 141 above).

156
In those circumstances, the Court finds that the applicants and the Federal Republic of Germany were sufficiently informed of the grounds for the [contested decision] and that, in the absence of more specific arguments, the Commission was not obliged to state the grounds for it more extensively.

157
It follows from the above considerations as a whole that the complaints alleging infringement of Article 92(2)(c) of the Treaty and an insufficient statement of reasons must be rejected.

Arguments of the parties

67
According to the appellants and the German Government, the contested decision does not enable either the appellants or the Court of First Instance to discern the reasons for which the Commission refused to apply Article 92(2)(c) of the Treaty.

68
Volkswagen and VW Sachsen claim that the reference by the Court of First Instance to other decisions which are also vitiated by faulty reasoning is not capable of making the contested decision intelligible to the persons concerned. Moreover, according to the case-law of the Court of Justice, a decision must be comprehensible in itself and that defect cannot be remedied by reference to decisions which do not, as such, provide more precise information on the considerations which led the Commission to refuse to apply Article 92(2)(c) of the Treaty. Moreover, the decisions cited by the Court of First Instance in paragraph 153 of the contested judgment do not appear in the contested decision and were not transmitted.

69
Furthermore, the Court of First Instance infringed Article 190 of the Treaty by failing to take into account that a decision adopted by the Commission must be intelligible not only to the persons to whom it is addressed but also to the Court of First Instance, so that it can exercise its power of review with respect to compliance with the duty to state reasons.

70
According to Volkswagen and VW Sachsen, it is apparent from the contested judgment that the contested decision does not contain reasons to justify the refusal to apply Article 92(2)(c) of the Treaty. The Commission should have given particular reasons in the contested decision as regards the interpretation of that provision, in that, first, the German authorities and the Commission did not share the same view on that interpretation and, second, the Commission was fully informed of the importance of the position it adopted on this point.

71
The Commission points out, to begin with, that an appeal can only be based on pleas in law alleging an infringement of Community law by the Court of First Instance. In the context of an appeal, the Court of Justice does not examine points of fact and does not make its own legal assessment of the facts. The Commission says that whether a statement of reasons can be understood and reviewed by the Court of First Instance is a point of fact which only that Court can decide.

72
The Commission notes that, where a decision is situated in a particular context, it suffices for that context to be recorded in the decision for Article 190 of the Treaty to be complied with. It states that the appellants took part in the procedures which led up to the adoption of the Mosel I decision and the contested decision, so that their argument on this point should be rejected.

73
When Volkswagen and VW Sachsen submit that the Commission decisions which form the context of the contested decision were themselves inadequately reasoned, they are really submitting that the Court of First Instance made an error in the determination and assessment of a fact. This argument must therefore be rejected as inadmissible.

74
According to the Commission, the decisions it cited in the contested decision, including the Daimler-Benz and Tettau decisions, constitute in the present case a context which the Court of First Instance took note of and assessed correctly.

75
As regards the Mosel I decision, the Commission notes that it expressly refused authorisation for part of the aid concerned and for the remainder expressly ruled out the applicability of Article 92(2)(c) of the Treaty. The appellants did not bring an action against that decision, even though they were adversely affected by it and it was necessary for them to contest it in view of their interpretation of that provision.

Findings of the Court

76
According to settled case-law, the statement of reasons required by Article 190 of the Treaty must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent Community court to exercise its power of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 190 of the Treaty must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (see, in particular, Joined Cases 296/82 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission [1985] ECR 809, paragraph 19, and Case C-367/95 P Commission v Sytraval and Brink's France [1998] ECR I-1719, paragraph 63).

77
The Court of First Instance was therefore right to hold that the contested decision was adequately reasoned. While that decision contains summary reasoning in this respect, it sets out, first, that it was adopted in a well-known context and forms part of a consistent decision-making practice.

78
It states, second, that the arguments previously adduced in support of the applicability of Article 92(2)(c) of the Treaty were rejected in the past for the same reasons, in particular in the Mosel I decision which was not contested by the appellants or the German Government.

79
Finally, it may be seen from the contested decision that, despite the contacts between the German Government and the appellants on the one side and the Commission on the other revealing persistent differences of opinion as to whether that provision was applicable, no specific argument was put forward during the administrative procedure (see Case C-156/98 Germany v Commission, paragraphs 104 to 108).

