CFI, 3rd chamber, September 4, 2009, No T-211/05

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Third Chamber),

Background to the dispute

1. The national measures at issue

1 The aid scheme implemented by the Italian Republic in favour of newly listed companies was established by Article 1(1)(d) and Article 11 of decreto legge n° 269 (su) disposizioni urgenti per favorire lo sviluppo e per la correzione dell'andamento dei conti pubblici (Decree Law laying down urgent measures to promote development and correct the trend in public finances) ('DL 269-2003') of 30 September 2003, which was converted into Law No 326 of 24 November 2003. The aid scheme came into effect on 2 October 2003, when DL 269-2003 was published in the Gazzetta ufficiale della Repubblica italiana (GURI - the Official Journal of the Italian Republic), and was not notified to the Commission of the European Communities.

2 Article 1(1)(d) of DL 269-2003 provides as follows:

'For the purposes of the application of company income tax, the following expenditure shall, without prejudice to the ordinary deduction of business expenses, be deductible for any company pursuing its activities at the date of the entry into force of [DL 269-2003]:

(...)

(d) the amount of the costs of admission to trading on a regulated market within the meaning of Article 11 of [DL 269-2003].'

3 Article 11 of DL 269-2003 provides as follows:

'1. Any company the shares of which are admitted to trading on a regulated market in a Member State of the European Union between the date of the entry into force of [DL 269-2003] and 31 December 2004 shall be entitled to a reduced income tax rate of 20% for the trading year during which it is admitted to trading and for the two subsequent tax years where its shares have not previously been traded on a regulated market in a Member State of the European Union (...) and where, in order to obtain its admission to trading, it has published a share subscription offer which brings about an increase of at least 15% in its net worth as shown on the balance sheet for the trading year preceding that in which the offer was launched, after deduction of annual profits.

2. The maximum net declared income to which the reduced rate is applicable for the purpose of Article 11(1) shall be limited to EUR 30 million.

3. Where the shares referred to in Article 11(1) are not included in the listing and except for the case referred to in Article 133 of Legislative Decree No 58 of 24 February 1998 [namely, in the case of a company that is subsequently listed on another European stock exchange affording a degree of protection for investors equivalent to that provided by the Italian stock exchange], the relief under that provision shall be available only for the tax years which ended before the cancellation.

4. The relief available under Article 1 et seq of Legislative Decree No 466 of 18 December 1997 shall not be applicable to the companies referred to in Article 11(1) during the tax years in the course of which such companies benefit from the relief available under that provision. However, such companies may opt for the relief provided in Legislative Decree No 466 of 18 December 1997 to be applied instead of the relief available under [DL 269-2003].'

4 Decreto legislativo n° 466 (sul) riordino delle imposte personali sul reddito al fine di favorire la capitalizzazione delle imprese, a norma dell'art. 3, comma 162, lettere a), b), c), d) ed f), della legge 23 dicembre 1996, n° 662 (Legislative Decree for the reorganisation of personal income taxes to promote the capitalisation of undertakings, in accordance with Article 3(162)(a), (b), (c), (d) and (f) of Law No 662 of 23 December 2003) of 18 December 1997, published in the Ordinary Supplement to GURI No 3 of 5 January 1998, introduced a relief mechanism known as 'Super DIT' ('the Super DIT'). The Super DIT provides, inter alia, for a reduction of 7% in the tax rate applicable to the normal return on an increase in investment capital, which cannot give rise to an average tax rate of less than 20%, for companies whose stocks and shares are listed on a regulated market for the three tax years following that of the first listing. The Super DIT was abolished by legge no 383 (su) primi interventi per il rilancio dell'economia (Law concerning initial action to boost the economy) of 18 October 2001, published in GURI No 248 of 24 October 2001. However, companies which, as of 30 June 2001, had carried out transactions to increase share capital for the purpose of that legislation continued to benefit from those forms of relief.

5 Article 11(4) of DL 269-2003 provides that the companies concerned may choose between the tax incentives granted by that provision and the relief available under the Super DIT.

2. Administrative procedure and the contested decision

6 By letter of 22 October 2003, the Commission invited the Italian authorities to provide it with information concerning the measures adopted in DL 269-2003 and their entry into force, while at the same time reminding them of their notification obligations under Article 88(3) EC.

7 By letter of 5 November 2003, the Italian authorities provided the information requested and stated, first, that DL 269-2003 had yet to be converted into law and, second, that its provisions would have no effect on the determination of advance income tax payments for the 2003 tax year.

8 By letter of 19 December 2003, the Commission reminded the Italian authorities once more of their obligations under Article 88(3) EC and invited them to inform the potential beneficiaries of the consequences envisaged by the EC Treaty and Article 14 of Council Regulation (EC) No 659-1999 of 22 March 1999 laying down detailed rules for the application of Article [88] EC (OJ 1999 L 83, p. 1) if it were to be established that the measures in question constituted unlawfully implemented aid. The Italian authorities did not respond to that letter.

9 The Commission informed the Italian Republic by letter of 18 February 2004 that it had decided to initiate the procedure laid down in Article 88(2) EC in respect of the fiscal aid granted under Article 1(1)(d) and Article 11 of DL 269-2003. The Italian authorities submitted their comments on 21 April 2004.

10 The Commission's decision to initiate a formal investigation procedure was published in the Official Journal of the European Union of 3 September 2004 (OJ 2004 C 221, p. 7).

11 Meetings were held on 16 and 27 September 2004 between Commission staff and the Italian authorities in order to examine certain aspects of the measures at issue.

12 On 4 October 2004, the Commission received observations from Borsa Italiana SpA (the Italian stock exchange). The Commission forwarded those observations to the Italian authorities, which provided the Commission with their comments on the observations by letter of 30 November 2004.

13 On 16 March 2005, the Commission adopted Decision 2006-261-EC on aid scheme C 8-2004 (ex NN 164-2003) implemented by Italy in favour of newly listed companies (OJ 2006 L 94, p. 42) ('the contested decision').

14 In the contested decision, the Commission sets out, first, the procedure leading up to that decision (section I) and the measures at issue (section II). Next, it indicates the grounds for initiating the formal investigation procedure (section III), the comments of the Italian authorities and the interested parties (section IV) and its assessment of the aid in question (section V).

15 With regard to its assessment, first, the Commission states that the aid scheme examined clearly confers selective advantages since it derogates from the normal operation of the tax system and favours certain undertakings (recitals 26 to 32).

16 Second, it observes that the advantages granted are conferred by the State in that they consist in the foregoing of tax revenues normally collected by the Italian Treasury (recital 33).

17 Third, the Commission states that the measures at issue are liable to affect trade between Member States and distort competition between undertakings because the beneficiaries may be operating on international markets and be involved in trade and other business activities in markets where competition is intense (recitals 34 to 37).

18 Fourth, the Commission points out that the Italian authorities implemented the measures at issue without prior notification and they are therefore to be classed as unlawful aid (recital 38).

19 Fifth, at recitals 39 to 45 of the contested decision, the Commission examines whether the aid scheme is compatible with the common market, concluding that none of the exceptions provided for in Article 87(2) and (3) EC applies to the scheme.

20 The operative part of the contested decision reads as follows:

'Article 1

The state aid scheme in the form of tax incentives for companies admitted to listing on a regulated European market, provided for by Articles 1(1)(d) and 11 of [DL 269-2003] which [the Italian Republic] has put into effect, is incompatible with the common market.

Article 2

[The Italian Republic] shall abolish the aid scheme referred to in Article 1 with effect from the tax year current on the date of notification of this Decision.

Article 3

1. [The Italian Republic] shall take the necessary measures to recover from the beneficiaries the aid referred to in Article 1 and unlawfully made available to them.

2. Recovery shall be effected without delay and in accordance with the procedures of national law provided that they allow the immediate and effective implementation of the Decision.

3. The recovery shall be completed at the earliest opportunity. In particular, where the aid has already been made available by means of lower part-payments of taxes due for the current tax year, [the Italian Republic] shall collect the entire tax due by means of the final scheduled payment for 2004. In all other cases, [the Italian Republic] shall recover the tax due at the latest by the end of the tax year current on the date of notification of this Decision.

4. The aid to be recovered shall bear interest, running from the date on which it was first put at the disposal of the beneficiaries until its actual recovery.

5. The interest shall be calculated in accordance with Chapter V of Commission Regulation (EC) No 794-2004.

6. Within two months of the date of notification of this Decision, [the Italian Republic] shall enjoin all beneficiaries of the aid referred to in Article 1 to reimburse the unlawful aid, with interest.

Article 4

Within two months of the date of notification of this Decision, [the Italian Republic] shall inform the Commission of the measures already taken and planned to comply with it. ... Within the same period of time, [the Italian Republic] shall transmit all documents giving evidence that the recovery proceedings have been initiated against the beneficiaries of the unlawful aid.

(...)'

Procedure and forms of order sought by the parties

21 By application lodged at the Registry of the Court of First Instance on 26 May 2005, the Italian Republic brought the present action.

