CJEC, 6th chamber, March 8, 1988, No 62-87

THE COURT (SIXTH CHAMBER)

1. By applications lodged at the court registry on 27 February and 9 March 1987 respectively, the Executif regional wallon, based in Brussels, and Glaverbel SA, whose registered office is also in Brussels, brought an action under the second paragraph of article 173 of the EEC treaty for the annulment of Commission decision 87-195-EEC of 3 December 1986 on a proposal by the Belgian government to grant aid for investments by a flat-glass producer at Moustier.

2. The Belgian law of 17 July 1959 introducing and coordinating measures to encourage economic expansion and the creation of new industries (Moniteur belge (official gazette) of 29 august 1959) provides for general measures to assist the Belgian economy in the form, inter alia, of interest rebates on loans raised to pay for investments. When it examined that law, the Commission reached the conclusion that it constituted a general aid scheme which had no sectoral or regional objectives. The Commission accordingly took the view that the Belgian government should notify to it either a plan for regional or sectoral application or significant individual awards. A 1975 decision (Commission decision 75-397-EEC of 17 June 1975, Official Journal 1975, L 177, p. 13) requires the Belgian government to notify to the Commission, in advance and in good time, the significant individual cases of the application of the aforesaid law of 1959 so as to enable the Commission to state its views on the compatibility with the Common Market of the aid in question.

3. In accordance with that procedure the Belgian government, by letter of 15 November 1985, notified the Commission of its intention to grant, under the 1959 law, aid towards investments by a flat-glass producer based at Moustier in the province of namur. Those investments, amounting to BFR 1 201 725 000, were for the renovation of one of the two float-glass production lines and for the modernization of the other, thereby improving energy use and working conditions, so as to enable tinted glass and pyrolytically coated glass to be produced besides clear glass.

4. The proposed aid was to take the form of an interest subsidy of 4% on an amount of BFR 531 600 000 for six years, a capital grant of 4% on an amount of BFR 269 550 000 for six years and an exemption from land tax for five years on the whole investment. According to the Commission, the aid represents a net grant equivalent of 5.8 %.

5. Article 1 of decision 87-195 provides that the Belgian government is to refrain from implementing its proposal to grant aid and article 2 provides that it is to inform the Commission within two months of the date of notification of the decision of the measures it has taken to comply with it. Article 3 states that the decision is addressed to the kingdom of Belgium.

6. One of the two applicants is the Executif regional wallon, which, by virtue of the rules which apply in Belgium, is at present the body empowered to grant aid to undertakings established in wallonia, a region which includes the province of namur. The Executif regional wallon was the body which decided on 18 October 1984 to grant the contested aid to Glaverbel SA, the other applicant.

7. Reference is made to the report for the hearing for a fuller account of the background to the case and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the court.

8. The Commission has not contested the admissibility of the two applications and the court considers that there are no grounds for examining it on its own initiative.

9. The submissions of the two applicants are broadly the same. They object to the application of article 92 (1) of the EEC treaty, the non-application of article 92 (3) (b) and the non-application of article 92 (3) (c). They also allege that no reasons, or insufficient reasons, were given for the contested decision on several points. Lastly, the Executif regional wallon maintains that the Commission infringed its right to receive a fair hearing.

10. The complaints regarding the stating of reasons concern the recitals in the preamble to the contested decision dealing with the application of article 92 (1) of the treaty and the non-application of article 92 (3) (b) and (c). Those complaints should be considered together with the submissions on the substance of the case.

A - Article 92 (1) of the treaty

11. Both applicants argue that the Commission's decision is based on a wrong assessment of the facts. They claim that the Commission based its decision on the premiss that the flat-glass industry had been in difficulties owing to under-utilization of capacity, since between 1982 and 1985 unused capacity ranged from 10% to 16 %. Those figures are incorrect; the rate of utilization for 1985 was 91% or even 92 %. Moreover, the Commission overlooked the steady increase in the rate of utilization during the reference period, which continued in 1986 with the closure of a number of furnaces producing window glass in the community.

12. The Commission quotes Glaverbel's management report for 1982 to 1984, according to which, by 1982, the consumption of flat glass in Europe had reached its lowest level since 1975. The Commission concedes that the situation has improved slightly since then, but it also quotes data supplied by Glaverbel to show that undertakings in the glass sector complained of rising production costs, stagnant demand and the need to close down various production units.

