62000O0323

1. Appeals - Pleas in law - Incorrect assessment of the facts - Inadmissible - Review by the Court of Justice of the assessment of the evidence before the Court of First Instance - Excluded unless the sense of the evidence has been distorted

(ECSC Statute of the Court of Justice, Art. 51(1))

2. ECSC - Aid to the steel industry - Definition - Private investor test - Prospects of profitability

(ECSC Treaty, Art. 4(c); General Decision No 3855/91, Art. 1(2))

3. ECSC - Aid to the steel industry - Commission decision requiring a complex economic assessment - Judicial review - Limits

(ECSC Treaty, Arts 4(c) and 33)

4. Appeals - Pleas in law - Mere repetition of pleas in law and arguments submitted to the Court of First Instance - Inadmissible - Appeal dismissed

(ECSC Statute of the Court of Justice, Art. 49; Rules of Procedure of the Court of Justice, Art. 112(1)(c))

5. ECSC - Aid to the steel industry - Recovery of unlawful aid - Restoration of the previous situation

(ECSC Treaty, Art. 4(c))

1. The Court of First Instance has exclusive jurisdiction to find the facts, save where a substantive inaccuracy in its findings is attributable to the documents submitted to it, and to appraise those facts. That appraisal thus does not therefore, save where the clear sense of the evidence has been distorted, constitute a point of law which is subject, as such, to review by the Court of Justice on appeal.

( see para. 34 )

2. In order to determine whether investment by the public authorities in the capital of an undertaking, in whatever form, is in the nature of State aid, it is necessary to consider whether in similar circumstances a private investor of comparable size with the bodies governing the public sector might have provided injections of capital of such an amount. Although the conduct of a private investor, with which the intervention of a public investor pursuing economic policy aims must be compared, need not be the conduct of an ordinary investor laying out capital with a view to realising a profit in the relatively short term, it must at least be the conduct of a private holding company or a private group of undertakings pursuing a structural policy - whether general or sectoral - and guided by prospects of profitability in the longer term.

( see para. 42 )

3. The Commission's examination of the question whether a given measure may be classified as State aid because the State did not act as an ordinary economic operator involves a complex economic assessment. Where it adopts a measure involving such assessments, the Commission has a wide discretion, and review of that measure by the courts must therefore be limited, as Article 33 of the ECSC Treaty shows, to checking that the rules of procedure and on the statement of reasons have been complied with, that the facts relied on in making the contested decision are accurate, and that there has been no obvious error in assessing those facts or any misuse of powers. In particular, the Court of First Instance must not substitute its own economic assessment for that of the Commission.

( see para. 43 )

4. An appeal in which the applicant merely repeats the same claims as at first instance in reality constitutes a request for a simple re-examination of the application before the Court of First Instance, which, in accordance with Article 49 of the ECSC Statute of the Court of Justice, is outside the latter's competence.

( see para. 54 )

5. As far as the system of aid laid down in the EC Treaty is concerned, the removal of unlawful State aid by means of recovery is the logical consequence of a finding that it is unlawful and that the aim of obliging the State concerned to abolish aid found by the Commission to be incompatible with the common market is to restore the previous situation. It follows that express competence for the Commission to demand repayment is not necessary. There is no reason in this respect for a different assessment to be made of aid subject to the system under the ECSC Treaty.

First, the system of aid established by the ECSC Treaty is not, as the applicant seeks to argue, less rigid than that of the EC Treaty. On the contrary, Article 4(c) of the ECSC Treaty establishes a system that is clearly more severe than that of the EC Treaty in so far as it authorises the Commission to prohibit all State aids from the outset, without there being any need to verify whether they distort or threaten to distort competition or whether they fall within exceptions to the general prohibition.

In addition, where a Member State does not comply with the Commission's decision to demand repayment of unlawful aid, the Commission must, under the system of the ECSC Treaty in the same way as under that of the EC Treaty, use the procedure for failure to fulfil obligations. It is only at a later stage of that procedure, namely where penalties are to be imposed by reason of non-compliance with obligations, that the third paragraph of Article 88 of the ECSC Treaty provides, unlike the procedure for failure to fulfil obligations established by the EC Treaty, that the Council is to become involved.