80
It follows that the second plea must be rejected as unfounded.

Third plea in law: breach of Article 92(3)(b) of the Treaty

81
The Court of First Instance held as follows in the contested judgment:

166
Under Article 92(3)(b) of the Treaty, aid may be considered to be compatible with the common market if it is [...] to remedy a serious disturbance in the economy of a Member State.

167
It follows from the context and general scheme of that provision that the disturbance in question must affect the whole of the economy of the Member State concerned, and not merely that of one of its regions or parts of its territory. This, moreover, is in conformity with the need to interpret strictly a derogating provision such as Article 92(3)(b) of the Treaty. The judgment in [Case 730/79 Philip Morris v Commission [1980] ECR 2671], relied on by the applicants in support of their argument, makes no comment of any kind on the point at issue here.

168
The applicants' argument must therefore be rejected as inoperative since they merely refer to the state of the economy of the Free State of Saxony, without even alleging that this caused a serious disturbance of the economy in the Federal Republic of Germany as a whole.

169
Moreover, the question whether German reunification has caused a serious disturbance in the economy of the Federal Republic of Germany involves complex assessments of an economic and social nature, to be made within a Community context, which fall within the exercise of the wide discretion which the Commission enjoys under Article 92(3) of the Treaty (see, by analogy, Case C-355/95 P TWD v Commission [1997] ECR I-2549, paragraph 26). In that context, judicial review must be limited to verifying whether the rules on procedure and the statement of reasons have been complied with, that the facts are materially accurate, and that there has been no manifest error of assessment and no misuse of powers. In particular, it is not for the Community judicature to substitute its economic assessment for that of the Commission (Case T-380/94 AIUFFASS and AKT v Commission [1996] ECR II-2169, paragraph 56; Case T-149/95 Ducros v Commission [1997] ECR II-2031, paragraph 63).

170
In this case, the applicants have not put forward any concrete evidence capable of establishing that the Commission made a manifest error of assessment in taking the view that the unfavourable repercussions of the reunification of Germany on the German economy, however real, did not in themselves constitute a ground for applying Article 92(3)(b) of the Treaty to an aid scheme.

171
As for the statement of reasons for the [contested decision], although brief, it appears to be sufficient having regard to the context of the case, to its antecedents, especially the Mosel I decision, and to the absence of specific arguments raised during the administrative procedure. In that regard, the considerations set out in paragraphs 140 to 142 and 149 to 156 above apply, mutatis mutandis, as regards the statement of reasons for the Commission's refusal to apply in this case the derogation laid down in Article 92(3)(b) of the Treaty.

172
It follows from the above that the complaints alleging infringement of Article 92(3)(b) of the Treaty and an insufficient statement of reasons must be rejected.

Arguments of the parties

82
The appellants contest the Court of First Instance's interpretation that Article 92(3)(b) of the Treaty can apply only if the whole of the territory of a Member State is affected. Neither the wording nor the effectiveness of that provision justifies that Court's conclusion that the collapse of the former socialist economy of the German Democratic Republic in the course of reunification could not be classified as a serious disturbance in the economy of Germany. The expression serious disturbance in the economy of a Member State was deliberately given a wide formulation by the authors of the Treaty so as not to limit the application of that provision to a certain form of serious economic crisis. The wording of Article 92(3)(b) of the Treaty does not prejudge the question whether the serious economic crisis in question derives from the collapse of a certain economic sector, the global economic situation or the economic decline of a region of importance for the whole of the Member State.

83
The German Government adds that, for the purposes of that provision, a disturbance is serious if it affects either the whole of the economy or at least several regions or economic sectors.

84
Moreover, it states that to restrict to the utmost a provision such as Article 92(3)(b) of the Treaty has the effect of disregarding the fact that, unlike the provision on division in Article 92(2)(c) of the Treaty, it is not a statutory exception which applies automatically where the material conditions are satisfied. Article 92(3)(b) of the Treaty is a provision whose application depends on the Commission's assessment. It would, however, be contrary to the spirit of that provision to reduce, by taking the narrowest possible interpretation, the margin which the authors of the Treaty intended to confer on that institution.