22 Upon hearing the report of the Judge-Rapporteur, the Court (Third Chamber) decided to open the oral procedure and, by way of measures of organisation of procedure under Article 64 of its Rules of Procedure, put questions to the parties, requesting that they reply in writing. The parties replied to those questions within the prescribed period.

23 The parties presented oral argument and answered the questions put to them by the Court at the hearing on 9 September 2008.

24 The Italian Republic claims that the Court should:

- annul the contested decision;

- order the Commission to pay the costs.

25 The Commission contends that the Court should:

- dismiss the action;

- order the Italian Republic to pay the costs.

Law

26 The Italian Republic relies on five pleas in law. The first plea alleges, in essence, infringement of the rule that the parties have the right to be heard, as regards the decision to initiate the procedure under Article 88(2) EC. The second plea alleges breach of essential procedural requirements and of Article 253 EC in that the Commission failed to take account of the fact that there exists within the Italian legal system a measure with the same characteristics as the measures at issue. The third, fourth and fifth pleas allege infringement of Article 87 EC and a failure to state adequate reasons. As part of the third plea, the Italian Republic also alleges infringement of the rule that the parties have the right to be heard, with regard to a particular complaint raised by the Commission in the contested decision. The Court will examine, first, the plea alleging infringement of the rule that the parties have the right to be heard, which was raised in connection with the first plea and the third plea. It will then examine the alleged failure to state adequate reasons by grouping together all the arguments put forward by the Italian Republic in that connection and, lastly, the alleged infringement of Article 87 EC.

1. Infringement of the rule that the parties have the right to be heard

27 The Italian Republic alleges, in essence, infringement of the rule that the parties have the right to be heard both in its first plea and, in conjunction with an alleged infringement of Article 87(1) EC, as part of its third plea.

The first plea, alleging, in essence, infringement of the rule that the parties have the right to be heard, with regard to the decision to initiate the formal investigation procedure

Arguments of the parties

28 The Italian Republic criticises the Commission for initiating the formal investigation procedure under Article 88(2) EC without inviting it to provide explanations as to the nature and effects of the measures in question. It relies in that connection on Case C-400-99 Italy v Commission [2005] ECR I-3657, paragraph 29 to 31. According to that case-law, the Commission must broach the subject of the measures in question with the Member State concerned before initiating the procedure under Article 88(2) EC so that the State has an opportunity to put forward its view that those measures do not constitute aid or constitute existing aid.

29 The Italian Republic submits, essentially, that in its letter of 22 October 2003, the Commission merely formulated a general request for information, covering a range of measures, and did not make any reference to Articles 1 or 11 of DL 269-2003, which meant that it was not possible to engage in a preliminary discussion of the specific features of the measures at issue. Moreover, the Commission stated in its letter of 19 December 2003 that it did not have available to it information to enable it to rule out the possibility that the measures provided for in DL 269-2003 constituted State aid that was incompatible with the common market. As a result of the very manner in which the letter was formulated, it was not possible for the Italian authorities to understand the doubt entertained by the Commission concerning the measures at issue. By stating in that letter that it lacked information enabling it to rule out the possibility that two of the potential recipients benefited from the reduction in taxes provided for in DL 269-2003, the Commission also failed to take account of information provided by the Italian authorities to demonstrate that those measures had no effect on advance tax payments due in 2003.

30 It is also apparent from the third paragraph of that letter that it was not possible for the Commission to rule out that the tax incentives in Article 11 of DL 269-2003 were operating aid. However, the Commission omitted to state the reasons for which it considered or, at the very least, suspected, first, that the aid was State aid and, second, that it was operating aid and was not 'normally' liable to qualify for the exception in Article 87(3)(c) EC. Moreover, since no reference is made in that paragraph of the letter to the measure in Article 1(1)(d) of DL 269-2003, it could have been assumed that the measure in question could, in the Commission's view, constitute investment aid that could be authorised pursuant to Article 87(3)(c) EC.

31 In view of the fact that it was impossible, in those circumstances, to engage even in preliminary discussions, the Italian Republic did not act upon the Commission's letter of 19 December 2003, since it had already provided all relevant information in its letter of 5 November 2003.

32 The Italian Republic also takes issue with the Commission's argument that it was not necessary at the preliminary stage to engage in a discussion as to whether the measures at issue should be classified as existing aid, on the ground that the tax advantages introduced by those measures should have been evaluated as representing a continuation of the advantages previously granted by decreto legislative No 466 establishing the Super DIT.

33 In any event, the Italian Republic maintains that it was not possible for the measures at issue to be technically suspended and that the decision to initiate the procedure did not have any suspensory effect in view of the period for which the measures at issue were to be applied. It considers that it was therefore permissible for it not to take any steps against the decision to initiate the procedure, while at the same time reserving the right to rely on any defects that might vitiate that decision in any action brought against the final decision.

34 The Commission rejects the Italian Republic's arguments.

Findings of the Court

35 In the context of the procedure for review of State aid laid down in Article 88 EC, the preliminary stage of the procedure for reviewing aid under Article 88(3) EC, which is intended merely to allow the Commission to form a prima facie opinion on whether the measure concerned amounts to State aid and whether the aid in question is partially or totally compatible with the common market, must be distinguished from the formal investigation stage envisaged by Article 88(2) EC. It is only under the latter provision, which is designed to enable the Commission to be fully informed of all the facts of the case, that the EC Treaty imposes an obligation on the Commission to give the parties concerned notice to submit their comments (Case T-95-03 Asociación de Estaciones de Servicio de Madrid and Federación Catalana de Estaciones de Servicio v Commission [2006] ECR II-4739, paragraph 133).

36 In accordance with Article 4(4) of Regulation No 659-1999, the Commission is required to open the procedure provided for in Article 88(2) EC if an initial examination has not enabled it to overcome all the difficulties raised by the question whether the State measure under scrutiny constitutes aid for the purposes of Article 87(1) EC, unless, in the course of that initial examination, the Commission has been able to satisfy itself that the measure at issue would in any event be compatible with the common market, even if it were aid (Asociación de Estaciones de Servicio de Madrid and Federación Catalana de Estaciones de Servicio v Commission, paragraph 134).

37 In view of the legal consequences of a decision to initiate the procedure provided for in Article 88(2) EC, provisionally classifying the measures concerned as new aid even though the Member State concerned is unlikely to subscribe to that classification, the Commission must first broach the subject of the measures in question with the Member State concerned so that the latter has an opportunity, if appropriate, to inform the Commission that, in its view, those measures do not constitute aid or constitute existing aid (Italy v Commission, paragraph 29).

38 An examination of the exchanges between the Italian authorities and the Commission's departments does not disclose any failure on the part of the Commission to comply with its obligations.

39 First, the Commission's letter of 22 October 2003, which constituted a general request for information covering a range of measures in DL 269-2003, referred, under the section headed 'Measure 4', to the measures at issue.

40 In that letter, which stated that certain tax measures 'appear[ed] to consist of tax relief for certain categories of undertakings, namely ad hoc aid for certain undertakings, for the purpose of Article 87(1) [EC]', the Commission requested the Italian authorities to specify the precise nature of the tax advantages envisaged, the identity and number (even an estimate) of the beneficiaries of the advantages, the financial impact (even an estimate) of the advantages being granted, any justification for the measures by reference to the tax regime and any other information which would enable it to form an opinion.

41 The Italian authorities responded to that letter by letter of 5 November 2003, persisting in its view that the measures at issue were of a general nature in order to dispute the classification of the measures as State aid.

42 Second, the Commission stated in its letter of 19 December 2003 that it was not in possession of information enabling it to rule out the possibility that the tax incentives examined constituted a tax advantage limited to certain undertakings admitted to listing on a regulated market during the period for which the aid scheme was to apply and that the advantage led to a distortion of competition and of intra-Community trade. It also stated in that letter that it did not have available to it information enabling it to rule out the possibility that the tax incentives provided for in Article 11 of DL 269-2003 constituted operating aid, which is usually incompatible with the single market, since those measures did not relate to investments or any of the objectives referred to in Article 87(3) EC. Lastly, the Commission asked the Italian authorities to inform the prospective beneficiaries of those tax incentives that the aid might be recovered from them if it was found to be unlawful.

43 By that letter, the Commission provided the Italian authorities with its preliminary analysis and thereby afforded them the opportunity to put forward any objections they might have. However, the Italian authorities failed to act on that letter.

44 In the light of the foregoing, contrary to the Italian Republic's assertions, the Commission must be regarded as having broached the subject of the disputed measures with the Italian authorities before it adopted the decision to initiate the procedure under Article 88(2) EC.

45 In any event, even though, in order to comply with the rule that the parties have the right to be heard, the Member State in question must be given the opportunity effectively to make known its views on the evidence on which the Commission based its assessment (see, to that effect and by analogy, Case C-142-87 Belgium v Commission [1990] ECR II-959, paragraph 47), the fact remains that, in order for an infringement of the right to be heard at the preliminary stage to result in annulment of the final decision, it must be established that, had it not been for such an irregularity, the outcome of the procedure might have been different (see, to that effect and by analogy, Belgium v Commission, paragraph 48; Case C-288-96 Germany v Commission [2000] ECR I-8237, paragraph 101; and Case T-198-01 Technische Glaswerke Ilmenau v Commission [2004] ECR II-2717, paragraph 201 and the case-law cited). The burden of proof in that regard falls upon the Member State concerned, since any infringement of the rights of the defence constitutes a procedural defect, which means that the party concerned must demonstrate the specific prejudice to its individual rights caused by the breach (see, to that effect, Technische Glaswerke Ilmenau v Commission, paragraph 203).

