1.

The applicant, William Cook pic (hereinafter referred to as ‘Cook’), the main European undertaking in the foundries sector, contests the Commission's decision ‘to raise no objections’ to several aids granted by the Spanish authorities to Piezas y Rodajes SA (hereinafter referred to as ‘PYRSA’).

2.

In support of its application for annulment, Cook relies on three grounds: first of all, the Commission is alleged to have committed a manifest error in assessing the facts on which the decision is based; secondly, the Commission is alleged to have infringed the rights of the defence by failing to give Cook an opportunity to make its views known before the adoption of the decision; thirdly — and lastly — the Commission purportedly infringed the Treaty provisions governing the procedure for verifying the compatibility of State aid, inasmuch as, in this case, it found the aid to be compatible solely on the basis of the outcome of the preliminary examination procedure, that is without initiating the more complex procedure under Article 93(2) of the Treaty.

3.

Before dealing with the case, it would seem advisable to set out briefly the main conclusions of the analysis that is to follow:

4.

Having said that, I consider it useful to provide in limine some details regarding the procedural framework of a decision ‘to raise no objections’ to a particular aid. Those details will serve to clarify some general points to which I shall refer in due course when examining the various issues of admissibility and substance raised by this case.

5.

As we know, a decision ‘to raise no objections’ to a plan to grant aid is a measure whereby the Commission, in finding the aid compatible, also lays down that it is unnecessary to initiate the Article 93(2) procedure with a view to assessing such compatibility.

In other words, the distinguishing feature of such a decision is procedural, in the sense that the Commission thereby determines compatibility at a preliminary stage and refrains from conducting a more detailed investigation into the nature and effects of the measure notified to it.

6.

The power conferred on the Commission to adopt a decision of that type, on fulfilment of certain specific conditions, stems from the fact that, under the Treaty, verification of the compatibility of State aids is a two-stage process.

7.

The first stage, provided for by Article 93(3), consists in a preliminary examination of the plan that has been notified. The aim of that first stage is to enable the Commission to form a ‘prima facie opinion’ (judgment in Lorenz ( 1 )) in order to distinguish, swiftly and on completion of a simplified verification procedure, measures which as from their notification clearly appear to be compatible (or which are manifestly not even in the nature of aid) from measures which in contrast raise, to say the least, doubts as to their compatibility and therefore require further investigation.

8.

In keeping with its purpose — which is precisely to permit a clear and concise prima fade verification of compatibility — the preliminary procedure exhibits three characteristics: it is opaque; no provision is made for the participation of third parties; it should — in principle — be of short duration.

9.

It is opaque inasmuch as there is no form of publicity to bring plans which have been notified to the attention of third parties. In its judgment in Heineken, ( 2 ) the Court pointed out that Article 93(3) ‘does not require that the notification to the Commission by a Member State of plans to grant or alter aid should be immediately made known to all the interested parties; such an obligation falls upon the Commission alone when it initiates the procedure provided for in Article 93(2)’. Accordingly, third parties may be wholly unaware of the fact that a particular aid has been notified and that the Commission has commenced its examination of it.

On the other hand, the decision terminating the preliminary procedure is published. The Official Gazette (C series) carries both decisions to initiate the Article 93(2) procedure and (as from July 1990) decisions ‘to raise no objections’ (of which, however, only a very concise extract is published, frequently after the date on which the decision was adopted).

10.

The opaqueness of that stage is linked to the absence of any participation by third parties. Since the Commission is under no obligation ‘to give notice to the parties concerned to submit their comments’(judgment in Germany v Commission ( 3 )), it is clear that the preliminary examination is, as a rule, carried out by the Commission alone on the basis of notification and of any views exchanged with the authorities of the State granting the aid. Evidently, third parties who have in any event discovered the existence of the aid are always entitled to express their views and, if necessary — as was the case here — to approach the Commission in order to seek the initiation of the Article 93(2) procedure. That, however, is merely a hypothetical possibility.

11.

Finally, and in keeping with the aforesaid characteristics, the preliminary procedure is viewed as being of short duration. It is apparent from Article 93(3) that, where necessary, the Commission must set in motion the next procedural stage ‘without delay’.