85
The appellants and the German Government also state that, given that German reunification required the economic restructuring of nearly a third of German territory, it is not possible to maintain that the serious economic disturbance observed in the new Länder does not fall within the circumstances referred to in Article 92(3)(b) of the Treaty. Moreover, the Community institutions were aware of the fact that the economic consequences of reunification could not be confined solely to the territory of those Länder.

86
By declaring, moreover, without giving any reasons, that derogations are to be interpreted narrowly, the Court of First Instance arbitrarily cut down the margin of discretion which the authors of the Treaty intended to attach to that provision. Even derogations must be interpreted in the light of their history as well as their wording and spirit.

87
According to the Commission, this plea is partly inadmissible, partly irrelevant, and otherwise unfounded.

88
First of all, in its view, the argument relating to breach of Article 92(3)(b) of the Treaty is inadmissible in so far as the Free State of Saxony did not rely on it before the Court of First Instance. It is therefore barred from putting it forward, under Articles 42(2) and 118 of the Rules of Procedure.

89
Next, the plea is also irrelevant, since the appellants and the German Government do not submit that, in applying Article 92(3)(b) of the Treaty, the Commission committed an error in the exercise of the discretion it enjoys, nor that the Court of First Instance decided incorrectly in this respect. Even if that provision were applicable in the case of a disturbance affecting part only of the territory of a Member State, as the appellants and the German Government submit, that would not lead to annulment of the contested judgment.

90
An appeal is also unfounded if the judgment which it contests proves to be justified in law for reasons other than those adopted by the Court of First Instance. Since no error of assessment was relied on, the third plea in the appeals cannot lead to annulment of the contested judgment.

91
Finally, as to the remainder, the plea is unfounded. Article 92(3)(b) of the Treaty, in contrast to parts (a) and (c) of that provision, concerns not a serious disturbance in the economy of a region but of a Member State as a whole.

92
The Commission says that, when the appellants and the German Government supplement their arguments by asserting that the economic problems of the new Länder required financial sacrifices in the entire Federal Republic of Germany, they are criticising an allegedly incorrect finding of fact by the Court of First Instance, so that the argument is inadmissible. In any event, since those sacrifices did not cause a serious disturbance in the economy, the argument is immaterial.

Findings of the Court

93
It should be remembered that, under Article 118 of the Rules of Procedure, Article 42(2) of those rules, which prohibits generally the introduction of new pleas in law in the course of the procedure, applies to the procedure before the Court of Justice on appeal from a decision of the Court of First Instance. In an appeal, the Court's jurisdiction is thus confined to review of the findings on the pleas argued before the Court of First Instance (see Case C-136/92 P Commission v Brazzelli Lualdi and Others [1994] ECR I-1981, paragraph 59, and Case C-321/99 P ARAP and Others v Commission [2002] ECR I-4287, paragraph 112).

94
It is common ground that the argument relating to breach of Article 92(3)(b) of the Treaty was not raised by the Free State of Saxony before the Court of First Instance (see, in particular, paragraph 95 of the contested judgment).

95
The third plea must therefore be rejected as regards the Free State of Saxony.

96
As to the argument of Volkswagen and VW Sachsen that the Court of First Instance was wrong to hold that that provision can apply only if the entire territory of a Member State is affected, it is clear from paragraph 167 of the contested judgment that, on this point, the Court of First Instance referred not to the whole territory of a Member State but to the whole economy of the Member State concerned.

97
Moreover, as the Commission rightly observes, unlike points (a) and (c) of Article 92(3) of the Treaty, point (b) of that paragraph requires a serious disturbance in the economy of a Member State, not of regions, since a disturbance in the economy of the latter would not necessarily affect that of the Member State concerned.

98
In those circumstances, the Court of First Instance was right to hold in paragraph 167 of the contested judgment, noting that as a derogation Article 92(3)(b) of the Treaty must be interpreted narrowly, that the disturbance must affect the whole of the economy of the Member State concerned and not merely that of one of its regions or parts of its territory.