13. It should be observed that the dispute over the figures regarding the rate of utilization of production capacity is irrelevant in ascertaining whether the measures proposed by the Executif regional wallon constituted "aid" for the purposes of article 92 (1). It is common ground that between 1982 and 1986 the flat-glass industry encountered difficulties in finding outlets for its products and that those difficulties led to redundancies in that sector. In those circumstances, allowances of the kind envisaged by the proposed measures must be regarded as favouring one undertaking at the expense of its competitors and as thus constituting "aid" within the meaning of the treaty.

14. The applicants further maintain that the investments in question were intended to promote the production and marketing of a new product, designed according to a new technology developed by Glaverbel enabling the pyrolytic coating to be applied to the sheets of glass whilst they are still, to use the technical term, "on line" or "floated ". The new product competes with only a very limited number of existing products.

15. That argument is not such as to preclude the application of article 92 (1). First, the applicants have not managed to demonstrate that there are two separate markets, one for the new product and another for traditional products. Secondly, the new product represented only about 30% of Glaverbel's total output, whereas Glaverbel, as an undertaking producing a variety of products, received financial advantages from the aid.

16. The applicants further allege that the Commission, in its decision, omitted to show how the proposed aid could have affected trade between member states or distorted competition in the Common Market. The Commission merely set out general considerations and statistics relating to the situation on the market for glass, without giving any specific indications enabling its reasoning to be understood.

17. In its decision the Commission mentions three different considerations in that regard. First, it maintains the vulnerability of the market for flat glass, due in particular to stagnant demand, unused production capacity and the steady decline in employment. It then gives figures on trade between the Belgo-Luxembourg economic union and the other member states, concluding that the volume of trade is large and stating that Glaverbel exports about 50% of its flat-glass production to other member states. Finally, the Commission explains that in 1984 and 1986 three decisions (decisions 84-497, 86-593 and 84-507) were adopted whereby aid to the flat-glass industry in the three Benelux countries was declared incompatible with article 92 of the treaty.

18. Together, those considerations provide, for the purposes of article 190 of the treaty, an adequate statement of reasons in support of the Commission's conclusions that the proposed aid was likely to affect trade between member states and could distort, or threaten to distort, competition by favouring certain undertakings in relation to others.

19. It follows that the complaints concerning article 92 (1) and the inadequacy of the statement of reasons on this point must be rejected.

B - Article 92 (3) (b)

20. The Executif regional wallon maintains that the new technology in which the investments in question were to be made would enable Glaverbel to reduce European dependence on American and Japanese producers, especially in high-technology areas such as the development of thin-layer photovoltaic cells, which is part of the European programme for research and development in information technologies (esprit) in which Glaverbel is involved. The proposed aid was thus intended to "promote the execution of an important project of common European interest" within the meaning of article 92 (3) (b).

21. It should be observed that the categories of aid set out in article 92 (3), including aid to promote the execution of an important project of common European interest, "may" be considered by the Commission to be compatible with the Common Market. It follows that the Commission enjoys a discretion in the matter.

22. The Commission has based its policy with regard to aid on the view that a project may not be described as being of common European interest for the purposes of article 92 (3) (b) unless it forms part of a transnational European programme supported jointly by a number of governments of the member states, or arises from concerted action by a number of member states to combat a common threat such as environmental pollution.

23. In adopting that policy and in taking the view that the investments envisaged in this case did not fulfil the requisite conditions, the Commission did not commit a manifest error of judgment.

24. The two applicants further complain that the Commission failed to give any reasons in the contested decision for its negative assessment. It merely observes that "it is clear that the aid in question is not intended to promote the execution of an important project of common European interest ".

25. The court considers that a statement of reasons which is based on a supposedly "clear" fact must generally be regarded as insufficient. In this case, however, the applicants' arguments cannot be accepted. None of the documents laid before the court lends any support whatever to the conclusion that the aid at issue might contribute to the implementation of an "important" project of "common" European interest. The mere fact that the investments envisaged enabled new technology to be used does not make the project one of common European interest; that certainly cannot be the case when, as in this instance, the products have to be sold on a saturated market.

26. It follows that the complaints of an infringement of article 92 (3) (b) and of an insufficient statement of reasons on this point must be rejected.

C - Article 92 (3) (c)

27. After again pointing out that the proposed aid was part of a wider plan of beneficial restructuring, the Executif regional wallon takes issue with the Commission' s stated view that the renovation of the plant in question (a float line) was in principle a replacement investment and that aid for the periodic renovation of a float line does not satisfy the requirements for the development of the sector concerned without adversely affecting trading conditions to an extent contrary to the common interest. According to the Executif regional wallon, the Commission had to apply the exemption provided for in article 92 (3) (c).