The Court has pointed out (in its judgment in Lorenz) that while the Commission must have ‘sufficient time for consideration... of the plans’, it must, having regard to the duty to act with care,‘act diligently and take account of the interest of Member States of being informed of the position quickly’; this means that the Commission's ‘delay’ must not prevent it from defining its attitude ‘within a reasonable period’. On the basis of those considerations, and by analogy with Articles 173 and 175 of the Treaty, the Court has come to the conclusion that the Commission must abide by a period of two months. ( 4 )

The fact remains that in practice the tendency is for the preliminary procedure to be extended indiscriminately for months on end (it is not infrequent for a preliminary examination to last much longer than a year). The reason is that the two-month period starts to run only once the Commission has been fully notified by the State granting the aid, that is notification comprising all the information needed for a prima fade assessment of the plan. In actual fact, however, the frequent ‘extension’in time of the preliminary examination, in so far as it involves an intense exchange of views, if not proper negotiations, between the Commission and the State concerned, would seem to run counter to the Treaty to the extent to which it brings de facto within the scope of the preliminary examination — which, as stated above, should be limited only to a ‘prima fade opinion’ — tests and appraisals that should instead be carried out under, and subject to the guarantees of, the Article 93(2) procedure.

12.

While the aim of the preliminary procedure is to carry out a swift, clear and concise screening of measures that are clearly compatible with the common market, the aim of the Article 93(2) procedure is to carry out an in-depth investigation into the nature and impact of the planned measure.

13.

The stage referred to in Article 93(2) begins with a communication, published in the Official Journal, giving notice to third parties to submit their comments.

14.

That stage has a twofold purpose. First of all, it enables third parties (Member States and undertakings) to make their views known in the appropriate manner on measures which affect their legitimate interests. Secondly, it enables the Commission — which has no power of investigation in the field of State aid — to gather all the factual and legal information it needs to assess the compatibility of the aid.

It is, therefore, a procedure which satisfies two requirements in point of principle inasmuch as, on the one hand, it safeguards the rights of the defence and, on the other, it ensures that the Commission exercise its power of appraisal in full knowledge of the facts and, therefore, carefully and impartially.

15.

Those findings have in point of fact been confirmed by the Court in its case-law: in Commission v Germany, ( 5 ) where the Court states that the ‘sole aim of this communication is to obtain from [the] persons concerned all [the] information required for the guidance of the Commission with regard to its future action’; in the judgment in Intermills, ( 6 ) where the Court emphasizes, in particular, that the purpose of Article 93(2) ‘is to oblige the Commission to take steps to ensure that all persons who may be concerned are notified and given an opportunity of putting forward their arguments’; and, in terms which are even more comprehensive and exhaustive, in Germany v Commission, cited above, where the Court points out that the Article 93(2) procedure ‘guarantees the other Member States and the sectors concerned an opportunity to make their views known’ and, at the same time, ‘allows the Commission to be fully informed of all the facts of the case before taking its decision’.

It may be worth noting, moreover, that, what the Court stated in relation to the procedure provided for in Article 93(2) of the Treaty for verifying the compatibility of State aid is purely and simply a specific expression of generally applicable principles. The Court has pointed out that, in procedures involving complex assessments and decisions of a discretionary nature, compliance with the rights of third parties, the principles of impartiality and sound administration and, ultimately, the specific requirements inherent in the judicial review of acts of the administration impose ‘an obligation on the competent institution to examine, carefully and impartially, all the relevant circumstances of the case, the right of the person concerned to make his views known and the right to an adequate statement of reasons for the decision’. ( 7 )

16.

In the light of those factors, it is now clear that, precisely as a result of the various characteristics and aims of the preliminary procedure and the Article 93(2) procedure, strict limits must be set to the Commission's power to determine the compatibility of aid solely on the basis of the outcome of the preliminary procedure, that is by means of a decision ‘to raise no objections’ of the kind which is at issue in the present case.

17.

As stated above, the preliminary procedure is consistent with the requirement not to ‘weigh down’ unduly the system of verifying the compatibility of aid in the case of measures which are clearly compatible with the common market. Where national measures are manifestly compatible, any comments by third parties would not in any event have any effect on the outcome of the final decision, but would delay without justification the implementation of public measures which are in the interest of both the Community and, evidently, the State which enacts them.

In those circumstances, therefore, the initiation of the more complex procedure under Article 93(2) would appear to be superfluous, if not actually detrimental.

When, however, the compatibility of measures is not already manifestly apparent upon an initial examination, the participation of third parties — through the initiation of the procedure under Article 93(2) — is absolutely essential. That procedure alone is capable of safeguarding the legitimate interests of competitors of an undertaking in receipt of aid (interests which are largely ‘sacrificed’ at the preliminary stage) and it alone enables the Commission to gain the information it needs for a full assessment of the nature and Communitywide impact of the relevant national measure.

18.