99
As regards the argument of Volkswagen, VW Sachsen and the German Government that neither the wording nor the effectiveness of that provision justifies the conclusion of the Court of First Instance that the collapse of the former socialist economy of the German Democratic Republic in the course of reunification could not be classified as a serious disturbance in the economy of Germany, the Court of First Instance found, in paragraphs 169 and 170 of the contested judgment, that the question of the extent of the serious disturbance in the economy following reunification involves complex assessments of an economic and social nature which fall within the wide discretion enjoyed by the Commission, and that no concrete evidence had been put before it capable of establishing that that institution made a manifest error of assessment in that respect.

100
No criticism can be made of that finding by the Court of First Instance, so that the German Government is wrong to submit that the mere reference to the provision, in the context of a known factual situation, suffices to show that the conditions for the application of Article 92(3)(b) of the Treaty were satisfied.

101
In this plea, Volkswagen, VW Sachsen and the German Government confine themselves, for the remainder, to calling into question the assessment of the facts by the Court of First Instance, without even putting forward the slightest element to support the claim that that Court distorted the facts.

102
It must be remembered that the appraisal of the facts by the Court of First Instance does not, save where the clear sense of the evidence produced before it is distorted, constitute a question of law which is subject, as such, to review by the Court of Justice (see, inter alia, Joined Cases C-238/99 P, C-244/99 P, C-245/99 P, C-247/99 P, C-250/99 P to C-252/99 P and C-254/99 P Limburgse Vinyl Maatschappij and Others v Commission [2002] ECR I-8375, paragraph 330).

103
It follows from all the foregoing that the third plea must be rejected as partly inadmissible and partly unfounded.

Fourth plea in law: breach of Articles 92(3) and 93 of the Treaty

104
The Court of First Instance held as follows in the contested judgment:

203
Contrary to what the applicants maintain, the aid measures in dispute cannot be regarded as falling within a regional aid programme already approved by the Commission and thus exempt from the duty of prior notification.

204
By referring, in the Nineteenth Outline Plan adopted pursuant to the Joint Task Law, to a number of specific sectors in which each of the projects to be supported remained subject to the need for prior authorisation from the Commission (see paragraph 7 above), Germany acknowledged that approval of the regional aid envisaged by that outline plan did not extend to the sectors in question and, in particular, the motor-vehicle industry, to the extent that the cost of a support operation exceeded 12 million ecus.

205
That is confirmed, in particular, by the Commission's letter of 2 October 1990 approving the regional aid scheme laid down for 1991 by the Nineteenth Outline Plan (see paragraph 7 above) and by its letter of 5 December 1990 approving the application of the Joint Task Law to the new Länder (see paragraph 11 above), in which the Commission expressly drew the attention of the German Government to the need to take account, when implementing the measures contemplated, of the Community framework existing in certain sectors of industry; by its letters of 14 December 1990 and 14 March 1991, insisting that the aid for Volkswagen's new investments could not be implemented without having first been notified to the Commission and having received its approval (see paragraph 18 above); and by the fact that each of the 1991 [decisions] states that it is subject to the authorisation of the Commission. The applicants are wrong in arguing that such a reference is devoid of purpose having regard to the authorisation already obtained by virtue of the approval of the Nineteenth Outline Plan; that approval does not extend to the motor-vehicle industry, as has just been pointed out in paragraph 204 above. The applicants are also incorrect in arguing that the production of the letters referred to above, in an annex to the rejoinder, was out of time and inadmissible. In the first place, those letters are cited both in Point II of the [contested decision] and in the decision to initiate the investigation procedure. Moreover, they were produced in response to an assertion made for the first time in the reply.

206
In the light of the factors described above, the fact that application of the Community framework was suspended between January and April 1991, even if established, cannot have the legal consequence that the aid to the motor-vehicle industry is to be regarded as covered by the approval of the Nineteenth Outline Plan. On the contrary, if that fact were established, it would have to be held that Article 93(3) of the Treaty remained fully applicable to the aid in question.

207
It follows from the above that, in any event, the aid in dispute was subject to the duty of prior notification to the Commission, and that it could not be implemented before the procedure had led to a final decision.

208
By contrast, the question whether or not the Community framework had binding force vis-à-vis Germany in March 1991 is of no relevance for the purposes of these proceedings.