46 It is clear that the Italian Republic has failed to provide any evidence to enable it to be established that, had it not been for the alleged irregularity, the outcome of the procedure might have been different, and did no more than state that 'no one is in a position to "guess" what the effect would have been of a preliminary discussion, which never took place, on any later developments in the procedure'.

47 The Italian Republic has failed to demonstrate in particular the prejudice that would be caused by the alleged defects vitiating the decision to initiate the procedure under Article 88(2) EC.

48 In the light of the foregoing considerations, it must be concluded that the measures at issue were broached with the Italian authorities before the Commission adopted the decision to initiate the procedure and that, in any event, the Italian Republic has failed to demonstrate that that decision was characterised by any irregularity or defect but for which the outcome of the procedure might have been different.

49 The first plea in law must therefore be rejected as unfounded.

The part of the third plea alleging infringement of the rule that the parties have the right to be heard

Arguments of the parties

50 The Italian Republic claims that it was only in the contested decision, in particular at recital 30 in the preamble, that the Commission articulated for the first time its objection concerning the advantage to be derived by Italian undertakings as a result of the application of the tax relief in question to the world-wide profits generated by such companies and the fact that foreign undertakings would benefit from the relief only in respect of the profits they generated in Italy. The Commission therefore infringed the rule that the parties have the right to be heard.

51 The Italian Republic submits that, of the decision to initiate the procedure and throughout the procedure, the Commission raised only the issue of an alleged difference in treatment as between Italian undertakings and foreign undertakings, consisting in the fact that the former would benefit from the preferential regime in question whereas the latter would be excluded from it. On the other hand, the Commission never raised the issue of the alleged difference in treatment as between Italian and foreign undertakings, all of which would be included in the aid scheme at issue.

52 The Commission does not accept the Italian Republic's arguments.

Findings of the Court

53 According to well established case-law, the right to a fair hearing, which is a fundamental principle of Community law and forms, in particular, part of the rights of the defence, requires that the undertaking concerned must have been afforded the opportunity, during the administrative procedure, properly to make known its views on the truth and relevance of the facts, complaints and circumstances relied on by the Commission to support its claim that there has been an infringement of the EC Treaty (Case C-413-06 P Bertelsmann and Sony Corporation of America v Impala [2008] ECR I-0000, paragraph 61; see also, to that effect, Case T-301-01 Alitalia v Commission [2008] ECR II-0000, paragraph 169 and the case-law cited).

54 In accordance with Article 6(1) of Regulation No 659-1999: '[t]he decision to initiate the formal investigation procedure shall summarise the relevant issues of fact and law, shall include a preliminary assessment of the Commission as to the aid character of the proposed measure and shall set out the doubts as to its compatibility with the common market'. Such a decision to initiate the procedure must give the parties concerned the opportunity effectively to participate in the formal investigation procedure, during which it will be possible for them to put forward their arguments. For that purpose, it is sufficient for the parties concerned to be aware of the reasoning which has led the Commission to conclude provisionally that the measure in issue might constitute new aid incompatible with the common market (Joined Cases T-195-01 and T-207-01 Government of Gibraltar v Commission [2002] ECR II-2309, paragraph 138).

55 It should also be noted that the formal investigation procedure enables a more in-depth examination and clarification of the questions raised of the decision to initiate the procedure, so that any difference between that decision and the final decision cannot be regarded in itself as constituting a defect rendering the final decision unlawful.

56 In the present case, of the decision to initiate the formal investigation procedure, and in particular at paragraph 19 thereof, the Commission stated that it was of the view that the measures at issue benefited only undertakings with their headquarters in Italy and gave them an advantage over foreign undertakings operating there in so far as the latter did not qualify for the tax relief granted by those measures. By letter of 21 April 2004, the Italian authorities stated that Article 11 of DL 269-2003 provided that foreign companies operating in Italy through a fixed establishment which were listed on a regulated market of the European Union were also able to benefit from the measures at issue. As a result of that letter, the Commission concluded, and stated at recital 30 in the preamble to the contested decision, that there remained, nevertheless, a difference in treatment as between Italian and foreign undertakings in so far as, for the former, the tax relief granted by the aid scheme in question related to the profits generated world-wide whereas, for the latter, it related to profits generated and taxed in Italy.

57 It should therefore be observed, as the Commission correctly pointed out, that while its position was undoubtedly clarified concerning the doubts expressed of the decision to initiate the procedure, that was precisely as a result of the dialogue in which it engaged with the Italian authorities, which had the opportunity, throughout the formal investigation procedure, to clarify their position on the Commission's complaints. Contrary to the Italian Republic's submissions, the object of the complaint set out by the Commission at recital 30 in the preamble to the contested decision does not differ from that of the complaint formulated in the initiating decision, in particular at paragraph 19 thereof. It differs only as regards the assessment of the extent of the difference in treatment as between undertakings registered in Italy and those not so registered and, therefore, also the significance of the selective nature of the advantage enjoyed by undertakings registered in Italy.

58 Moreover, neither the provisions relating to the review of State aid nor the case-law requires the Commission to inform the Member State concerned of its position before adopting its decision, where the Member State has been given notice to submit its comments, which was the case here (see, to that effect, Technische Glaswerke Ilmenau v Commission, paragraph 198).

59 In any event, as stated at paragraph 45 above, any infringement of the rights of the defence constitutes a procedural defect, which means that the Member State concerned must demonstrate the specific prejudice to its individual rights caused by the breach. It is sufficient to state in that connection that the Italian Republic has failed to demonstrate that, had it not been for such an alleged irregularity, the outcome of the procedure might have been different.

60 It follows that the part of the third plea alleging infringement of the rule that the parties have the right to be heard must be rejected.

2. The failure to state adequate reasons

61 The Italian Republic alleges infringement of Article 253 EC, both in its second plea and, in conjunction with alleged infringement of Article 87 EC, as part of its third, fourth and fifth pleas.

Arguments of the parties

62 In its second plea, the Italian Republic complains that the Commission failed to give an express reply to the observation made in its letter of 30 November 2004, in response to the observations of the Borsa italiana, to the effect that there already existed in the Italian legal system a measure with the same characteristics as the measure at issue, which was known as Super DIT. That measure, which was connected with the tax incentives provided in Article 11(4) of DL 269-2003, had already been the subject of a request for information from the Commission regarding its concern as to possible discriminatory aspects of the measures at issue, which was subsequently dispelled by the Italian authorities. Moreover, that measure had been formally submitted to the 'Economic Affairs and Finance' Council, which considered that it did not constitute a harmful measure within the meaning of the Resolution of the Council and the Representatives of the Governments of the Member States, meeting within the Council of 1 December 1997 on a code of conduct for business taxation (OJ 1998 C 2, p. 2).

63 In particular, relying on Joined Cases T-228-99 and T-233-99 Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission [2003] ECR II-435 ('WestLB'), paragraphs 279 to 281, and the case-law cited in that judgment, the Italian Republic submits that the Commission should have set out the reasons for which it took the view that it was not obliged to adopt the same position as that it had adopted in relation to the Super DIT. Essentially, the Commission should have explained the reasons for which, in the contested decision, it declared to be incompatible with the common market a measure which was similar to another measure adopted shortly before it, namely the Super DIT, in respect of which no objection was raised.

64 In its third plea, the Italian Republic alleges infringement of Article 253 EC in so far as the Commission concludes in the contested decision that the companies admitted to listing during the period for which the aid scheme was applicable enjoyed a selective advantage. The Commission simply stated that the difference in treatment did not correspond to any relevant distinction between the situations of listed as opposed to non-listed companies and also failed to define its position on the arguments put forward in that connection by the Borsa italiana and the Italian authorities.

65 In its fourth plea, the Italian Republic argues that the contested decision is vitiated by a failure to state adequate reasons in so far as the Commission concluded that the measure at issue would have an impact on intra-Community trade. The Commission should, at the very least, have set out the specific evidence from which it concluded that competition might be affected and trade between the markets of the Member States potentially affected. That applies all the more so in the present case since the undertakings concerned operate in various economic sectors and the amount of aid involved is very small. The Commission has failed to show that the measures at issue constitute operating aid and has simply made general and approximate statements. The Italian Republic also observes that, in the contested decision, the Commission examined only one of the measures at issue, namely the tax rate reduction provided for in Article 11 of DL 269-2003 and omitted to examine the deduction from the taxable amount of the costs of admission to trading, which is provided for in Article 1(1)(d) of DL 269-2003.