The need for the Article 93(2) procedure, should there be any doubts as to the compatibility of the aid, has been confirmed in point of fact by the Court in its decisions. In particular, in Germany v Commission, cited above, after emphasizing the specific aims of the Article 93(2) procedure, the Court points out that that procedure ‘is essential whenever the Commission has serious difficulties in determining whether a plan to grant aid is compatible with the common market’. The Court goes on to state:

‘It follows that the Commission may restrict itself to the preliminary examination under Article 93(3) when taking a decision in favour of a plan to grant aid only if it is convinced after the preliminary examination that the plan is compatible with the Treaty. If, on the other hand, the initial examination leads the Commission to the opposite conclusion or if it does not enable it to overcome all the difficulties involved in determining whether the plan is compatible with the common market, the Commission is under a duty to obtain all the requisite opinions and for that purpose to initiate the procedure provided for in Article 93(2)’. ( 8 )

19.

It transpires, therefore, from the Court's case-law that, where a difficulty arises in assessing the compatibility of aid, the Commission is under an obligation to initiate the Article 93(2) procedure. This means — in my view — that the Commission can confine itself to the preliminary procedure alone only if it is already manifestly apparent on a prima facie view that the measure notified by the State is not in the nature of aid, for the purposes of Article 92(1), or is definitely compatible by virtue of the derogations referred to in Article 92(2) or (3). If that is not the case, it is necessary, both in order to form an accurate picture of the impact of the aid and to safeguard the rights of third parties, to initiate the verification procedure under Article 93(2): in the absence of a power of investigation similar to that provided for the application of Articles 85 and 86, only that procedure can give the Commission the absolute certainty that the measure in question fulfils all the requirements enabling it to come within one of the derogations laid down by the provision concerned (or else falls entirely outside Article 92(1)).

20.

In the light of those general observations, and before I turn to the examination of the case, it is advisable briefly to recall the main facts.

21.

Under an investment programme valued at PTS 2788300000 for the construction in the province of Teruel of a foundry to produce sprockets (a toothed wheel that engages with a chain, used chiefly in the mining industry) and GET parts (used in the construction of earthmoving and excavation equipment), PYRSA received the following aids:

22.

On 14 January 1991 Cook submitted a formal complaint to the Commission concerning the above aids, in which it sought the initiation of the Article 93(2) procedure.

23.

In reply, the Commission wrote two successive letters to Cook.

By letter of 13 March 1991, the Commission informed Cook that:

24.

By letter of 29 May 1991, the Commission informed Cook that it had decided ‘to raise no objections’ with regard to the lastmentioned aids. A copy of that decision was enclosed with the letter.

25.

On 30 July 1991 Cook brought an action for the annulment of the decision, communicated by letter of 29 May 1991, ‘to raise no objections’ to the aids granted to PYRSA.

26.

It should be noted first of all that, in its reply, Cook pointed out that its application was not directed against the Commission's decision concerning the grant of PTS 975905000, which was communicated to the applicant by letter of 13 March 1991 and subsequently confirmed by letter of 29 May 1991.

There is no doubt, therefore, that the subject-matter of the application before the Court is confined to the decision adopted by the Commission not on the aforesaid grant but on the other aids granted by the Spanish authorities to PYRSA, with regard to which the Commission had reserved its position in its letter of 13 March 1991 and whose compatibility with the common market was not communicated to the applicant until 29 May 1991.

27.

Cook claims that its application must be regarded as admissible, however the letter of 29 May 1991 is categorized.

28.

Cook claims, primarily, that the letter does not merely forward to the applicant, for its information, the decision addressed to the Spanish Government in which the aids in question are stated to be compatible, but contains an independent and separate decision rejecting the applicant's complaint. The letter of 29 May 1991 therefore contains a decision of rejection addressed to Cook and the latter accordingly has standing to seek its annulment under Article 173 of the Treaty.

29.

In the alternative, Cook points out that, even if the letter of 29 May 1991 is regarded merely as a communication of the decision addressed to the Spanish Government, such a decision, although addressed to a third party, is in any event of direct and individual concern to it. In that case as well, therefore, Cook claims to have standing to seek its annulment.

30.

Let me say at once that the applicant's primary argument must, in my view, be rejected.

31.

In the first place, it is apparent from the actual wording of the letter of 29 May 1991 that, by means of that communication, the Commission merely ‘informed’ the applicant of its decision ‘to raise no objections’ with regard to the contested aids. That is confirmed by the fact that the Commission enclosed with its letter a translation of the decision addressed to the Spanish Government.

Hence the letter of 29 May 1991 does not contain an independent decision but must instead be categorized as a mere communication of information aimed at drawing the attention of the addressee to the terms of the decision addressed to the Spanish Government with regard to the aids granted by the latter to PYRSA.

32.

Secondly, it should be noted, generally speaking, that, under the Article 93 procedure, in contrast to procedures for the application of Articles 85 and 86, the only decision which the Commission is empowered to take is a decision on the compatibility of the aid. There is no place, on the other hand, for an independent and separate decision rejecting a complaint submitted by a competitor of the undertaking in receipt of aid.