209
In that respect, it should be emphasised that, although the rules of the Community framework, as appropriate measures proposed by the Commission to the Member States on the basis of Article 93(1) of the Treaty, are entirely devoid of binding force and bind Member States only if the latter have consented to them (Case C-292/95 Spain v Commission, paragraphs 30 to 33), there is nothing to prevent the Commission from examining the aid which must be notified to it in the light of those rules when exercising the wide discretion which it enjoys for the purposes of applying Articles 92 and 93 of the Treaty.

210
It should, nevertheless, be added that the applicants' argument that the investigation, in 1996, of the compatibility of the aid at issue with the common market could be based only on assessment criteria which existed in 1991 finds no support in the case-law of the Court of Justice and the Court of First Instance. Thus, in Case 234/84 Belgium v Commission [1986] ECR 2263, paragraph 16, and Case C-241/94 France v Commission [1996] ECR I-4551, paragraph 33, the Court of Justice stated that the legality of a decision concerning aid is to be assessed in the light of the information available to the Commission when the decision was adopted. The Court of First Instance did the same in Joined Cases T-371/94 and T-394/94 British Airways and Others and British Midland Airways v Commission [1998] ECR II-2405, paragraph 81.

211
Moreover, Article 92(1) of the Treaty prohibits, in so far as it affects trade between Member States, any aid which distorts or threatens to distort competition. It follows that, when it establishes the existence of an aid within the meaning of that provision, the Commission is not strictly bound by the conditions of competition existing at the date on which its decision is adopted. It must carry out an assessment in a dynamic perspective and take account of the foreseeable development of competition and the effects which the aid in question will have upon it.

212
The Commission cannot therefore be criticised for having taken account of factors arising after the adoption of a plan to grant or alter aid. The fact that the Member State concerned implemented the proposed measures before the investigation procedure resulted in a final decision, in breach of its obligations under Article 93(3) of the Treaty, is of no relevance to that question.

213
The applicants' argument that such a practice is incompatible with the principle of legal certainty cannot be accepted. Whilst the preliminary investigation procedure under Article 93(3) of the Treaty is intended to allow the Commission sufficient time, the Commission must, nevertheless, act diligently and take account of the interest of the Member States of being informed of the position quickly in spheres where the need to intervene may be urgent by reason of the effect that the Member States expect from the planned incentive measures. The Commission must therefore take a position within a reasonable period, which the Court of Justice has assessed at two months [Case 120/73 Lorenz [1973] ECR 1471, paragraph 4; see also Article 4 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83, p. 1)]. Moreover, the Commission is bound by the same general duty of diligence where it decides to initiate the inter partes investigation procedure laid down by Article 93(2) of the Treaty, and its failure to act in the matter may in appropriate cases be condemned by the Community judicature in proceedings under Article 175 of the EC Treaty (now Article 232 EC).

214
Moreover, the question of a possible infringement of the principle of legal certainty does not arise in this case. The length of time which elapsed between the date on which the first [decisions] granting aid were adopted (March 1991) and the date of the [contested decision] (26 June 1996) was due, first, to the absence of complete notification of the measures in question; secondly, to the successive amendments which the applicants made to their plans, which in turn entailed successive amendments to the [decisions] granting the aid; and, thirdly, to the considerable difficulties which the Commission encountered in obtaining from the German Government and the applicants the information which it needed in order to take a decision (see paragraphs 16 to 42 above).

215
In particular, the Mosel I decision shows that, at the beginning of 1993, the Commission was in a position to take a decision on the whole of Volkswagen's investment plans, as initially submitted to it. It was at the express request of Volkswagen, submitted on 31 January 1993, that the Commission limited its assessment to the aid concerning Mosel I and Chemnitz I. It was then necessary to wait until 1995, when the Commission threatened the German authorities that it would adopt a decision on the basis of the incomplete file in its possession, for the information which it needed to be finally communicated to it. In short, it was not until 1996 that the Commission was placed in a position to take a decision with full knowledge of the facts.

216
In the meantime, the applicants' initial plans had been changed three times and, in consequence, the 1991 [decisions] had been amended by the 1993, 1994 and 1996 [decisions]. Although the parties disagree as to the extent of those successive amendments, it is undisputed that, at the very least, they involved a significant reduction in the scale of the plans and, above all, the postponement by three to four years of the entry into service of the paint and final assembly workshops of Mosel II and Chemnitz II.