66 Lastly, in its fifth plea, the Italian Republic criticises the Commission for basing its assessment that the measures at issue are incompatible with the common market simply on the fact that they introduced operating aid and, in any event, for failing to support with sufficient legal reasoning its conclusion that the measures at issue are incompatible with the common market.

67 The Commission disputes the Italian Republic's arguments.

Findings of the Court

68 First, it must be borne in mind that, according to consistent case-law, the scope of the obligation to state reasons depends on the nature of the act in question and the context in which it was adopted. The statement of reasons must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in such a way as to enable the Community judicature to review the legality of the measure and the persons concerned to ascertain the reasons for the measure, so that they can defend their rights and ascertain whether or not the decision is well founded. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (Case C-367-95 P Commission v Sytraval and Brink's France [1998] ECR I-1719, paragraph 63, and WestLB, paragraphs 278 and 279 and the case-law cited). In particular, the Commission is not obliged to adopt a position on all the arguments relied on by the parties concerned. It is sufficient if it sets out the facts and the legal considerations having decisive importance in the context of the decision (see WestLB, paragraph 280 and the case-law cited).

69 Moreover, in the case of an aid scheme, the Commission may confine itself to examining the general characteristics of the scheme in question without being required to examine each particular case in which it applies (Joined Cases C-15-98 and C-105-99 Italy and Sardegna Lines v Commission [2000] ECR I-8855, paragraph 51, and Case C-278-00 Greece v Commission [2004] ECR I-3997, paragraph 24) in order to establish whether the scheme involves elements of aid (Case C-66-02 Italy v Commission [2005] ECR I-10901, paragraph 91).

70 It is in the light of those principles that it is necessary to examine whether sufficient reasons are stated in the contested decision concerning the various aspects of the Commission's assessment which are contested by the Italian Republic.

The plea alleging failure to state adequate reasons in so far as the Commission did not take account of the fact that there exists in the Italian legal system a measure with the same characteristics as the measures at issue

71 In its second plea, the Italian Republic complains essentially that the Commission failed to adopt a position on the fact, as alleged, that there was continuity between one of the two measures at issue, namely the tax reduction provided for in Article 11 of DL 269-2003, and the Super DIT.

72 It should be pointed out, as a preliminary, that the reference to the Super DIT, which has a temporal and legal connection with the measures at issue, was made formally for the first time in the observations submitted by the Borsa italiana on 4 October 2004, which the Italian authorities commented on in their letter of 30 November 2004. According to the Italian authorities and the Borsa italiana, the measures at issue are, essentially, justified by the general principles underlying the Italian tax scheme, on the ground that the Super DIT already existed as part of the Italian legal system.

73 It should also be pointed out, as submitted by the Italian Republic, that the Commission set out in the contested decision the reasons for which the tax incentives in DL 269-2003 conferred a selective advantage for the purpose of Article 87(1) EC without making any reference to the Super DIT.

74 However, the Italian Republic's argument cannot succeed.

75 First, as it argued in its pleadings, the Commission never expressed a view on whether the Super DIT should be classified as State aid. That measure was not notified to the Commission under Article 88(3) EC and, since it was abolished in 2001, which is not disputed by the Italian Republic, did not form part of the aid scheme in question. The Super DIT is merely referred to in Article 11 of DL 269-2003, in order to prevent the undertakings concerned benefiting from a double tax advantage.

76 Next, with regard to the claim that the Commission was aware of the Super DIT in connection with its supervision of the application of the rules on the internal market and of the fact that the Super DIT had been examined by the 'Economic Affairs and Finance' Council, it should be noted, first, that neither of those factors is covered by the review of State aid and, second, that any apparent failure to act on the part of the Commission in relation to a measure which might constitute State aid is irrelevant when, as is the case here, an aid scheme has not been notified to it (see, to that effect, Joined Cases C-183-02 P and C-187-02 P Demesa et Territorio Histórico de Álava v Commission [2004] ECR I-10609, paragraph 52).

77 Moreover, the fact that the Commission had detailed knowledge of the Super DIT and that, whilst it could have initiated a formal investigation procedure, it never expressed a view on whether the Super DIT should be classified as State aid has no bearing on the concept of State aid within the meaning of Article 87(1) EC or on the classification of aid as new aid or existing aid within the meaning of Regulation No 659-1999.

78 In any event, even if the Super DIT and the aid scheme in question were related, the one being a continuation and extension of the other, the fact that the Commission took no action in relation to the Super DIT is immaterial, since the aid scheme at issue in the present case, viewed independently of the Super DIT, constitutes State aid (see, to that effect, Case 57-86 Greece v Commission [1988] ECR 2855, paragraph 10, and Case C-148-04 Unicredito Italiano [2005] ECR I-11137, paragraph 105).

79 Finally, it should be borne in mind that, in accordance with the case-law cited at paragraph 69 above, the Commission was not obliged to adopt a position on all the arguments relied on before it by the parties concerned. It was sufficient if it set out the facts and the legal considerations having decisive importance in the context of the contested decision (see also, to that effect, Technische Glaswerke Ilmenau v Commission, paragraph 60 and the case-law cited). Moreover, nor was the Commission obliged to justify the contested decision in detail in responding to arguments which it regarded as irrelevant or only slightly relevant (see, to that effect, order of the President of the Court of Justice in Case C-404-04 P-R Technishce Glaswerke Ilmenau v Commission [2005] ECR I-3539, paragraph 37). Since the Super DIT did not form part of the aid scheme at issue and the Commission did not carry out any assessment as to whether it complied with the rules on State aid, it had no decisive importance in the context of the contested decision.

80 Accordingly, the Commission cannot be criticised for not having replied specifically to the claim that the measures at issue were capable of being regarded as a continuation of the Super DIT and could therefore be justified by the general principles underlying the Italian tax system.

81 The second plea must therefore be rejected as unfounded.

The plea alleging that the contested decision fails to state adequate reasons with regard to the selective nature of the measures at issue

82 The Commission devotes recitals 26 to 32 in the preamble to the contested decision to demonstrating that there was a selective advantage.

83 First, at recital 26 in the preamble to the contested decision, the Commission sets out its view that the measures at issue derogated from the normal operation of the tax system and conferred an exclusive advantage on companies which were able to obtain a listing during the brief period in which the aid scheme was applicable, excluding undertakings that were already listed, undertakings that did not fulfil the conditions for being listed and undertakings that decided not seek a listing during that period.

84 At recitals 27 to 29 in the preamble, it explains the reasons for which that derogation cannot be justified by the nature of the tax system, since it does not relate to any relevant distinction between the situations of companies listed on a regulated market as opposed to non-listed companies. The Commission states, first, that the reduction in the tax rate applicable to future profits earned by beneficiaries, provided for in Article 11 of DL 269-2003, is disproportionate because such profits are unrelated to the fact that the beneficiaries are admitted to listing, to their capital structures and to the other characteristics associated with listing and, second, that the reduction of taxable income provided for in Article 1(1)(d) of DL 269-2003 is an extraordinary incentive because it comes on top of the ordinary deduction of business expenses. Moreover, according to the contested decision, the short duration of the aid scheme, which effectively excludes many potential beneficiaries, makes it inconsistent with the specific objective of encouraging companies to seek a listing.

85 Second, the Commission states, at recital 30 in the preamble to the contested decision, that the measures at issue have significant effects on companies of a certain size and could distort competition by improving the position of such companies vis-à-vis their competitors not registered in Italy. In addition, it notes that, since the tax incentives in question are granted through the tax system, they favour Italian undertakings, for which the tax relief applies to world-wide profits, more than foreign undertakings, for which the tax relief applies only to profits generated in Italy. The Commission also rules out any justification by reference to the nature of the tax system, since the scheme constitutes an extraordinary incentive, which cannot be justified as part of the ordinary operation of the tax system.

86 It is apparent from the foregoing paragraphs that the Commission clearly set out in the contested decision the manner in which the undertakings benefiting from the measures at issue enjoyed a selective advantage. In the circumstances, the part of the third plea alleging a failure to state adequate reasons must be rejected.

The plea alleging that adequate reasons are not stated in the contested decision as regards the effect of the measures at issue on competition and intra-Community trade

87 While the Commission must at the very least refer to the circumstances in which aid was granted in the statement of the reasons for its decision where those circumstances show that the aid is such as to affect trade between Member States and to distort or threaten to distort competition, it is not required to carry out an economic analysis of the actual situation on the relevant markets, of the market share of the undertakings in receipt of the aid, of the position of competing undertakings or of trade flows between Member States. Furthermore, in the case of aid granted illegally, the Commission is not required to demonstrate the actual effect which that aid has had on competition and on trade between Member States. If that were the case, such a requirement would ultimately give Member States which grant unlawful aid an advantage over those which notify the aid at the planning stage (see, to that effect, Case T-55-99 CETM v Commission [2000] ECR II-3207, paragraphs 100 to 103, and Technische Glaswerke Ilmenau v Commission, paragraph 45 above, paragraph 215).

88 In the light of that case-law, it does not appear, in the circumstances of the present case, that the Commission has failed to fulfil its obligation to give sufficient reasons for the part of the contested decision relating to the effect of the measures at issue on competition and intra-Community trade.