This follows from the fact that, so far as concerns aid, the Commission is under an obligation, once it has been made aware (by notification, a complaint or any other means) that an aid has been introduced, to decide whether it is compatible. In keeping with the principles of care and proper administration, the terms of that decision are brought to the attention of any persons who have complained of the existence of the aid or have, in any event, expressed their views on it. It is clear, however, that the reply to a complaint depends exclusively on, and is therefore subsumed in, the decision taken on the compatibility of the aid: the Commission cannot react to the complaint until after deciding whether the aid is compatible and its reply cannot be anything more or less than the communication of the decision concerning the compatibility of the aid.

33.

Ultimately, I consider that the act adversely affecting the applicant and challenged by the latter must be identified with the decision ‘to raise no objections’ to the aids granted to PYRSA, which is addressed to the Spanish Government and which was brought to Cook's attention by the Commission's letter of 29 May 1991.

34.

Since Cook is challenging a decision addressed to a third party, it is necessary to ascertain whether that decision is of direct and individual concern to the applicant, as required by Article 173. ( 9 )

35.

As the Court has consistendy held, persons other than those to whom a decision is addressed may claim to be individually concerned within the meaning of the second paragraph of Article 173 only if that decision affects them by reason of certain attributes which are peculiar to them, or by reason of circumstances in which they are differentiated from all other persons, and by virtue of those factors distinguishes them individually just as in the case of the persons addressed. ( 10 )

36.

In this case, it must be pointed out first and foremost, there is no doubt that the contested decision is of ‘direct’ concern to the applicant. As stated above, the Commission's decision ‘to raise no objections’ nevertheless constitutes a ‘favourable decision’ which authorizes the aid, which therefore enables the State to implement it, and which consequendy leads to injury being sustained by third-party rivals of the undertaking in receipt of the aid.

37.

So far as concerns the question whether or not the contested decision is of ‘individual’ concern to Cook, it must be borne in mind that in its judgment in COFAZ, ( 11 ) the Court took account, in its assessment, of two factors: the applicant undertaking must be significantly affected by the aid held to be compatible by the Commission and the undertaking itself must have played an active role in the Article 93(2) procedure.

38.

With regard to the first factor, according to the Commission and the Spanish Government, the applicant has failed to demonstrate that its position on the market is significandy affected by the aid granted to PYRSA.

39.

In that regard, in his Opinion in COFAZ, Mr Advocate General Verloren van Themaat emphasizes that the applicant undertaking must demonstrate that a substantial proportion of its activities are in competition with a substantial proportion of the activities of the undertaking in receipt of the aid.

That criterion — which I believe was upheld by the Court — must, in my view, be regarded as a minimum threshold of admissibility, in the sense that it should result in standing to take action under Article 173 being denied only to undertakings which are not active competitors of the undertaking in receipt of aid and which are therefore only marginally concerned by a Commission decision finding aid compatible.

40.

That is not the case here. It is undisputed that Cook produces GET parts, that is to say one of the two categories of products manufactured by the plant in receipt of the aid. In addition, Cook produces steel castings and it has emphasized, without being contradicted by the Commission, that the PYRSA plant is capable, with minimal additional investment, of operating in the steel castings sector as well. There is no doubt, therefore, that Cook and PYRSA are competitors, both actual (in the GET parts sector) and potential (in the steel castings sector), as regards a substantial proportion of their respective activities.

Furthermore, Cook has also emphasized — ever since its complaint to the Commission — that the aids to PYRSA were likely to cause it significant injury on account of their size, the existence of overcapacity on the market in question, and the fact that a substantial proportion of PYRSA's production would be exported to Community countries.

41.

More generally, it must be borne in mind that the only information regarding aid normally at the disposal of undertakings which challenge a decision ‘to raise no objections’ is either that communicated to them by the Commission or that resulting from the bare extract published in the C series of the Official Journal. They cannot be required therefore — as the Commission seems to demand in this case — to formulate in the document instituting the proceedings precise submissions regarding the size and the effect of the aid (such as its impact on the recipient's production costs, shifts in market shares or the effect on trading patterns). As I stated earlier, in order to have standing to take action, the applicant only has to establish for those purposes that it is competing genuinely and not just marginally with the undertaking in receipt of the aid held to be compatible, and it has certainly established that in this case.

42.

As for the second condition laid down by the Court in COFAZ — namely the applicant's participation in the administrative procedure — I could confine myself to pointing out that Cook played an active part in that procedure since, by lodging a complaint, it drew the Commission's attention to the existence of aids that had not been notified by the government which granted them.

Besides, there is no dispute between the parties on that point.

43.