( see paras 65-68 )

In Case C-323/00 P,

DSG Dradenauer Stahlgesellschaft mbH, represented by U. Theune and M. Luther, Rechtsanwälte, with an address for service in Luxembourg,

appellant,

APPEAL against the judgment of the Court of First Instance of the European Communities (Fifth Chamber, Extended Composition) in Case T-234/95 DSG v Commission [2000] ECR II-2603, 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, assisted by M. Hilf, with an address for service in Luxembourg,

defendant at first instance,

Federal Republic of Germany, represented by W.-D. Plessing, acting as Agent, assisted by W. Kirchhoff and M. Schütte, Rechtsanwälte,

and

United Kingdom of Great Britain and Northern Ireland, represented by L. Nicoll, acting as Agent,

interveners at first instance,

THE COURT (Fifth Chamber),

composed of: P. Jann (Rapporteur), President of the Chamber, D.A.O. Edward, M. Wathelet, C.W.A. Timmermans and A. Rosas, Judges,

Advocate General: D. Ruiz-Jarabo Colomer,

Registrar: R. Grass,

after hearing the Opinion of the Advocate General,

makes the following

Order

1 By application lodged at the Court Registry on 1 September 2000, DSG Dradenauer Stahlgesellschaft mbH (DSG) lodged an appeal under Article 49 of the ECSC Statute of the Court of Justice against the judgment of the Court of First Instance of 29 June 2000 in Case T-234/95 DSG v Commission [2000] ECR II-2603 (the contested judgment), in which the Court of First Instance dismissed its action for the annulment of Commission Decision No 96/236/ECSC of 31 October 1995 concerning State aid granted by the City of Hamburg to the ECSC steel undertaking Hamburger Stahlwerke GmbH, Hamburg (OJ 1996 L 78, p. 31; the contested decision).

The facts of the case and the procedure before the Court of First Instance

2 The facts of the case, as can be seen from paragraphs 8 to 22 of the contested judgment, may be summarised as follows.

3 From 1974 to 1983, Hamburgische Landesbank Girozentrale (HLB), which is a public-law bank, 100% owned by the City of Hamburg, held 49% of the shares of Hamburger Stahlwerke GmbH (the old HSW) in a fiduciary capacity as security for loans which it had granted to the company without guarantee or surety from the City of Hamburg. In 1983, that company was placed in liquidation. At that date, the sums owing from the old HSW to the City of Hamburg and HLB amounted to DEM 181 million, of which 129 million was guaranteed by the City of Hamburg and 52 million was assumed by HLB as its sole financial risk.

4 In order to continue the exploitation of the assets, in order, according to the German Government, to recover part of the debts owing to them, the City of Hamburg and HLB decided to contribute financially to the creation of a revived company. Thus, on the creation in 1984 of the new company Hamburger Stahlwerke GmbH (HSW), DEM 20 million, representing nearly all its capital, was lent to the owners of HSW by HLB, at whose disposal the money had been placed by the City of Hamburg. It was agreed that repayment of that loan and interest thereon would be made only if HSW made a profit, that the owners of HSW would transfer to HLB their right to share in the profits of HSW in a proportion equivalent to that between the sum lent and the capital of HSW, and that decisions concerning the management or the board of directors of the undertaking would be subject to the prior agreement of HLB.

5 At the outset of HSW's activities in 1984, HLB granted the company a DEM 130 million revolving credit line on the basis of regularly renewed yearly contracts, DEM 52 million being at the risk of HLB and DEM 78 million being granted by order of the City of Hamburg. The credit line was guaranteed by a transfer by way of security of the current assets and the debts owed to HSW by third parties.

6 Between 1984 and 1993, HSW made losses for six years and profits for four. In 1991, it made losses of DEM 8.5 million.

7 In 1992, it made further losses of DEM 19.8 million. It needed the renewal of the DEM 130 million credit line granted by HLB and also an extension to the credit line of DEM 20 million. HLB decided to renew the DEM 52 million of the credit line for which it bore the risk, but did not participate in the extension. On the orders of the City of Hamburg, it finally extended the credit line by DEM 20 million in December 1992, on condition that HSW adopted a restructuring plan.

8 In 1993, HSW incurred losses totalling DEM 24.4 million, as the steel market in general was facing growing difficulties. An expert report, requested by the City of Hamburg of the MacKinsey company in 1993 and submitted on 19 January 1994, found that the insolvency of HSW was imminent, and that it should be privatised before incurring further debts.

9 In that situation, HLB refused to extend the credit line. Nor was it willing to continue with its previous undertaking, which was not covered by the credit order of the City of Hamburg of DEM 52 million. However, in December 1993, the City of Hamburg ordered HLB to grant to HSW, with effect from 1 January 1994, a credit line of DEM 150 million, with an extension of DEM 24 million and a swing of DEM 10 million. The City of Hamburg then assumed the whole of the economic risk arising from that total loan of DEM 184 million.