89 The Commission devotes recitals 34 to 37 in the preamble to the contested decision to an examination of the effects of the measures at issue on competition and intra-Community trade.

90 First, it states that the measures at issue are 'liable to distort competition between undertakings and have an effect on trade between Member States because the beneficiaries may be operating on international markets and involved in trade and other business activities in markets where competition is intense' (recital 34).

91 Next, it sets out the financial objectives of companies seeking admission to listing, which include increasing and diversifying the sources of corporate financing, increasing the financial standing of the listed company and obtaining a market valuation for the company, and establishes that '[b]y conferring an extraordinary tax advantage on companies that decide to seek a listing, the scheme improves their competitive position and financial standing vis-à-vis their competitors', going on to state that these effects 'may favour Italian beneficiaries operating on markets where intra-Community trade takes place' and that it follows that 'the scheme affects trade and distorts competition' (recital 35).

92 Lastly, the Commission states that '[t]he [ten] companies obtaining a listing on the Italian stock markets belong to various sectors, ranging from manufacturing to public utilities, which are open to international competition' and expresses the view that the benefits conferred by the tax reductions are considerable, potentially amounting to EUR 11.7 million for each beneficiary during the three-year period for which the aid scheme was applicable (recital 36).

93 The Commission concludes, at recital 37 in the preamble to the contested decision, that 'the distortion of competition deriving from the scheme in the different sectors where the beneficiaries operate is significant, considering that the beneficiaries are often leaders in their respective business sectors in Italy, and this justifies the negative appraisal of the scheme'.

94 The statement of reasons for the contested decision thus enables the Italian Republic and the Community judicature to ascertain the reasons for which the Commission reached the conclusion that the conditions for the application of Article 87(1) EC relating to the effect on trade between Member States and distortion of competition were satisfied in the present case.

95 That conclusion is not affected by the Italian Republic's claim that the examination of the distortion of competition and the effect of the measures at issue on trade between Member States did not address the measure in Article 1(1)(d) of DL 269-2003. It is sufficient to recall, in that connection, that by referring to the effects of the 'scheme', recitals 34 to 37 in the preamble to the contested decision disclose in a clear and unequivocal fashion that the reasoning followed by the Commission applies to the aid scheme as a whole and, therefore, to both the measures at issue.

96 It follows that the part of the fourth plea alleging that sufficient reasons are not stated in the contested decision regarding the effect of the measures at issue on competition and intra-Community trade must also be rejected.

The plea alleging that adequate reasons are not stated in the contested decision with regard to the incompatibility of the measures at issue with the common market

97 The Commission devotes recitals 39 to 45 in the preamble to the contested decision to an analysis as to whether the measures at issue are compatible with the common market.

98 First, the Commission points out that the compatibility of those measures must be assessed in the light of the exceptions provided for in Article 87(2) and (3) EC (recital 39) and that the Italian authorities have not explicitly challenged the assessment set out in the decision to initiate the procedure that none of those exceptions is applicable in the present case (recital 40). Next, it states that '[t]he advantages in question are either unrelated to any expenses or linked to expenses that are not eligible for aid under the Community block exemption regulations or guidelines' (recital 41). The Commission also states that the exceptions provided for in Article 87(2) and (3)(a), (b) and (d) EC are not applicable in the present case (recitals 42 to 44). Lastly, with regard in particular to Article 87(3)(c) EC, it notes that '[t]he tax advantages granted by the scheme are not linked to specific investments, job creation or specific projects' and that '[t]hey simply constitute a reduction in the costs that would normally have to be borne by the firms concerned in the course of their business and must therefore be regarded as operating aid that is incompatible with the common market' (recital 45).

99 With regard in particular to the claim that the Commission is under an obligation to give specific reasons for its conclusion that the measures at issue are incompatible with the common market as against the possibility that the aid could be justified, even as operating aid, it should be borne in mind that, according to the case-cited at paragraph 68 above, the Commission is not obliged to express a view on all the arguments relied on by the parties concerned. It is sufficient if it sets out the facts and the legal considerations having decisive importance in the context of the decision. Moreover, according to the case-law cited at paragraph 79 above, nor is the Commission required to justify its decision in detail in responding to arguments which it regards as irrelevant or only slightly relevant.

100 It is sufficient to point out that, at recitals 39 to 45 in the preamble to the contested decision, the Commission gave a sufficient account of the essential reasons for its conclusion that the aid scheme was incompatible with the common market and stated, at recital 46, that none of the available exceptions was applicable to that aid, which constituted operating aid.

101 Clearly, the statement set out in the contested decision makes it possible to understand the reasons for which the Commission concluded that the exceptions under Article 87(2) and (3) EC were not applicable and, in particular, the reasons for which it classified the measures at issue as operating aid, which is excluded from the scope of Article 87(3)(c) EC, and not as investment aid.

102 In the light of the foregoing considerations, the part of the fifth plea alleging that adequate reasons are not given in the contested decision as regards the incompatibility of the measures at issue with the common market must be rejected.

3. Infringement of Article 87 EC

103 In its third, fourth and fifth pleas, the Italian Republic alleges infringement of Article 87 EC, with regard to various aspects of the Commission's assessment of the measures at issue. In its third plea, it disputes that an advantage was conferred on newly listed companies and that any such advantage was selective. It disputes in its fourth plea that the measures at issue had an effect on competition and intra-Community trade and, in its fifth plea, that the measures at issue were incompatible with the common market.

The selective nature of the advantage conferred on newly listed companies

Arguments of the parties

104 In its third plea, the Italian Republic submits that the measures examined are not selective or that the difference in treatment they apply is justified by the nature or the structure of the tax system.

105 The Italian Republic challenges the assertion at recital 26 in the preamble to the contested decision that the selective nature of the advantage resides in the fact the measures at issue derogate 'from the normal operation of the tax system, and that [they] favour certain undertakings or the production of certain goods, in that [they] constitute a specific scheme favouring only the undertakings that are able to obtain a listing during the period stipulated by the scheme'. It considers that, since the aid scheme in question covers all limited companies that may potentially obtain a listing, it is not selective. Indeed, a new aid scheme is necessarily directed at companies which, at the time of its entry into force, satisfy the conditions laid down by the scheme, whereas it cannot be directed at those which do not satisfy those conditions or which satisfied them previously.

106 The Italian Republic also challenges the assertion at recital 27 in the preamble to the contested decision that the aid scheme in question cannot be justified by the nature of the Italian tax system, is disproportionate in so far as the reduction in the tax rate applies to future profits earned by its beneficiaries, such profits having no connection with the fact that the beneficiaries are admitted to listing, their capital structures or with the other characteristics associated with listing, and also cannot be justified by its own specific objectives in the light of its short duration, which makes it de facto inaccessible to a great number of potential beneficiaries. According to the Italian Republic, the measures at issue makes a distinction which is inherent in the logic of the tax system in that they are linked to a situation - that of listed companies - which, from an objective point of view, is different from the situation of non-listed companies. Listed companies are faced with significant costs, part of which they will remain liable for because they may not be deductible for the tax period during which they were incurred or, even when they are deductible, that may lead to a tax saving which cannot exceed the rate of taxation applicable to taxable income.

107 According to the Italian Republic, the judgments in Case C-143-99 Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke [2001] ECR I-8365, paragraphs 41 and 42, and Case C-409-00 Spain v Commission [2003] ECR I-1487, paragraph 52, confirm that different tax treatment for listed companies is consistent with the logic of the system and does not constitute selective treatment.

108 With regard to the Commission's argument that the reduction in the rate of taxation provided for in Article 11 of DL 269-2003 is not linked to the costs of admission to trading but to the profits earned by the companies, the Italian Republic submits that there may not have been any profit, in which case the reduction in the tax rate would have no real impact and that, even if profits were earned, they would most certainly be greatly reduced on account of the costs incurred in the admission to listing itself.

109 Therefore, according to the Italian Republic, the Commission's assertion that the differential treatment 'does not address any relevant ... distinction between the situations of listed as opposed to non listed companies' (recital 27 in the preamble to the contested decision) is incorrect in law.

110 The Italian Republic adds that, in order to determine whether the measures at issue are selective, it is necessary to compare the situation only of limited companies having the potential to be listed rather than the situation of all limited companies. That being so, it is obvious that, since they are directed without distinction at all limited companies having the potential to be listed, the disputed measures are not 'subjectively' selective.

111 According to the Italian Republic, the Commission also failed to take account of the fact that the two measures at issue are consistent as they represent a continuation of previous tax relief measures for newly listed companies, namely the Super DIT.

112 It also maintains that measures can be non-selective even though they are temporary, all the more so since it is possible as a result of the temporal limitation for the aid scheme in question to be reconciled with the budgetary requirements of the State, and this can also be explained by the fact that the measure in question is introduced on an experimental basis.