Having said that, however, I consider it advisable to draw the Court's attention to a matter of general interest. The judgment in COFAZ was concerned with a situation in which the Commission had initiated the Article 93(2) procedure and in which, therefore, third parties had been given an opportunity to participate in the administrative procedure. In those circumstances, the inference can be drawn that only third parties who have actually taken part in the administrative procedure may bring an action for annulment (of a favourable decision).

On the other hand, in the converse situation in which the Commission has not initiated the Article 93(2) procedure but has confined itself to taking a decision ‘to raise no objections’, on the basis of the outcome of the preliminary examination alone, it would seem to be wholly irrational to make standing to take action conditional on the applicant having taken part in the (preliminary) administrative procedure, for the simple reason that a third-party applicant might have been wholly unaware of the fact that the Commission had initiated the preliminary procedure.

As was made abundantly clear earner, there is no form of publicity drawing the attention of third parties to the fact that the Commission has initiated a preliminary examination procedure in relation to a particular aid. In fact, given its aims, that procedure is normally conducted without the participation of third parties. Their participation, where it comes about — as in this case — stems from the purely hypothetical possibility of the third parties themselves discovering the existence of the aid from other sources and consequently taking steps in relation to the Commission (by lodging a complaint, by submitting comments or by other means).

I consider, therefore, that the participation of a third party in the preliminary procedure — a procedure of which that party is normally unaware — cannot constitute a conditio sine qua non for bringing an action against a decision ‘to raise no objections’. Furthermore, in challenging such a decision, all the third party seeks is that the Commission should initiate the Article 93(2) procedure, publish in the Official Journal a communication setting out precise information regarding the aid in question and thus place all the parties concerned in a position to take part in the examination of the aid by making their views known and submitting any useful comments in that regard.

44.

Accordingly it is desirable, in my view, that in declaring this application admissible, the Court should take account of the fact that the judgment in COFAZ cannot be applied as such to a situation in which a decision ‘to raise no objections’ is challenged. Indeed any competitor of the undertaking in receipt of the aid must be deemed to have standing to institute proceedings against such a decision, regardless of whether he has previously participated in the preliminary administrative procedure.

45.

Turning to the substance of the case, it seems appropriate to begin by considering the applicant's third submission, which concerns the alleged infringement by the Commission of the procedural rules in Article 93(2). According to the applicant, the Commission infringed those rules by deciding that the aids were compatible on the basis of the preliminary procedure alone, that is without initiating the Article 93(2) procedure.

46.

In support of that allegation, Cook argues in the first place that in the event of the Commission applying, when assessing the compatibility of aid, the provisions referred to in Article 92(3), that process, which involves complex and discretionary appraisals, should necessarily be conducted within the procedural framework of Article 93(2).

47.

That argument, to the effect that the initiation of the aforesaid procedure should be ‘automatic’ whenever one of the derogations referred to in Article 92(3) is to be applied, has already been challenged by Mr Advocate General Slynn in his Opinion in Germany v Commission, cited above. In these proceedings, I cannot but endorse the opinion expressed by my eminent predecessor.

In practice, as stated above, the initiation of the procedure in question depends on another criterion. The Commission continues to be under an obligation to initiate the examination procedure envisaged by Article 93(2) if the preliminary examination procedure fails to dispel all the uncertainty regarding the compatibility of the national measures in question. However, there is no reason why the possibility of finding a measure compatible by virtue of one of the provisions of Article 92(3) should not already be manifestly apparent at the preliminary stage (for instance, as investment aid intended for an undertaking located in an economically depressed area, which clearly complies with the ceiling for regional aid authorized for that area and concerns a market segment is which demand is known to be rising). In those circumstances, there is no doubt that the initiation of the Article 93(2) procedure would be unjustified, since any observations by third parties could not in any event affect the terms of the decision and would, moreover, needlessly delay the authorization and implementation of the measure.

48.

Secondly, the applicant maintains that the Commission should have initiated the Article 93(2) procedure inasmuch as, in this case, the preliminary examination had revealed the existence, to say the least, of serious doubts regarding the compatibility of the aids granted to PYRSA. Accordingly, there was some difficulty, if nothing else, in assessing the impact of the aids which, according to the case-law of the Court, warranted the initiation of the aforesaid procedure.

49.

In that regard, it must be emphasized that the Commission would have been entitled to restrict its analysis to the preliminary stage alone only if the compatibility of the aids granted to PYRSA had, already on a prima facie view, been apparent. However, that would have presupposed that the Commission had at its disposal, as from the preliminary stage, a full range of assessment criteria which clearly indicated that the aids qualified for one of the derogations provided for in Article 92(3) and that, consequently, the initiation of the Article 93(2) procedure was wholly superfluous.

50.