10 At the end of 1994, HSW was sold to a private investor for DEM 275 000, and in consideration of the investor assuming liability for the DEM 17.2 million still owing of the initial loan of company capital of DEM 20 million.

11 Having learned in the press that the City of Hamburg was supporting HSW financially, the Commission of the European Communities commenced infringement proceedings under Article 4(c) of the ECSC Treaty at the beginning of 1994. After investigation, it came to the conclusion that the loans granted to HSW in December 1992, in the context of the DEM 20 million extension of the line of credit, and in December 1993, in the context of the total credit line of DEM 174 million and the swing of DEM 10 million, constituted State aid that was incompatible with the ECSC Treaty and Commission Decision No 3855/91/ECSC of 27 November 1991 establishing Community rules for aid to the steel industry (OJ 1991 L 362, p. 57; the fifth Steel Aid Code). Therefore, on 31 October 1995, it adopted the contested decision. In that decision, it declared that the aid in question was incompatible with the above provisions (Article 2 of the contested decision), and ordered the Federal Republic of Germany to demand repayment of the aid by the beneficiary undertaking (Article 3 of the contested decision) and to notify the Commission of the measures taken to comply with that decision (Article 4 of the contested decision). The Commission did, however, declare that the initial loan of DEM 20 million granted by HLB in 1984 in order to cover the company capital of HSW (Article 1 of the contested decision), which is not the subject-matter of these proceedings, was compatible with Community law.

12 In the grounds for the contested decision, the Commission stated that the City of Hamburg, without being the legal owner of HSW, was exposed to a risk equivalent to that run by an owner committing risk capital. The loans referred to in Articles 2 and 3 of the contested decision were granted at a time when HSW was on the verge of bankruptcy, when fresh losses had been announced and the market had not improved, and in the presence of the conclusions of the export report of the MacKinsey company. According to the Commission, no private investor would have placed fresh capital at HSW's disposal in such a situation, as was already demonstrated by the fact that HLB itself had initially refused the financing sought, and it had required the City of Hamburg, in its turn assuming all the risks, to order HLB to provide the finance.

13 On 21 December 1995, DSG, which had taken over the rights and obligations of HSW, brought an action before the Court of First Instance seeking the annulment of the contested decision, save for Article 1 thereof.

14 In the proceedings before the Court of First Instance, the Federal Republic of Germany was given leave to intervene in support of the applicant, and the United Kingdom of Great Britain and Northern Ireland was given leave to intervene in support of the Commission.

15 By the contested judgment, the Court of First Instance dismissed the action.

The contested judgment

16 In the contested judgment, the Court of First Instance examined together the first two pleas in the action, which it interpreted, in paragraphs 68 to 72, as both alleging infringement of Article 4(c) of the ECSC Treaty and Article 1(2) of the fifth Steel Aid Code. It then examined the third and fourth pleas in the action, alleging misuse of powers by the Commission.

17 Concerning the first two pleas, the Court of First Instance made the preliminary observation, in paragraphs 115 to 119 of the contested judgment, that, in exercising its jurisdiction over actions for annulment brought against Commission decisions, the Community judicature confines itself to examining whether the Commission has misused its powers or has manifestly failed to observe the provisions of the ECSC Treaty or any rule of law relating to its application, the term manifestly implying an obvious error in the assessment of the situation in respect of which the decision was taken. In particular, the Community judicature cannot substitute its own assessment of the facts, in the economic sphere, for that of the Commission.

18 In the light of those considerations, the Court of First Instance first found, in paragraphs 123 to 131 of the contested judgment, that the Commission had not made an obvious error either by drawing a distinction, for the purposes of applying the private-investor test, between loans granted to the applicant by HLB at its own risk and those granted pursuant to a credit order of the City of Hamburg or by holding that, in refusing to increase or extend the credit lines at its own risk, HLB had adopted a line of conduct which might have been that of a private investor in a similar situation.

19 The Court of First Instance then held, in paragraphs 132 to 169 of the contested judgment, that, having regard in particular to the greatly deteriorated financial position of the applicant, its urgent need of financing, and the precarious state of the European steel market, the Commission did not make an obvious error of assessment by holding, first, that a private investor would not have agreed to an increase in the credit line in December 1992 (paragraph 139 of the contested judgment) and, second, that the chances of finding a private investor willing to grant the credit line and a swing in December 1993 were negligible or even non-existent (paragraph 163 of the contested judgment). According to the Court of First Instance, the Commission might therefore legitimately take the view that a private investor would not have granted the credits in question (paragraphs 145 and 167 of the contested judgment) and that these constituted State aid (paragraph 169 of the contested judgment).