113 As regards the assertion at recital 28 in the preamble to the contested decision that the provision in Article 1(1)(d) of DL 269-2003 enabling listing costs to be deducted from taxable income is also an extraordinary incentive because it comes on top of the ordinary deduction of business expenses, the Italian Republic draws attention to the contradiction inherent in the contested decision in so far as the Commission, on the one hand, states that that measure might be deemed to be justified by the specific objective pursued by the aid scheme and, on the other, disregards any such justification when it comes to the other measure at issue, namely the tax reduction provided for in Article 11 of DL 269-2003.

114 With regard to recital 30 in the preamble to the contested decision, which states that the measures at issue mainly benefit Italian undertakings because the tax relief applies to the world-wide profits generated by such undertakings, the Italian Republic submits that whether a measure is selective is to be determined only by comparing, on the one hand, the situations at which the measure is directed and, on the other, the situations excluded from that measure, whereas it is irrelevant for the purpose of establishing whether State aid has been granted to make a comparison between situations at which the measure concerned is directed in order to assess whether the recipient undertakings derive from that measure equal advantages or different advantages.

115 Lastly, the Italian Republic argues that it cannot be prohibited for the measures at issue to have a different impact on Italian recipient companies as against foreign recipient companies because it is normal for a tax system to be based on the principle that the taxation of and advantages available to residents apply to their aggregate income whereas non-residents are subject to the principle of fiscal territoriality (see, to that effect, Case C-279-93 Schumacker [1995] ECR I-225, paragraphs 31, 32 and 34, and Case C-391-97 Gschwind [1999] ECR I-5451, paragraphs 21 to 24).

116 The Commission contests the Italian Republic's arguments.

Findings of the Court

117 Article 87(1) EC prohibits State aid which '[favours] certain undertakings or the production of certain goods', that is to say aid which is selective (Case C-66-02 Italy v Commission, paragraph 94). However, according to established case-law, the concept of State aid does not refer to State measures which differentiate between undertakings and which are, therefore, prima facie selective where that differentiation arises from the nature or the overall structure of the system of charges of which they form part (Case C-159-01 Netherlands v Commission [2004] ECR I-4461, paragraph 42, and Case C-88-03 Portugal v Commission [2006] ECR I-7115, paragraph 52 and the case-law cited).

118 Accordingly, it is appropriate to examine, first, whether the measures reducing the tax rates in question are, prima facie, selective and, if necessary, then to examine whether, as the Italian Republic submits, those measures are justified by the nature and overall structure of the Italian tax system.

- Whether the measures at issue are prima facie selective

119 As regards the assessment of the condition of selectivity, which is a constituent factor in the concept of State aid, it is clear from the case-law that Article 87(1) EC requires it to be determined whether, under a particular statutory scheme, a State measure is such as to favour certain undertakings in comparison with other undertakings which are in a legal and factual situation that is comparable in the light of the objective pursued by the scheme in question (see Spain v Commission, paragraph 47, and Portugal v Commission, paragraph 54 and the case-law cited).

120 In the present case, it emerges from various aspects that the tax advantage conferred in Article 1(1)(d) and Article 11 of DL 269-2003 is selective. First, the right to a reduced rate of income tax during the three years following the tax year in which a company is listed and the right to deduct from taxable income an amount equal to the listing expenses are available only to undertakings newly listed on a regulated market. Next, such undertakings, that is, limited companies that are newly listed, must obtain an official listing on a regulated market during the period between 2 October 2003, the date when DL 269-2003 came into force, and 31 December 2004, the deadline for the first listing in accordance with Article 11 of DL 269-2003. Accordingly, the measures at issue benefit only undertakings carrying out the operations in question (see, to that effect, Case C-66-02 Italy v Commission, paragraph 97) during the brief fifteen-month period for which the aid scheme was applicable (see, to that effect and by analogy, Joined Cases T-92-00 and T-103-00 Diputación Foral de Álava and Others v Commission [2002] ECR II-1385, paragraph 49). All other undertakings are excluded from the advantages conferred by the aid scheme, be they companies that are already listed or those which do not or cannot satisfy the conditions required for listing during the period covered by the aid scheme. It should also be pointed out in that connection, as is apparent from recital 18 in the preamble to the contested decision and as the Commission observed on numerous occasions in its pleadings, without being contradicted by the Italian Republic, that the brief period for which the aid scheme was applicable was essentially the same as the period of time required to plan, initiate and successfully complete admission to listing, having regard to the relevant governing provisions, which impose rigorous conditions to be complied with by the undertakings intending to obtain a listing. Therefore, as the Italian Republic acknowledged at the hearing, the advantages conferred by the measures at issue were in fact available only to undertakings which had already initiated the listing procedure, to those which had at least contemplated doing so and to those which were ready to undertake such an initiative in a very short time.

121 In so far as companies admitted to listing during the period covered by the aid scheme benefited from tax relief - namely the reduction in the rate of income tax and the deduction from taxable income, in addition to ordinary deductible costs, of the costs incurred in listing - which are not available to undertakings not carrying out operations such as those at which those measures are directed, they enjoy advantages to which they would not have been entitled under the normal rules governing the system. The measures at issue are therefore selective.

122 Moreover, the measures at issue are selective in that they actually favour companies registered in Italy by comparison with companies not registered there (see, to that effect and by analogy, Case 203-82 Commission v Italy [1983] ECR 2525). As the Commission correctly pointed out at recital 30 in the preamble to the contested decision, the tax incentive, which is granted, as an exception to the normal rules governing tax treatment, to all undertakings taxable in Italy which are admitted to listing on a regulated market, mainly benefits companies registered in Italy. In addition, for those companies, the tax relief applies to their world-wide profits, whereas for foreign companies the relief applies only to profits generated in Italy.

123 That conclusion cannot be affected by the Italian Republic's argument that whether a measure is selective must be determined solely by comparing, on the one hand, the situations covered by the measure and, on the other, the situations excluded from it and not by making a comparison between situations covered by the measure in question. It should be borne in mind that Article 87(1) EC is intended to prohibit any aid liable to favour 'certain undertakings or the production of certain goods' and defines an aid measure in terms of its effects. As the Commission correctly stated, there is therefore nothing to prevent a measure that is already limited to certain given subjects - in the present case, listed companies - from favouring certain beneficiaries - in the present case, the Italian companies for which the tax relief applies to world-wide profits - to a greater extent than other companies which also benefit from the aid scheme, namely foreign companies for which the tax relief applies only to profits generated in Italy.

124 It follows from the foregoing that the measures at issue favour 'certain undertakings' within the meaning of Article 87(1) EC. It is therefore appropriate to consider whether the distinction made by those measures is justified by the nature or the overall scheme of the tax system of which they form part.

- Whether the measures at issue are justified by the nature and the overall scheme of the Italian tax system

125 Where such a differentiation is based on objectives other than those pursued by the overall scheme, the measure in question will, as a general rule, be regarded as satisfying the condition of selectivity laid down in Article 87(1) EC (see, to that effect, Case 173-73 Italy v Commission [1974] ECR 709, paragraph 33, and Adria-Wien Pipeline and Wietersdorfer & Peggauer Zementwerke, paragraph 49). Furthermore, it is for the Member State which has introduced such a differentiation between undertakings in relation to charges to show that it is actually justified by the nature and general scheme of the system in question (Netherlands v Commission, paragraph 43).

126 According to the Italian Republic, the tax reduction constituted a tax incentive for the companies at which the aid scheme was directed to become listed because any company intending to be admitted to listing on the stock exchange or any other regulated market was faced with substantial costs. Those measures were therefore tailored to a situation that was particular to companies intending to be listed, which was objectively different from that of other companies.

127 In that connection, the Commission states, at recital 27 in the preamble to the contested decision, that the measures at issue do not relate to any relevant tax distinction between the situation of companies that are listed on the stock exchange or any other regulated market and the situation of non-listed companies.

128 It is therefore necessary to determine whether the Commission was correct in concluding that there was no connection between the measures at issue and any objective situation peculiar to the beneficiaries of those measures.

129 From that point of view, it is appropriate to examine the two measures separately.

130 First, as the Commission correctly pointed out at recital 27 in the preamble to the contested decision, since the tax relief provided for in Article 11 of DL 269-2003 is granted upon admission to listing, it applies to future profits earned by the beneficiaries, which are unrelated to the fact that the beneficiaries have been admitted to listing, to the costs incurred as a result of the listing operation, or to any alleged disadvantage arising from that particular situation. Moreover, in view of its short duration, nor can the aid scheme be justified by its own specific objective, namely to encourage undertakings to obtain a listing, since it excludes de facto a considerable number of potential beneficiaries.

131 Furthermore, the Italian Republic has failed to establish any connection between the specific characteristics of companies admitted to listing - in particular the alleged disadvantages associated with listing in terms of access to capital markets and administrative costs - and the measures in question.

132 Therefore, even if listed companies may have different characteristics from those of non-listed companies, in particular as regards access to capital markets and administrative costs, the tax relief provided in Article 11 of DL 269-2003 cannot be regarded as having any connection with those characteristics.