In this case it must be said, however, that, on the one hand, the Commission did not, on its own admission, have at its disposal the relevant information for a full and reliable assessment of the compatibility of the aid and that, on the other, the information in the case-file reveals, if anything, that there were no grounds for finding the aids granted to PYRSA compatible with the common market. In those circumstances, therefore, the Commission was not justified in giving a definitive ruling on the question of compatibility by adopting a decision ‘to raise no objections’, but should have investigated the contested aids in more detail by initiating the procedure laid down for that purpose by the Treaty.

51.

That conclusion is based on the following considerations.

First of all, in examining the compatibility of the aids granted to PYRSA, the Commission was required to analyse their regional as well as sectoral implications.

52.

So far as the regional aspect is concerned, the Commission's appraisal was facilitated by the fact that, by Decisions of 26 May 1987 and 1 September 1987 (see paragraph 22 supra) authorizing a general regional aid scheme, the Commission had already assessed the different levels of underdevelopment in the regions of Spain and the maximum amounts of State aid (for regional purposes) that could be granted to each. It was apparent from that measure that the province of Teruel was classified amongst those in which the level of underdevelopment was particularly serious and in respect of which the derogation in Article 92(3)(a) authorizes the highest ceiling of 75% net grant equivalent (NGE). ( 12 )

Although those decisions related to a scheme other than those on the basis of which PYRSA received the contested aids, there is no reason why the Commission should not have referred, also in assessing those aids, to the general criteria previously laid down with regard to the economically lessfavoured province of Teruel and the relevant aid ceiling. In the light of those criteria, therefore, the Commission considered in the contested decision that the individual aids granted to PYRSA did not give rise to any difficulties from that point of view, inasmuch as their overall intensity was below the ceiling of 75% NGE set for the province of Teruel. Nor has that been disputed by the applicant. ( 13 )

53.

On the other hand, the assessment of the sectoral impact of the measures in question was a far more complex matter.

It must be borne in mind that, in accordance with the principles underlying the Community regional aid scheme, as laid down in the Resolution of 20 October 1971 of the Member States meeting within the Council and frequently restated in the Commission's general frameworks and decisions, the Commission may not, in applying the derogations provided for in Article 92(3)(a) and (c) of the Treaty in favour of regional aids, confine its attention only to the regional implications of a particular public measure, but is required also to determine the full extent of the sectoral repercussions which the measure itself is likely to have. ( 14 ) This follows from the fact that ‘it is in the goods and services sectors that the effects of aid on competition and trade are felt’ (point 8 of the annex to the Council Resolution of 20 October 1971) with the result that it is necessary to assess ‘the problems that the sectoral repercussions of this aid may raise at Community level’ (point 6 of the Council Resolution). The main purpose of that investigation into sectoral repercussions is to avert the possibility that ‘under cover of worthwhile regional objectives, artificial sectoral development can be brought into being which, in some sectors, may produce harmful effects from the common interest point of view’ (First Report on Competition Policy, point 142).

In that regard, (regional) aids for financing profitable investments in sectors experiencing difficulties, in which structural overcapacity exists, are not normally considered to be compatible with the common market. Those aids merely aggravate the imbalances which affect the markets concerned by exerting pressure on the level of prices. They are unlikely, therefore, to promote a durable and balanced process of development, ( 15 ) but encourage economically precarious activities and are not therefore consistent with the actual purpose of the regional aid scheme, which is to resolve effectively and on a permanent basis the development problems of the regions concerned.

Furthermore, and more generally, the grant of aid for further profitable investments (or even mere operating aids) in sectors where substantial overcapacity exists has the effect, which is unacceptable at Community level, of transferring sectoral economic difficulties and related employment problems to other Member States (beggar my neighbour), thereby aggravating in particular the position of undertakings from other countries which are not in receipt of similar aids and therefore have only their own resources with which to deal with the consequences of the crisis on the market in which they operate. That approach, moreover, which is already expressed in the Commission's 1978 Communication on sectoral aid schemes, ( 16 ) incorporates the guidelines laid down by the European Council in Copenhagen on 7 and 8 April 1978 and is based on recognition of the ‘need to overcome the grave problems posed by structural overcapacity in many industries’. ( 17 )

That is why, in the sphere of sectoral aid, the fundamental criterion on which the Commission relies is that which in principle authorizes only aids which facilitate adaption by undertakings to market conditions; such adaptation in turn requires ‘(a) either an actual reduction in capacity or the avoidance of undesirable increases in capacity, and (b) the restoration of the competitiveness of Community industry’. ( 18 )

More specifically, this means that ‘aids for investment should not result in capacity increases, since it is a common feature of the industries concerned that capacity is excessive. (The Commission has sought in certain instances to apply this criterion in the case of regional aids)’. ( 19 )

54.