20 The Court of First Instance further held, in paragraphs 171 to 181 of the contested judgment, that the fact that the applicant might have been able to obtain capital from third parties thanks to its sureties did nothing to alter the fact that the Commission could lawfully classify the contested measures as State aid.

21 Finally, the Court of First Instance held, in paragraphs 182 to 187 of the contested judgment, that the Commission was entitled to require repayment of the aid.

22 Concerning the third plea, accusing the Commission of failing to take account of a planned reduction in production capacity at one of HSW's sites in Euskirchen, the Court of First Instance held, in paragraphs 193 to 209 of the contested judgment, that events which were only at the planning stage at the time of the facts of the case could not be taken into consideration.

23 The Court of First Instance therefore dismissed the action in its entirety.

The appeal

24 DSG and the Federal Republic of Germany argue that the Court should:

- annul the contested judgment;

- annul Articles 2, 3 and 4 of the contested decision;

- order the Commission to pay the costs.

25 In support of its appeal, DSG makes three pleas in law. The first plea, which is subdivided into four parts, alleges infringement of Article 4(c) of the ECSC Treaty, in that, first, the Court of First Instance made an erroneous assessment of the concept of an economic unit, second, it misapplied the criterion of the private investor, third, it erroneously classified the extension of the credit line in December 1993 as a contribution of capital, and, fourth, it made an erroneous analysis of the other possibilities for financing HSW. The second plea alleges infringement of Article 88 of the ECSC Treaty, in that the Court of First Instance wrongly held that the Commission was entitled to demand repayment of the aid considered incompatible with that Treaty. The third plea alleges infringement of general principles of law, in particular the laws of logic, in the context of the influence of the reduction in production capacity at HSW's Euskirchen site on the classification of the aid in question.

26 The Commission claims that the Court should dismiss the appeal in its entirety and order the applicant to pay the costs.

Findings of the Court

27 Under Article 119 of its Rules of Procedure, where an appeal is clearly inadmissible or clearly unfounded, the Court of Justice may at any time dismiss it by reasoned order.

The first plea

The first part of the first plea

28 In the first part of its first plea, the applicant accuses the Court of First Instance of infringing Article 4(c) of the ECSC Treaty by holding that the Commission did not make an obvious error of assessment by regarding the City of Hamburg and HLB as distinct legal entities and, on the basis of that distinction, using the conduct of HLB as a criterion for assessing what the conduct of a private investor would be, acting in a market economy.

29 The applicant explains in detail why, in its view, the City of Hamburg and HLB should be regarded as one economic unit. By ignoring that information, the Court of First Instance had based the contested judgment on an erroneous interpretation of the concept of an economic unit, which was a concept of law and not one of fact.

30 The Commission replies that all those allegations have already been submitted in the same manner at first instance, and that the applicant is merely asking the Court to carry out a fresh assessment which corresponds better to its argument. Such a request is inadmissible at the appeal stage.

31 In any event, it submits, the plea is without foundation. The question at issue is the determination whether HSW could have obtained from a private investor operating under market conditions economic advantages comparable with those conferred upon it by the City of Hamburg. That private investor test is contained in Article 1(2) of the fifth Steel Aid Code, which provides that [t]he term "aid" also covers the aid elements contained in transfers of State resources ... which cannot be regarded as a genuine provision of risk capital according to usual investment practice in a market economy.

32 Thus, the comparison with a private investor is based on the hypothetical conduct of a third party and requires a complex analysis of the overall situation of the beneficiary undertaking, the market in which it operates, the economic prospects concerned and the situation of the capital market. The Commission maintains that it has a wide discretion in this respect, as the Court of First Instance correctly held in paragraph 125 of the contested judgment. The Commission's citing the fact that HLB had refused to grant the credits requested by HSW at its own risk and had made the payments only on the orders of the City of Hamburg as an example of the conduct of a private investor was one point among others in the overall assessment of the economic situation.

33 In that respect, first, the applicant does not establish in what way the concept of an economic unit is a legal, rather than a factual, concept, essential to the question whether or not a State measure must be classified as State aid within the meaning of Article 4(c) of the ECSC Treaty.