28. Both applicants also claim that the recitals in the preamble to the contested decision do not disclose the reasoning followed by the Commission in reaching the conclusion that the aid would affect trading conditions to an extent contrary to the common interest, even if the investment in question included technological innovations.

29. In the contested decision the Commission states first of all that the periodic renovation of a float line, which must be carried out every six to nine years, is in principle an investment the cost of which is an element of the operating costs. It is perfectly normal and in the interests of the producer itself that it should use the most modern and economic techniques and materials in order to reduce its running costs, including energy consumption. Consequently, aid for the periodic renovation of a float line does not satisfy the requirements of the development of the sector concerned laid down in article 92 (3) (c).

30. Having laid down that principle, the Commission examines, in the preamble to its decision, the information supplied in this case by the Belgian government and Glaverbel relating to the technical innovations included in the investments in question. The Commission acknowledges in the preamble that the recipient undertaking is the first glass-maker in Europe to produce glass with energy-saving coatings directly on floats. However, it considers that that fact is not such as to change its assessment. It points out that coated glass can be made using two different processes which result in products which, although different in their composition, may be used for partly the same purposes, in particular the insulation of buildings. In view of the surplus capacity in the coated and tempered glass field, the aid in question would thus affect trading conditions to an extent contrary to the common interest, even if the investment included technological innovations.

31. It is apparent from the points made by the Commission that it based its decision on the view that the investment in question was intended to renovate a float line and that such renovation, which must be carried out periodically, cannot be regarded as being designed to facilitate the development of certain economic activities, even if such renovation entails the introduction of new technology. The Commission goes on to consider that, even if such renovation could constitute a new technical development which could be regarded as economic development within the meaning of article 92 (3) (c), it could not warrant an exemption under that provision in the case of the flat-glass industry because, in view of the unused capacity in that industry, the aid would affect the position of other undertakings and would thus be contrary to the common interest.

32. It must be stated first of all that that line of reasoning is comprehensible and enables those concerned to ascertain the reasons for the Commission's adverse decision and the court to review them. The complaint of insufficient reasons must therefore be rejected.

33. As far as the application of article 92 (3) (c) is concerned, it should be observed first of all that the applicants did not challenge the facts on which the Commission relied. In particular, they acknowledged that a float line must be periodically renovated and that, in this instance, the plant in question had to be renovated. The applicants did challenge the view that there was unused capacity on the flat-glass market, but their grounds for doing so have already been considered and rejected above.

34. It should also be borne in mind that the Commission enjoys a power of appraisal in applying article 92 (3) (c) as well as in applying article 92 (3) (b). It is, in particular, for the Commission to determine whether trading conditions between the member states are affected by aid "to an extent contrary to the common interest ". The applicants have supplied no evidence to suggest that in making that assessment the Commission misused its powers or committed a manifest error.

35. It follows from the foregoing that the complaints concerning the alleged infringement of article 92 (3) (c) and the insufficiency of the reasons given in that regard must be rejected.

D - right to a fair hearing

36. The Executif regional wallon has submitted that in its contested decision the Commission mentions observations submitted during the administrative procedure by two other member states, an industry federation and a manufacturing group in the same sector and that for its figures on output and trade it relies on a report issued in 1985 by the Groupement europeen des producteurs de verre plat whereas those documents were not notified to the applicant so that it was unable effectively to express its view on their content.

37. As regards the observations submitted by the two governments, an industry federation and a manufacturing group, the Commission decision refers to them and states that they were submitted in the consultations which took place pursuant to the first paragraph of article 93 (2). The reasons on which the decision is based do not refer anywhere to those observations; even without being aware of the observations in question, the parties concerned were therefore fully informed of those reasons.

38. As regards the figures which the Commission took from a report by the Groupement europeen des producteurs de verre plat, the information supplied by the Commission at the request of the court reveals that the same figures were contained in the letter of 15 November 1985 by which the Belgian government notified the Commission of its intention to grant the aid. In those circumstances, the Executif regional wallon, which must be regarded as the body acting for the Belgian state in the granting of aid in wallonia, cannot plead that it was unaware of those figures.

39. The submission concerning the infringement of the right to a fair hearing is therefore unfounded.

40 it follows from the foregoing that the application must be dismissed in its entirety.

Costs

41 under article 69 (2) of the rules of procedure, the unsuccessful party is to be ordered to pay the costs. As the applicants have failed in their submissions, they must be ordered to bear the costs.

On those grounds,

THE COURT (sixth chamber)

Hereby :

(1) dismisses the application;

(2) orders the applicants jointly and severally to bear the costs.