It is in pursuance of those criteria, moreover, that, when it determines the compatibility of a specific general regional aid scheme, the Commission always refers in its decision to the obligation of the Member State concerned to comply, in granting individual aids, with the ‘frameworks’ which are laid down for particular sectors and which, in view of the crisis in the sectors concerned, normally permit only grants of aid designed to bring about a substantial reduction in overcapacity through the implementation of industrial restructuring and reconversion plans, while excluding aid which contributes to a further increase in production capacity.

Besides, in the aforesaid Decision of 26 May 1987 which it adopted with regard to the Spanish general regional aid scheme, the Commission also pointed out that in applying that scheme the government would have to comply with the provisions of the sectoral frameworks.

55.

In the light of those criteria, the Commission, in assessing the compatibility of the aids granted to PYRSA, had to take account, first of all, of the fact that those aids were intended for the construction of a new plant and, consequently, for the further expansion of production capacity on the relevant market, and secondly of the fact that the sector in question, namely the foundries sector, falls within the scope of the Community framework laid down by the Commission itself in Communication 88/C320/03, ( 20 ) which states in particular that:

Those assessments, made in the 1988 Communication, were confirmed in full for the whole of 1990 in an (unpublished) letter of 30 May 1991 from the Commission to the Member States (annexed to the Commission's defence).

56.

Nevertheless, in the contested decision referred to in Cook's letter of 29 May 1991, the Commission considered that the aids to PYRSA, which were also intended to finance the construction of a new foundry and therefore to increase production capacity not only were not incompatible with the requirements of the sector but were so manifestly compatible as not to warrant even a closer investigation of the kind which could have been conducted under the Article 93(2) procedure. The only reason given in that regard is the statement that in the sub-sectors in which PYRSA was said to operate — namely sprockets and GET parts — there had been an increase in demand such as to preclude the existence of overcapacity.

57.

The Commission's assessment of the sectoral impact of the aids granted to PYRSA, whilst constituting a fundamental aspect of the decision, is wholly devoid of substance.

In reply to a specific question from the Court seeking to establish precisely on what factors it had based its appraisal, the Commission acknowledged, manifestly contradicting the reasons stated in the decision, that it did not in fact have, nor had ever had at its disposal, any specific figures on the state of, and the trend in the sub-sectors in question.

58.

The Commission therefore defended itself by stating that it had taken as a basis the trend in the foundries sector as a whole and, in that regard, it produced some figures taken from the statistics compiled by the relevant trade association, the Committee of European Foundry Associations (CAEF), supposedly showing that in 1989 and 1990 there was an increase in production and employment from the 1988 level.

59.

That statement as well, however, which in any event differs from that set out in the contested decision, would appear to be wholly unfounded.

In the first place, let me point out once again that in the letter to the Member States of 30 May 1991, dated only a day later than the letter addressed to Cook, the Commission confirmed for 1990 the analysis of the state of the foundries sector which was made in the 1988 Communication and in which the sector is classified amongst those which are sensitive and at risk.

Secondly, so far as concerns the figures produced by the Commission (and supplied only in response to questions from the Court), I shall confine myself to the following brief observations:

Finally, it is quite apparent from the documents before the Court that, in adopting its decision, the Commission took no account whatsoever of the views expressed and objections raised, not only by Cook, but also by other influential figures in the foundries industry, who had unequivocally emphasized that the Spanish authorities' policy of massive public subsidies was incompatible with the existence of overcapacity in the sector in question or with the restructuring efforts undertaken with a view to bringing production back to a level consistent with the prospects of the market. ( 22 )

60.

In conclusion, in the light of the foregoing observations, the possibility that the compatibility of the aforesaid aids was manifestly apparent as from the preliminary stage can be ruled out altogether. On the contrary, at the time when the contested decision was adopted, the information available to the Commission already revealed the existence, to say the least, of serious doubts as to the compatibility of the aids themselves.

61.

In those circumstances, the Commission should, both in order to safeguard the rights of third parties and to obtain a full set of assessment criteria enabling it to make a proper appraisal of the impact of the aids on the market, have initiated the procedure laid down for that purpose by the Treaty under Article 93(2).

A different solution, on the other hand, would be tantamount to acknowledging — which, in my view, is frankly unacceptable — that the Commission may adopt a decision ‘to raise no objections’, thereby giving the ‘go-ahead’ to aids which distort competition, in a situation where not only it cannot be sure that the aids are compatible but all the information available indicates instead that the aids themselves stand in sharp contrast to the specific requirements inherent in the reorganization of a market with serious structural difficulties.

62.

The submission alleging infringement by the Commission of the procedural rules in Article 93(2) must therefore be upheld.

63.

Having regard to the conclusion which I have arrived at, I shall confine myself to a concise examination of the remaining allegations made by the applicant.