34 Second, in so far as this part of the first plea is intended to accuse the Court of First Instance of erroneous factual assessments in examining the results the Commission came to when applying the private investor test, it should be recalled that the Court of First Instance has exclusive jurisdiction to find the facts, save where a substantive inaccuracy in its findings is attributable to the documents submitted to it, and to appraise those facts. That appraisal thus does not, save where the clear sense of the evidence has been distorted, constitute a point of law which is subject, as such, to review by the Court of Justice on appeal (see, in particular, the order of the President of the Court of 11 April 2001 in Case C-479/00 P(R) Commission v Gerot Pharmazeutika [2001] ECR I-3121, paragraph 45).

35 It follows that the first part of the first plea raised by the applicant is in part clearly unfounded and in part clearly inadmissible.

The second part of the first plea

36 In the second part of its first plea, the applicant argues that the Court of First Instance infringed Article 4(c) of the ECSC Treaty by misapplying the private investor test in that it used an incorrect reference criterion. In paragraphs 135 and 166 of the contested judgment, the Court of First Instance claimed to examine whether, in December 1992 and December 1993, a private investor would have increased or extended the credit line granted to HSW on the same conditions as the City of Hamburg. In reality, the Court of First Instance used as its reference criterion only the conduct of an outside investor envisaging a financial involvement in HSW for the first time.

37 The case-law of the Court shows, however, that the reference criterion in assessing whether or not a financing measure must be classified as State aid is the conduct of a private investor in a situation as close as possible to that of the public authority, thus, in this case, in a situation in which the imminent bankruptcy of the undertaking requesting the financing measure would involve significant losses for that investor.

38 In the applicant's submission, a lender of funds clearly acts as a private investor in market conditions where, having regard to a major financial investment which he risks losing entirely, he continues to support his debtor in payment difficulties, going so far as to grant the latter an additional aid in order to obtain the largest possible repayment of the loan previously granted. The reduction of a loss which would be inevitable without that measure was thus equivalent to a gain, which the Commission had moreover recognised in several decisions concerning other undertakings.

39 The Commission argues, as a preliminary argument, that, under Article 33 of the ECSC Treaty, the review of Commission measures by the Community judicature covers only a misuse of powers or an obvious infringement of the applicable Community law. That applies fully to the application of the criterion of the private investor. The Court of First Instance did not, therefore, infringe the law by limiting itself to those aspects when exercising its review and thus confirming the contested decision.

40 In particular, the Court of First Instance took due account in this case of the profitability of the contested measures alleged by the applicant, from the point of view of the limitation of losses. However, since HSW was on the verge of insolvency and operated in a very unfavourable economic context, the increase in the line of credit, as carried out in this case, would not have made sense for any private investor, even with a view to saving earlier investments, either in December 1992 or, a fortiori, in December 1993 when the situation again became much worse.

41 In that respect, it should be recalled that Article 1(2) of the fifth Steel Aid Code provides that, in determining how a hypothetical private investor would have reacted in a specific situation, reference must be made to the normal practice of companies in a market economy.

42 Moreover, the case-law of the Court of Justice on Article 92 of the EC Treaty (now, after amendment, Article 87 EC), which is equally relevant when applying the corresponding provisions of the ECSC Treaty, shows that, in order to determine whether investment by the public authorities in the capital of an undertaking, in whatever form, is in the nature of State aid, it is necessary to consider whether in similar circumstances a private investor might have provided injections of capital of such an amount. Although the conduct of a private investor, with which the intervention of a public investor pursuing economic policy aims must be compared, need not be the conduct of an ordinary investor laying out capital with a view to realising a profit in the relatively short term, it must at least be the conduct of a private holding company or a private group of undertakings pursuing a structural policy - whether general or sectoral - and guided by prospects of profitability in the longer term (see, in particular, Case C-42/93 Spain v Commission [1994] ECR I-4175, paragraphs 13 and 14).

43 It is also clear, first, that the Commission's examination of the question whether a given measure may be classified as State aid because the State did not act as an ordinary economic operator involves a complex economic assessment. Where it adopts a measure involving such assessments, the Commission has a wide discretion, and review of that measure by the courts must therefore be limited, as Article 33 of the ECSC Treaty shows, to checking that the rules of procedure and on the statement of reasons have been complied with, that the facts relied on in making the contested decision are accurate, and that there has been no obvious error in assessing those facts or any misuse of powers. In particular, the Court of First Instance must not substitute its own economic assessment for that of the Commission.

