Keywords
Summary

Keywords

++++

1. State aid ° Concept ° Financial assistance granted to an undertaking by a Member State ° Criterion of assessment ° Reasonableness of the operation for a private investor pursuing a medium or long-term policy ° Not reasonable since it concerns a reinvestment at greater cost than liquidation before transfer of the undertaking

(EEC Treaty, Art. 92(1))

2. State aid ° Effect on trade between Member States ° Impairment of competition ° Criteria of assessment

(EEC Treaty, Art. 92)

3. State aid ° Prohibition ° Derogations ° Aid intended for the development of specified regions ° Aid granted for use by undertakings in difficulty on the basis of ad hoc decisions ° Criteria for inclusion

(EEC Treaty, Art. 92(3)(a))

4. State aid ° Prohibition ° Derogations ° Aid which may fall within the scope of the derogation provided for in Article 92(3)(c) of the Treaty ° Aid to an undertaking in difficulty which does not form part of a restructuring programme designed to reduce or redirect its activities ° Exclusion

(EEC Treaty, Art. 92(3)(c))

5. State aid ° Recovery of unlawful aid ° Breach of the principles of proportionality, protection of legitimate expectations and legal certainty ° None

Summary

1. In order to determine whether investment by the public authorities in the capital of undertakings, in whatever form, is in the nature of State aid within the meaning of Article 92 of the Treaty, it is necessary to consider whether in similar circumstances a private investor of a size comparable to that of the bodies administering the public sector might have provided capital of such an amount.

Although a parent company may, for a limited period, bear the losses of one of its subsidiaries in order to enable the latter to close down its operations under the best possible conditions, since such decisions may be motivated not solely by the likelihood of an indirect material profit but also by other considerations, such as a desire to protect the group' s image or to redirect its activities, a private investor pursuing a structural policy ° whether general or sectoral ° and guided by prospects of viability in the long term could not reasonably allow itself, after years of continuous losses, to make a contribution of capital which, in economic terms, proves to be not only costlier than selling the assets, but is moreover linked to the sale of the undertaking, which removes any hope of profit, even in the longer term.

2. Where State financial aid strengthens the position of an undertaking compared with other undertakings competing in Community trade the latter must be regarded as affected by that aid. For that purpose, it is not necessary for the beneficiary undertaking itself to export its products. Where a Member State grants aid to an undertaking, domestic production may for that reason be maintained or increased, with the result that undertakings established in other Member States have less chance of exporting their products to the market in that Member State.

Similarly, the relatively small amount of aid or the relatively small size of the undertaking which receives it does not as such exclude the possibility that intra-Community trade might be affected.

3. Having regard to the indications provided by a communication of the Commission of 3 February 1979 on regional aid systems, the Commission was justified in regarding ad hoc aid, that is to say, aid which does not form part of a national programme of Community interest financed by the European Regional Development Fund, as not meeting in principle the criterion of regional specificity which requires Article 92(3)(a) of the Treaty to be applied. That aid is not primarily intended to facilitate the development of certain economic regions, but is granted in the form of aid for the operation of undertakings in difficulty. In those circumstances, it is for the Member State concerned to establish that such aid actually fulfils the regional specificity criterion. None the less, the Commission should first specify the criteria according to which it considers ad hoc aid, exceptionally, to be regional in character. The fact that aid was granted on the basis of ad hoc decisions cannot therefore preclude it from being described as regional aid within the meaning of the abovementioned provision.

4. In order to be declared compatible with Article 92(3)(c) of the Treaty, aid to undertakings in difficulty must be bound to a restructuring programme designed to reduce or redirect their activities. Where, according to the plan presented upon privatization of an undertaking, the sole purpose of the aid is to allow the beneficiary to continue its activities on a larger scale, the Commission is justified in declaring inapplicable the derogation provided for in Article 92(3)(c) of the Treaty.

5. The recovery of State aid unlawfully granted for the purpose of re-establishing the previously existing situation cannot in principle be regarded as disproportionate to the objectives of the Treaty in regard to State aids.

Moreover, a Member State whose authorities have granted aid contrary to the procedural rules laid down in Article 93 of the Treaty may not rely on either the legitimate expectations of recipients or the principle of legal certainty in order to justify a failure to comply with the obligation to take the steps necessary to implement a Commission decision instructing it to recover the aid.