64.

So far as concerns the allegation that there was a manifest error of assessment, it seems to me that, in the light of the aforesaid considerations, this submission must also be upheld.

65.

It has become apparent during the proceedings before the Court that the Commission's appraisal of the sectoral impact of the aids granted to PYRSA, which was based on the alleged absence of overcapacity, is not substantiated by any objective factor, and is therefore wholly arbitrary; it is also clearly refuted by the information in the case-file.

From that point of view, therefore, the contested decision is capable, to my mind, of being annulled not only because — as I stated earlier — the compatibility of the aids was not manifestly apparent as from the preliminary stage, but also because the assessment to the effect that the aids are compatible would in any event seem to be patently incorrect. In other words, in finding the contested aids compatible, the Commission not only infringed the procedural rules of the Treaty, but also adopted a measure which reaches the wrong conclusion, inasmuch as it is based on a wholly incorrect assessment of the state of the market and, consequently, of the effects of the aids on competition and trade.

66.

For the sake of completeness, it should be noted that the applicant has further claimed that the Commission also miscalculated the amount of aid inherent in the guarantee provided by the Autonomous Community of Aragon in respect of the PTA 490000000 loan contracted by PYRSA. According to Cook, since PYRSA would not, without that official guarantee, have been able to contract a loan of that size, the amount of aid should in this case be identified with the total value of the loan and not, as the Commission maintains, merely with the difference between the rate of interest obtained as a result of the guarantee and the rate that would otherwise have been granted.

That point, which is considered in detail in Cook's complaint to the Commission, is not referred to in the document instituting the proceedings, but is set out in the reply.

This allegation, viewed on its own, and on the assumption that it is admissible, does not seem to me to have been adequately proven in substance. The Court does not have any information at its disposal to substantiate a finding that the conclusion arrived at by the Commission is, on this particular point, manifestly incorrect.

Nevertheless, the applicant's objection regarding the calculation of the amount of aid involved, which did not evoke a precise response in the contested decision, may be regarded as a further argument in support of the fact that the assessment of the contested aids was not an easy matter and should therefore have been conducted within the procedural framework envisaged by Article 93(2).

67.

Finally, the applicant alleges that the rights of the defence have been infringed, in so far as the Commission did not give it an opportunity to make its views known before adopting the contested decision.

68.

In my view, this submission must be rejected since the Commission is not in general under any obligation to hear third parties before adopting a decision ‘to raise no objections’. That is so, however, on condition that the decision complies with the procedural rules of the Treaty and is therefore taken only in cases where the compatibiliţy of the national measure is, on a prima facie view, manifestly apparent.

69.

In this case, precisely the reverse situation has arisen, inasmuch as the Commission considered to be manifestly compatible with the common market aids which instead were (manifestly) incompatible with it. It is true, therefore, that the rights of the defence in Cook's case were unduly constricted, but not because the applicant had a right to be heard before the Commission adopted a decision ‘to raise no objections’, but because in this case the Commission should have initiated the Article 93(2) procedure, thereby giving all the third parties concerned, evidently including Cook, an opportunity to make their views known. This allegation must, in practice, be regarded as having been subsumed in the allegation of infringement of Article 93(2).

70.

In the light of the foregoing considerations, I suggest that the Court annul the decision ‘to raise no objections’, addressed to the Spanish Government and communicated to the applicant by letter of 29 May 1991, and order the Commission to pay the costs.

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for 1970 to 1990: a reduction of approximately 40% (from a volume of 1417000 tonnes to 862000 tonnes);

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for 1990 to 1995: a further reduction of 25% (from 862400 tonnes to 643000 tonnes);

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for 1995 to 2000: a further decrease of approximately 4% (from 643000 tonnes to 618000 tonnes).

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for 1970 to 1990: a reduction of 34% (from 1615000 tonnes to 1065200 tonnes);

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for 1990 to 1995: a further decrease estimated at approximately 16% (from 1065200 tonnes to 895000 tonnes);

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for 1995 to 2000: a further decrease estimated at approximately 9% (from 895000 tonnes to 810000 tonnes).

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letters of 16 July 1990 and 22 August 1990 from the chief executive of the largest French producer in the sector, a former president of the CAEF, emphasizing the efforts made by traders, with ‘very little government assistance’, to eliminate overcapacity, criticizing ‘Spain's frantic policy of subsidizing its foundries contrary to the European rules’, and pointing out that ‘we have made many financial sacrifices and contributions (France ana Europe) to reorganize the trade and we would not wish to see our efforts nullified’;

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letter of 2 July 1990 from the chief executive of the German trade association in the foundries sector which also criticizes the incompatibility of the Spanish aids in a situation in which overcapacity already exists.