44 Moreover, Article 51 of the ECSC Statute of the Court of Justice shows that review by the Court of Justice, on an appeal, is limited to questions of law and that an appeal may be based only on pleas alleging lack of competence of the Court of First Instance, procedural irregularities before the Court of First Instance which adversely affect the interests of the applicant, or infringement of Community law by the Court of First Instance. The Court of Justice must thus limit itself to examining whether the Court of First Instance infringed the law when reviewing the exercise of the Commission's discretion, as described in the preceding paragraph.

45 On that point, the Court of First Instance began by making an ample examination, in paragraphs 132 to 169 of the contested judgment, of the analysis of the Commission which led it to the conclusion that, in the economic context of the case, no reasonable private investor would have financed HSW. At the conclusion of that examination, the Court of First Instance confirmed the Commission's assessment to the effect that the financial situation of HSW was so precarious that the increase in the credit line in December 1992 constituted an emergency measure to keep HSW afloat, with no prospect of profitability even in the long term (paragraph 137 of the contested decision) and that, as for the measures taken in December 1993, by which time the situation had further deteriorated, the chances of HSW finding a private investor willing to act as the City of Hamburg did were practically non-existent (paragraph 163 of the contested judgment).

46 Those findings thus took ample account of the various aspects of the situation in this case, and of the conduct which might reasonably be expected of a private investor pursuing a prospect of profitability in the long term. By contrast, the applicant's opinion would lead to any conduct imaginable being used as the basis for assessing the private investor criterion, irrespective of whether or not it appears reasonable in such a perspective. Such conduct obviously cannot constitute an appropriate criterion.

47 In those circumstances, the Court of First Instance cannot be accused of committing an error of law by confirming the assessment which the Commission arrived at in the exercise of its wide discretion.

48 The second part of the first plea is therefore clearly unfounded and must be rejected accordingly.

The third part of the first plea

49 In the third part of its first plea, DSG argues that, in paragraphs 183 and 184 of the contested judgment, the Court of First Instance erroneously classified the measures taken in December 1993 as contributions of capital. In reality, this was a simple extension of the line of credit which had been granted long since. The credit line of DEM 130 million had been granted to HSW as early as 1984, and the Commission had tolerated it all those years.

50 DSG argues that, in 1993, the initial credit framework had already been entirely used and had thus been practically transformed into capital. The extension of the credit line did not therefore constitute a contribution of fresh liquidity. The Court of First Instance thus misassessed the economic and legal situation, characterised by a deferral of repayment of a loan previously granted, such deferral being necessary from an economic and legal point of view in order to avoid the insolvency of HSW.

51 The Court of First Instance should, at the very least, have annulled Article 2 of the contested decision, in which the Commission classified all the loans granted in December 1993 as State aid. Only the loans granted in the form of an increase in the initial credit line, which amounted to DEM 20 million in December 1992 and DEM 24 million in December 1993, might conceivably be capable of being classified as aid. As for the swing of DEM 10 million granted in December 1993, it was never used.

52 The Commission argues that this plea in inadmissible in so far as the applicant merely repeats arguments put forward at first instance and thereby seeks to obtain a fresh assessment of the facts from the Court of Justice. The applicant does not adduce any error of law allegedly committed by the Court of First Instance.

53 In any event, the Commission maintains that the plea is unfounded. Concerning the loans granted to HSW, taking account of the fact that it was on the verge of insolvency, the advantage conferred upon it did not reside in the difference between the interest rate of those loans and the normal interest rate but in the granting of those loans as such when no private investor would have been prepared to grant them. The Commission emphasises that the decision to grant the credit line had to be renewed each year and required an assessment of the prevailing situation on each occasion. In the disastrous financial situation of HSW at the end of 1993, the extension of the credit did indeed constitute State aid.

54 In this respect, the Commission has rightly pointed out that, in this part of its first plea, the applicant merely repeats the same claims as at first instance in order to obtain a simple re-examination by the Court of Justice of its application before the Court of First Instance. Such an appeal in reality constitutes a request for a simple re-examination of the application before the Court of First Instance, which, in accordance with Article 49 of the ECSC Statute of the Court of Justice, is outside the latter's competence (see, in particular, the order in Case C-111/99 P Lech-Stahlwerke v Commission [2001] ECR I-727, paragraph 33).

55 In so far as this branch of the first plea must be understood as accusing the Court of First Instance of misjudging the legal action to be taken on the factual claims submitted to it, no such obvious error can be inferred from the findings of the Court of First Instance. The latter held, in paragraph 183 of the contested judgment, that it was clear from the facts of the case that the extensions of the credit in question had to be negotiated each year, whereupon it was for the City of Hamburg and HLB to decide whether or not to grant the extension and/or the increase by reference to the economic situation of the time. The Court of First Instance inferred from that, in paragraph 184 of the contested judgment, that the Commission was entitled to take the view that the amount of the aid corresponded to the amount of the loans granted. There is no discernible error in that assessment.