217
In those circumstances, the applicants are wrong when they maintain that the Commission was required to examine plans that were successively devised in 1993, 1994 or 1996 solely in the light of the information at its disposal in 1991. On the contrary, the Commission was right to take account in its assessment of the changes that were subsequently made.

218
Moreover, even if it had initially approved the aid granted by the 1991 [decisions], the Commission would have been entitled to re-examine it at the time of its amendment, in accordance with Article 93(3) of the Treaty, under which the Commission is to be informed, in sufficient time to enable it to submit its comments, of any plans to alter the aid. Thus, while acknowledging that there was no surplus capacity in the motor-vehicle industry in 1991, the Commission would in principle have been entitled to take account of surplus capacity which became apparent from 1993 onwards.

219
It follows from the above that the applicants' arguments concerning, first, the need for an investigation ex ante and, secondly, the inapplicability of the Community framework, must be rejected in their entirety.

Arguments of the parties

105
According to the appellants, the Court of First Instance infringed Articles 92(3) and 93 of the Treaty by stating that the aid at issue was subject to an obligation of separate notification, whereas it was part of the 19th Outline Plan, which had been approved by the Commission by letter of 2 October 1990 addressed to the German Government.

106
On this point, the appellants point out that, in various letters, the Commission approved the application of the Joint Task Law and the extension of the existing regional aid schemes to the new Länder. Notwithstanding the fact that, in its letters, the Commission pointed out that the German authorities should take account, in implementing the programmes concerning aid, of the Community provisions in force in certain sectors, including those in the motor vehicle sector, the appellants claim that the Community framework, from January to April 1991, was not a provision of Community law in force.

107
They submit that the Community framework was applicable only for a period of two years expiring on 31 December 1990, since its extension was not agreed until April 1991. Consequently, as an appropriate measure within the meaning of Article 93(1) of the Treaty, that framework may be regarded as applicable only from April 1991, after the date of granting the aid, namely 22 March 1991.

108
In those circumstances, the aid at issue should have been regarded as forming part of an aid scheme which had been given general authorisation by the Commission, and hence classified as existing aid.

109
It follows that the aid did not have to be notified. As it was existing aid, the Commission should have confined itself to verifying that the individual aid came under the general scheme and that the conditions for the grant of aid laid down in the approval decision were complied with.

110
The Commission submits that the appellants' argument is partly irrelevant and partly mistaken. It submits essentially, first, that at the time of adoption of the contested decision, on 26 June 1996, it was not obliged to base itself on the factual and legal situation of March 1991. Second, even if it should have based itself on that situation, the aid at issue would still have had to be notified to it and it would have had to review such aid without restriction. Finally, even if it should have based itself on a date at which the Federal Republic of Germany had not yet given its agreement to the application of the Community framework, that would not prevent the Commission from applying that framework.

Findings of the Court

111
The appellants' argument is founded on the premiss that, since the Community framework did not apply from January to March 1991, the aid at issue, which came within the regional aid scheme provided for by the 19th Outline Plan, was already approved.

112
The Court of First Instance, in the light of the elements put before it which are mentioned in paragraphs 204 and 205 of the contested judgment, reached the conclusion that, even if the Community framework did not apply, aid for the motor vehicle industry was not covered by the approval of the regional aid scheme provided for by the 19th Outline Plan.

113
As was noted in paragraph 102 above, the appraisal of the facts by the Court of First Instance does not, unless they were distorted, constitute a question of law which is subject, as such, to review by the Court of Justice.

114
There was no distortion of the facts when the Court of First Instance considered that the aid at issue was subject to an obligation of prior notification to the Commission, so that it could not be implemented until the procedure had concluded with a final decision.

115
The Commission's approval of the regional aid scheme provided for by the 19th Outline Plan therefore excluded in any event from its scope aid granted inter alia in the motor vehicle sector.

116
That, moreover, was the understanding of the German Government, as appears from the citation from the 19th Outline Plan in paragraph 7 of the contested judgment, reproduced in paragraph 6 above.

117
It follows that, since the approval did not cover aid in the motor vehicle sector, the aid at issue should have been notified either under the provisions of the Community framework or, supposing that that did not apply, under Article 93(3) of the Treaty.