133 Second, as the Commission correctly observed at recital 28 in the preamble to the contested decision, the deduction from taxable income provided in Article 1(1)(d) of DL 269-2003, which comes on top of the ordinary deduction of expenses, is also an extraordinary incentive. Even if that could be regarded as being justified by the specific objective of encouraging companies to seek a listing, pursued by the aid scheme, the fact remains once again, as the Commission rightly stated, that in view of the short duration of the measure it is inconsistent with that objective because it excludes de facto a considerable number of potential beneficiaries.

134 Moreover, contrary to the Italian Republic's submission, there is no contradiction in the contested decision in the sense that the Commission would appear to have ruled out the possibility that the tax incentives set out in Article 11 of DL 269-2003 may be justified by the nature or the overall scheme of the system (recital 27 in the preamble to the contested decision) while at the same time recognising that the tax incentives set out in Article 1(1)(d) of DL 269-2003 may be justified (recital 28 in the preamble to the contested decision).

135 As regards the first measure, the Commission rightly ruled out any possibility of justification at the outset, since that measure is unrelated to any specific situation particular to listed companies and, as regards the second measure, ruled out any justification in the circumstances of the case, after pointing out that such a measure might have been justified since it relates to expenditure incurred in listing.

136 It must therefore be concluded that the Commission did not infringe Article 87(1) EC by considering that the measures at issue favour 'certain undertakings or the production of certain goods' and that, in the absence of any direct connection between those measures and the objective of the aid scheme, they are inconsistent with the nature and the overall scheme of the Italian tax system.

137 That conclusion cannot be undermined by the consistency which the Italian Republic claims exists between the measures at issue and similar earlier measures, namely the Super DIT.

138 The Italian Republic has failed to establish that there is any such consistency.

139 First, there was a break in continuity between the two schemes, since the Super DIT was abolished in 2001, even though it continued to be applied on a transitional basis to companies which, as at 30 June 2001, had carried out transactions to increase share capital, and the measures at issue were introduced in October 2003.

140 Moreover, the ambit of the two schemes is quite different. The Super DIT provided reductions in the tax rate applicable only to the normal return on an increase in investment capital for companies whose shares were listed on a regulated market for the three tax periods following the period of the first listing. As the Commission pointed out, the Super DIT was intended to alleviate the disadvantages associated with contributions of new risk capital when listing operations are undertaken, which is treated less favourably for tax purposes than loan financing. In contrast, the measures at issue provide for, first, a reduction in the tax rate applicable to total income and, second, the deduction of listing costs from taxable income, on top of the ordinary deduction of business costs.

141 In any event, even if the two successive measures were related, the one being a continuation and extension of the other, that would not be sufficient in itself to demonstrate that the measures at issue are consistent with the nature and overall scheme of the system, since, as stated at paragraph 75 above, the Commission never expressed a view on whether the Super DIT should be classified as State aid.

142 Lastly, with regard to the Italian Republic's argument deriving essentially from the fact that differential treatment of residents and non-residents is consistent with the domestic tax system, it should be borne in mind that, in the present case, the effects of the measures at issue do not stem from the determination of the basis of assessment itself and therefore from differentiated rules on taxation, the consistency of which was emphasised by the Italian Republic. Instead, as the Commission correctly observed, those effects stem from the decision to link the benefits in question to the basis of assessment, which is at odds with the logic of the tax system. In other words, the advantages, which are in principle intended to encourage listing on a regulated market, relate to the basis of assessment, which is wholly unrelated to listing. Consequently, although the advantage derives from listing, in practice the aid scheme ultimately confers a different advantage according to whether the beneficiary is primarily established in Italy or elsewhere.

143 It follows from the foregoing that the third plea must be rejected in so far as it alleges infringement of Article 87(1) EC.

The impact of the measures at issue on intra-Community trade and competition

Arguments of the parties

144 In its fourth plea, the Italian Republic calls into question the Commission's analysis of the two conditions relating to the undermining of competition and the effect on intra-Community trade.

145 According to the Italian Republic, the undermining of competition is, by definition, a shift in the existing competitive balance in the market, that is, an effect that can assessed only after a certain period has elapsed. The Commission failed to state the reasons for which, in spite of their brief duration and the small amount involved, the measures at issue nevertheless had the potential in themselves permanently to alter the competitive balance. The Italian Republic relies in that connection on the case-law which states that a relatively small amount of aid can affect trade 'where there is strong competition in the sector in which the undertaking receiving the aid operates', in order to conclude that the Commission was required to carry out an analysis, if only an overview, of the sectors in which the various beneficiaries of the measures in question could operate and of the competitive situation in those sectors, which it singularly failed to do in the present case.

146 Even though the Commission was required to carry out an economic analysis, it simply made general statements without distinguishing between Community sectors and those of merely national interest, in spite of the fact that it acknowledged that certain beneficiaries might operate in the latter sectors.

147 The Commission also failed to demonstrate that the measures at issue constitute operating aid. On the contrary, according to the Italian Republic, those measures were intended to promote the consolidation of the companies' assets following their admission to listing. Since those measures were therefore structural in scope and not aid for the purpose of day-to-day management, their alleged impact on competition should have been duly analysed by the Commission.

148 With regard in particular to the distortion of competition, the Italian Republic submits that it must be concluded, in the absence of a more detailed investigation, which was not carried out in the present case, that the tax advantage - which might represent a total saving of EUR 11.7 million for the three years during which the reduced rate was applicable - for the beneficiaries of the aid scheme taken into account in the contested decision, namely the major operators on the market, is not of itself such as to have a significant impact on their competitive position when considered in the context of the turnover of those undertakings.

149 Finally, since the tax rate reduction was designed to place on an equal footing companies that had just been admitted to listing, which bore heavy costs, and unlisted companies which were not admitted to listing, that reduction did not confer any advantage on companies admitted to listing and did not, therefore, bring about any distortion of competition.

150 The Commission contests the Italian Republic's arguments.

Findings of the Court

151 Article 87(1) EC prohibits aid which affects trade between Member States and distorts or threatens to distort competition.

152 In its assessment of those two conditions, the Commission is required, not to establish that the aid has a real effect on trade between Member States and that competition is actually being distorted, but only to examine whether that aid is liable to affect such trade and distort competition (see Case C-66-02 Italy v Commission, paragraph 111 and the case-law cited).

153 In particular, when aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, those undertakings must be regarded as affected by that aid. It is not therefore necessary that the beneficiary undertakings should themselves participate in the intra-Community trade. Where a Member State grants aid to an undertaking, internal activity may be maintained or increased as a result, so that the opportunities for undertakings established in other Member States to penetrate the market in that Member State are thereby reduced. Moreover, the strengthening of an undertaking which has not previously participated in intra-Community trade may place it in a position which enables it to penetrate the market of another Member State (see, to that effect, Case C-66-02 Italy v Commission, paragraphs 115 and 117 and the case-law cited).

154 Even aid of a relatively small amount is liable to affect trade between Member States where there is strong competition in the sectors in which the recipient undertakings operate (see, to that effect, Case T-214-95 Vlaams Gewest v Commission [1998] ECR II-717, paragraph 49).

155 Furthermore, according to established case-law, where a public authority favours an undertaking operating in a sector which is characterised by intense competition by granting it a benefit, there is a distortion of competition or a risk of such distortion. Where the benefit is limited, competition is distorted to a lesser extent, but it is still distorted. The prohibition in Article 87(1) EC applies to any aid which distorts or threatens to distort competition, irrespective of the amount, in so far as it affects trade between Member States (Vlaams Gewest v Commission, paragraph 46).

156 It is apparent from recitals 34 to 36 in the preamble to the contested decision that, in accordance with the case-law cited above, the Commission examined whether the measures at issue could distort competition and affect trade between Member States. In its view, the measures at issue enhanced the competitive position and the financial capacity of the recipient companies, which can operate on international markets and on markets characterised by intense competition, and this may also favour Italian beneficiaries operating on markets in which intra-Community trade takes place. The Commission also states that the recipient companies belong to different sectors, ranging from manufacturing to public utilities, all of which are open to international competition, and that the advantages conferred by the tax relief are considerable, potentially amounting to EUR 11.7 million for each beneficiary during the three-year period for which the aid scheme was applicable.

157 Contrary to the Italian Republic's claims, the Commission was not obliged to show that competition was undermined 'permanently', or to carry out a more detailed investigation of the substantial impact of the measures at issue on the competitive position of the recipients, and even less so by viewing this in the context of their turnover. The case-law does not require the distortion of competition, or the threat of such distortion, and the effect on intra-Community trade to be significant or substantial (Diputación Foral de Álava and Others v Commission, paragraph 78). Furthermore, as indicated at paragraphs 155 and 156 above, the fact that the amount of aid is small, which is relied on by the Italian Republic, is irrelevant in the circumstances because the recipients operate in sectors that are open to competition.

158 Moreover, as already stated at paragraph 87 above, with regard to aid that has not been notified to the Commission, the decision declaring that aid incompatible with the common market need not necessarily demonstrate the real effect of that aid on competition or trade between Member States.

159 Furthermore, contrary to the Italian Republic's claims, nor did the fact that certain recipient undertakings could operate on markets which were only of national interest impose an obligation on the Commission to carry out an in-depth analysis.