56 It follows that the third part of the first plea is partly inadmissible and partly unfounded.

The fourth part of the first plea

57 In the fourth part of its first plea, DSG accuses the Court of First Instance of an error of law by holding, in paragraphs 173 to 175 of the contested judgment, that the Commission had not made an obvious error of assessment by holding that the possibility of HSW obtaining loans from third parties thanks to the sureties it was able to offer did not prevent the contested measures being classified as State aid. According to DSG, the possibility of obtaining loans from third parties, on the hypothetical condition that HSW had sureties which it transferred to HLB, should have been taken into account when applying the private investor test.

58 On this point, the Commission points out that the hypothesis of loans granted by third parties does not constitute a reasonable situation of reference. First, such loans would have been highly improbable given the situation of possible sureties faced with an imminent insolvency. Second, in the circumstances of this case, the loans from the City of Hamburg were in the nature of capital-replacing loans, which would not have been the case with loans that might be obtained from third parties.

59 The Court of First Instance was therefore right to hold, in paragraph 174 of the contested judgment, that hypothetical loans from third parties would not have been comparable with those granted by HLB on the orders of the City of Hamburg, and to hold, in paragraph 180 of the contested judgment, that it was very doubtful whether third parties would have been able to benefit from sufficient sureties in order to consent to the granting of the necessary loans.

60 In this respect, there is no discernible error in the assessment by the Court of First Instance of the facts submitted to it. The Court of First Instance has rightly held that, in HSW's situation of imminent insolvency, the hypothesis of a third party being able to grant it a credit of the same amount granted by the City of Hamburg and guaranteed by sureties still available in that situation seemed highly improbable, and that the contested measures should therefore be classified as State aid incompatible with the ECSC Treaty.

61 It follows that this branch of the first plea must be dismissed as unfounded. Therefore, the first plea must be dismissed in its entirety.

The second plea in law

62 In its second plea, DSG accuses the Court of First Instance of infringing Article 88 of the ECSC Treaty by holding, in paragraph 187 of the contested judgment, that the Commission was competent to demand repayment of State aids which it considered incompatible with that Treaty.

63 The applicant argues that the ECSC Treaty has no provision similar to the combined provisions of Article 93(2) of the EC Treaty (now Article 88(2) EC) and Article 14 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), which confer upon the Commission express competence to demand the repayment of unlawful aid. As the older Treaty, the ECSC Treaty is characterised by a much less important role for the Commission vis-à-vis Member States than under the EC Treaty. The only way for the Commission to act would have been by using the procedure under the third paragraph of Article 88 of the ECSC Treaty, which, however, required the prior approval of the Council by a two thirds majority. There was no such approval in this case. In accordance with the principle of subsidiarity, it is for the Member States to draw the consequences of aid regarded as incompatible with the ECSC Treaty. Article 3 of the contested decision should therefore be annulled.

64 According to the Commission, these arguments are without foundation. The obligation to re-establish a situation in conformity with Community law and thus to recover unlawful aid flows directly from the strict system of aid established by the ECSC Treaty and the obligation of the Member States which arises from that system. Article 88 of that Treaty expressly provides that the Commission may record that obligation and set the Member State in question a time-limit for its fulfilment. The agreement of the Council was provided for in the third paragraph of that article only for the adoption of the specific measures described therein. No such measures are at issue in the present case.

65 In that respect it is sufficient to point out that, as far as the system of aid laid down in the EC Treaty is concerned, the removal of unlawful State aid by means of recovery is the logical consequence of a finding that it is unlawful and that the aim of obliging the State concerned to abolish aid found by the Commission to be incompatible with the common market is to restore the previous situation (see, in particular, Case C-75/97 Belgium v Commission [1999] ECR I-3671, paragraph 64). It follows that express competence for the Commission to demand repayment is not necessary.

66 There is no reason in this respect for a different assessment to be made of aid subject to the system under the ECSC Treaty.

67 First, the system of aid established by the ECSC Treaty is not, as the applicant seeks to argue, less rigid than that of the EC Treaty. On the contrary, Article 4(c) of the ECSC Treaty establishes a system that is clearly more severe than that of the EC Treaty in so far as it authorises the Commission to prohibit all State aid from the outset, without there being any need to verify whether they distort or threaten to distort competition or whether they fall within exceptions to the general prohibition.