118
The Court of First Instance was therefore right to hold, in paragraph 207 of the contested judgment, that the aid at issue was subject to the duty of prior notification to the Commission and could not be implemented before the procedure had led to a final decision.

119
In those circumstances, having regard to the fact that the question of the applicability of the Community framework between January and April 1991 is not material and the other arguments put forward by the appellants are directed at showing that the framework was not applicable, the fourth plea must be rejected.

Fifth plea in law: the consequences of the partial discontinuance taken note of by the Court of First Instance

120
The Court of First Instance held in paragraph 65 of the contested judgment: At the hearing on 30 June 1999, [Volkswagen and VW Sachsen] asked the Court to hold that the action had become devoid of subject-matter in so far as it sought the annulment of the first indent of Article 2 of the [contested decision], declaring investment aid in the form of special depreciation on investment incompatible with the common market, and to apply Article 87(6) of the Rules of Procedure in that respect. The Court also took formal notice of the fact that, in the Commission's submission, that request must be interpreted as a partial discontinuance and entail the application of Article 87(5) of the Rules of Procedure.

121
In paragraph 309 of the contested judgment, the Court of First Instance held: Under Article 87(2) of the Rules of Procedure, an unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Under Article 87(5) of the Rules of Procedure, a party who discontinues or withdraws from proceedings is to be ordered to pay the costs if they have been applied for in the other party's pleadings ...

122
Point 1 of the operative part of the contested judgment reads as follows: [The Court of First Instance] takes formal notice that [Volkswagen and VW Sachsen] discontinue their action in Case T-143/96 in so far as it seeks the annulment of the first indent of Article 2 of [the contested decision.]

Arguments of the parties

123
Volkswagen and VW Sachsen challenge these points of the contested judgment on the ground that they asked the Court of First Instance to find that, should their action be successful, they would not be allowed to apply special depreciation retrospectively because of an amendment to German tax legislation. They therefore, in fact, asked the Court of First Instance to declare that there was no need to adjudicate on this point, while seeking a ruling on costs in accordance with Article 87(6) of the Rules of Procedure of the Court of First Instance.

Findings of the Court

124
In this respect, it suffices to say that, according to settled case-law, where all the other pleas put forward in an appeal have been rejected, any plea challenging the decision of the Court of First Instance on costs must be rejected as inadmissible by virtue of the second paragraph of Article 51 of the EC Statute of the Court of Justice, which provides that no appeal shall lie regarding only the amount of the costs or the party ordered to pay them (see, in particular, Case C-396/93 P Henrichs v Commission [1995] ECR I-2611, paragraphs 65 and 66, and Joined Cases C-302/99 P and C-308/99 P Commission and France v TF1 [2001] ECR I-5603, paragraph 31).

125
It follows that the fifth plea must be rejected.

126
In those circumstances, since all the pleas in law have been rejected, the appeals must be dismissed.


Costs

127
Under Article 69(2) of the Rules of Procedure, which applies to the procedure on appeal by virtue of Article 118, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has asked for the Free State of Saxony, Volkswagen and VW Sachsen to pay the costs, and they have been unsuccessful, they must be ordered to pay the costs.

128
The first subparagraph of Article 69(4) of the Rules of Procedure, which also applies to the procedure on appeal by virtue of Article 118, provides that Member States and institutions which intervene in the proceedings are to bear their own costs. The Federal Republic of Germany must therefore be ordered to bear its own costs.

On those grounds,

THE COURT

hereby:

1.
Dismisses the appeals;

2.
Orders the Freistaat Sachsen to pay the costs in Case C-57/00 P;

3.
Orders Volkswagen AG and Volkswagen Sachsen GmbH to pay the costs in Case C-61/00 P;

4.
Orders the Federal Republic of Germany to bear its own costs.

Rodríguez Iglesias

Puissochet

Wathelet

Schintgen

Timmermans

Edward

Jann

Skouris

Macken

von Bahr

Cunha Rodrigues

Delivered in open court in Luxembourg on 30 September 2003.

R. Grass

G.C. Rodríguez Iglesias

Registrar

President

1 –
Language of the case: German.