160 In any event, as stated at paragraph 69 above, in the case of an aid scheme, the Commission may confine itself to examining the general characteristics of the scheme without being required to examine each particular case in which it applies in order to establish whether the scheme involves elements of aid. The fact that, in some circumstances, it also benefits recipients which operate only on markets of national interest does not call into question that finding, which is sufficient for Article 87(1) EC to apply to an aid scheme (see, to that effect and by analogy, Case C-66-02 Italy v Commission, paragraphs 91 and 92 and the case-law cited).

161 As regards the Italian Republic's argument that the reduction in the tax rate was intended essentially to balance out the disadvantage to which the recipients were subjected as a result of being listed, it should be noted that the fact the State measures in question seek to offset additional costs which the recipients have assumed as a result of their being admitted to listing cannot preclude them from being categorised as aid within the meaning of Article 87 EC (see, to that effect, Case C-251-97 France v Commission [1999] ECR I-6639, paragraph 47).

162 Lastly, as regards the distinction which the Italian Republic attempts to draw between operating aid and aid that is structural in scope, according to the case-law cited at paragraphs 152 to 155 above it is irrelevant for the purposes of examining the plea under consideration. Indeed, any grant of aid to an undertaking pursuing its activities in the Community market is liable to distort competition and affect trade between Member States (Diputación Foral de Álava and Others v Commission, paragraph 72).

163 Accordingly, the fourth plea must also be rejected as unfounded in so far as it alleges infringement of Article 87(1) EC.

Whether the measures at issue are to be classified as operating aid and whether they are incompatible with the common market

Arguments of the parties

164 The Italian Republic takes issue with the Commission's assessment that the aid scheme is incompatible with the common market.

165 First, it argues that, even if the measures at issue constituted operating aid, that would not place them outside the scope of Article 87(3)(c) EC. The Italian Republic also relies on Commission Decision 2000-410-EC of 22 December 1999 on the aid scheme which France [was] planning to implement in favour of the French port sector (OJ 2000 L 155, p. 52), in which the Commission accepted that operating aid was lawful on the basis of a number of circumstances - such as the fact that the economic impact of the aid was limited, the beneficiaries were small and medium-sized undertakings and no objections were made by third parties - which also apply in the present case. The Commission should therefore have conceded that the aid scheme at issue is lawful or, at the very least, given specific reasons for its conclusion that the scheme is incompatible with the common market, which cannot be based on a classification of the scheme as operating aid.

166 Second, the Italian Republic submits that, in any event, the measures at issue constitute investment aid because listing entails expenditure that is intrinsic to any operation to consolidate the assets and structure of the recipient company and therefore long-term costs, namely investments.

167 Third, the Italian Republic is of the view that the objective pursued by the measures at issue, that is, to encourage undertakings to obtain listing and increase their number, is a specific objective of economic policy capable of falling within Article 87(3)(c) EC.

168 The Commission contests the Italian Republic's arguments.

Findings of the Court

169 The Commission has a wide discretion when applying Article 87(3) EC, the exercise of which involves economic and social assessments which must be made in a Community context. Judicial review of the manner in which that discretion is exercised is confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with and to verifying the accuracy of the facts relied on and ascertaining that there has been no error of law, manifest error in the assessment of the facts or misuse of powers (see Case C-372-97 Italy v Commission [2004] ECR I-3679, paragraph 83 and the case-law cited).

170 Moreover, the case-law shows that the legality of a Commission decision declaring that new aid does not fulfil the conditions under which the exemption in Article 87(3)(c) EC applies must be assessed solely in the context of that provision, and not in the light of the Commission's earlier decision-making practice, assuming that is established (see, to that effect, Joined Cases C-57-00 P and C-61-00 P Freistaat Sachsen and Others v Commission [2003] ECR I-9975, paragraphs 52 and 53, and Case T-171-02 Regione autonoma della Sardegna v Commission [2005] ECR II-2123, paragraph 177).

171 In the present case, the Commission concluded at recital 45 in the preamble to the contested decision that the measures at issue are to be classified as operating aid that does not fall within the exception in Article 87(3(c) EC, which relates to the development of certain economic activities or of certain economic areas, and are therefore incompatible with the common market, stating that '[t]he tax advantages granted by the scheme are not linked to specific investments, job creation or specific projects'.

172 That finding cannot be regarded as vitiated by a manifest error of assessment. The measures at issue do not seek to promote the development of an activity or of an economic area but simply to reduce the costs normally borne by the undertakings concerned in connection with their business.

173 With regard, first, to the Italian Republic's claim that it is possible for the aid scheme to be regarded as compatible with the common market, even if the aid is classified as operating aid, it should be borne in mind that, as a general rule, operating aid does not fall within the scope of Article 87(3) EC since it distorts competition in the sectors in which it is granted and is at the same time incapable, by its very nature, of achieving any of the objectives laid down in that provision (see Case T-459-93 Siemens v Commission [1995] ECR II-1675, paragraph 48 and the case-law cited).

174 Such aid can be regarded as compatible with the common market only in exceptional circumstances. As is apparent from the documents before the Court and the contested decision, there were no such exceptional circumstances in the present case and nor were there claimed to be by the Italian authorities, which were obliged to provide all the information necessary to enable the Commission to verify whether the conditions for the exception from which it sought to benefit were satisfied (see, to that effect, Regione Autonoma della Sardegna v Commission, paragraph 129 and the case-law cited). Moreover, that finding cannot be affected by the Commission's earlier decision-making practice, assuming that is established, as is clear from the case-law cited at paragraph 170 above.

175 Next, with regard to the claim that the measures at issue are investment aid, the Commission was correct in ruling out such a classification in view of the fact that the tax advantages granted are not linked to specific investments, job creation or special projects, as indicated at paragraph 171 above. Furthermore, the Italian Republic has failed to adduce any evidence in support of its claim regarding such a classification.

176 Lastly, as regards the claim that the measures could be justified as measures designed to encourage undertakings to obtain a listing and increase the number of such undertakings, the tax reduction provided for in Article 11 of DL 269-2003 must be assessed separately from the deduction from taxable income provided for in Article 1(1)(d) of DL 269-2003, which permits the costs of listing to be deducted, in addition to the ordinary deduction of business expenses.

177 Since the tax reduction is linked to the recipients' total income, it is not directly linked to the costs of listing or to any other alleged disadvantages associated with admission to listing. As a result, it cannot in any way be classified as a measure designed to encourage undertakings to obtain a listing. The Commission has not therefore made any manifest error of assessment in that connection.

178 On the other hand, in so far as it is linked to the inherent costs of listing, the deduction from taxable income provided for in Article 1(1)(d) of DL 269-2003 could in principle be regarded as designed to encourage undertakings to obtain a listing. It is therefore necessary to consider whether the Commission made a manifest error of assessment in claiming that that measure did not pursue any objective that could be covered by Article 87(3)(c) EC.

179 It should be recalled that the Commission has a wide discretion when applying Article 87(3) EC, the exercise of which involves complex economic and social assessments which must be made in a Community context (see paragraph 169 above).

180 It should also be recalled that operating aid is not regarded as likely to assist in the attainment of one of the objectives mentioned in Article 87(3) EC and can be authorised only in exceptional cases, as stated at paragraph 174 above.

181 In the present case, the Commission ruled out the possibility that the measures at issue could be justified under Article 87(3)(c) EC because they constitute operating aid. In particular, the Commission states that '[t]he tax advantages granted by the scheme (...) simply constitute a reduction in the costs that would normally have to be borne by the firms concerned in the course of their business and must therefore be regarded as operating aid that is incompatible with the common market' (recital 45 in the preamble to the contested decision).

182 Contrary to the Italian Republic's claims, listing on the stock exchange is not, of itself, a specific investment, since it does not constitute expenditure on tangible or intangible investments or expenditure on the recruitment of new staff in connection with a new investment. Rather, it is a complex operation by which the companies which obtain a listing pursue financial objectives with a view to obtaining access to given sources of capital.

183 Moreover, the simple fact that the measures at issue are intended to increase the number of listed companies - which, according to the Italian Republic, is a national economic policy objective - cannot suffice to enable the measures to fall within the exception in Article 87(3)(c) EC. As the Court has stated, the aid in question does not meet the requirement that the aid must be intended to facilitate the development of certain economic activities or of certain economic areas or the requirement that it must not adversely affect trading conditions to an extent contrary to the common interest.

184 The Commission cannot therefore be regarded as having made a manifest error of assessment in considering that the measures at issue constitute operating aid incompatible with the common market and are not covered by the exception in Article 87(3)(c) EC.

185 The fifth plea must, therefore, also be rejected in so far as it alleges infringement of Article 87(3)(c) EC.

186 In the light of the foregoing considerations, since none of the pleas relied on by the Italian Republic can be upheld, the action must be dismissed.

Costs

187 Under Article 87(2) of the Rules of Procedure, 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 Italian Republic has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission.

On those grounds,

THE COURT OF FIRST INSTANCE (Third Chamber) hereby:

1. Dismisses the action;

2. Orders the Italian Republic to pay the costs.