68 In addition, where a Member State does not comply with the Commission's decision to demand repayment of unlawful aid, the Commission must, under the system of the ECSC Treaty in the same way as under that of the EC Treaty, use the procedure for failure to fulfil obligations. It is only at a later stage of that procedure, namely where penalties are to be imposed by reason of non-compliance with obligations, that the third paragraph of Article 88 of the ECSC Treaty provides, unlike the procedure for failure to fulfil obligations established by the EC Treaty, that the Council is to become involved.

69 In this case, when the applicant brought its action for annulment before the Court of First Instance, the procedure was still at the stage of the finding by the Commission that the aid in question was unlawful. At that stage, clearly, no provision is made for the involvement of the Council. It is, moreover, inconceivable that the principle of subsidiarity has thereby been infringed. The Court of First Instance was therefore right to hold, in paragraph 189 of the contested judgment, that the Commission had not committed an obvious error by requiring repayment of the aid in question.

70 The second plea in law is therefore clearly unfounded and must be dismissed.

The third plea in law

71 In its third plea in law, DSG accuses the Court of First Instance of infringing general principles of law in the context of the reduction of production capacity at one of its plants located in Euskirchen.

72 According to the applicant, that reduction in capacity strongly influenced the factual situation to be taken into consideration at the time the payments in question were classified, because subsidies could have been obtained, which would then have been capable of being set off against the aid in question.

73 First, the applicant argues, the Court of First Instance committed an infringement of the laws of logic by examining, in paragraph 200 of the contested judgment, the argument concerning the balancing of aid to be recovered against a reduction in unsubsidised capacity as if it were raised in the context of the dispute over the private investor test carried out by the Commission. To raise the question of such balancing would, however, be irrelevant in that context. Such an argument was not intended to deny the character of a measure as State aid, but presupposed it.

74 Second, the Court of First Instance did not examine the decisive question whether restructuring subsidies that were not used or not requested could be set off against unlawful aid which had to be recovered. In this case, the set-off consisted in taking into consideration the further and unsubsidised reduction of HSW's production capacity and imputing it, in the amount of the restructuring subsidies which might have been envisaged, against the restitutionary debt in relation to HSW. The action in classifying loans granted by the City of Hamburg as unlawful aid and demanding their repayment without taking account of the restructuring carried out subsequently without subsidy constituted disproportionately severe conduct. If the Court of First Instance had correctly analysed that argument of the applicant, it would have come to a different conclusion.

75 According to the Commission, this plea is inadmissible because DSG merely reiterates arguments that are irrelevant from a legal point of view and regarded as such by the Court of First Instance, without being able to adduce a specific error of law by the latter. Moreover, the plea is irrelevant inasmuch as the Court of First Instance rightly described the applicant's arguments as insignificant.

76 In that respect, it is not denied by the parties that, at the time of the granting of the aid in dispute, a reduction in production capacity of HSW's site at Euskirchen had not yet happened, but was at the planning stage. Those findings clearly contain no infringement of the law.

77 The Court of First Instance was therefore rightly able to hold, in paragraphs 200 and 201 of the contested judgment, that the applicant's arguments concerning events later than the granting of the aid were irrelevant, since the comparison with a private investor had to be made only on the basis of information that was in the possession of the City of Hamburg at the time of the disputed loans, and that, therefore, the beneficial consequences flowing from the closure of the Euskirchen subsidiary, even if established, could not be taken into consideration when examining the contested decision. Those findings clearly contain no infringement of the law.

78 The third plea in law is therefore clearly unfounded.

79 It follows from the whole of the above considerations that the pleas in law submitted by DSG in support of its appeal are either clearly inadmissible or clearly unfounded. Therefore, the appeal must be dismissed pursuant to Article 119 of the Rules of Procedure.

Costs

80 Under Article 69(2) of the Rules of Procedure, applicable 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 applied for DSG to be ordered to pay the costs, and the latter has been unsuccessful, it must be ordered to pay the costs. Since the first paragraph of Article 69(4) of the Rules of Procedure provides that Member States and institutions which intervene in the proceedings are to bear their own costs, the Federal Republic of Germany must be ordered to bear its own costs.

On those grounds,

THE COURT (Fifth Chamber)

hereby orders:

1. The appeal is dismissed.

2. DSG Dradenauer Stahlwerke mbH is to pay the costs.

3. The Federal Republic of Germany is to bear its own costs.