GC, 1st chamber, July 7, 2021, No T-680/19

THE GENERAL COURT (First Chamber),

Background to the dispute

1 Carrons Windfarm Ltd, Foyle Windfarm Ltd and Greenoge Windfarm Ltd operate wind farms in various counties in Ireland, while the Irish Wind Farmers’ Association Clg (IWFA), of which the three companies above are members, is the representative body and the pressure group for independent operators of wind farms in Ireland.

2 On 4 February 2016, the IWFA lodged a complaint with the European Commission under Article 24 of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 TFEU (OJ 2015 L 248, p. 9), in which it claimed that certain tax measures adopted pursuant to the Valuation Act 2001 (‘the 2001 Act’) constituted aid which is incompatible with the internal market.

Methods for calculating business rates

3 The business rate is an annual property tax applied and levied on non-domestic and business properties in Ireland. Its aim is to contribute towards the costs of services provided by local authorities. The amount of the business rate is calculated on the basis of the net annual value (‘the NAV’) of property used for commercial purposes, to which a rate, generally determined by local authorities at county level, is applied. The NAV of property essentially means the annual amount of the rent which can reasonably be expected from letting that property.

4 When it came into force, the 2001 Act repealed the previous Valuation Acts and provided for the revaluation of the value – formerly known as the ‘RV’ value – of all properties in Ireland as from 2005 by the Valuation Office (Ireland) (‘the VOI’), with a view to determining the amount of the business rates payable in respect of real property.

5 It is apparent from the 2001 Act that the VOI has different methods for determining the NAV of property, which are, in essence, as follows:

– The first method, known as the ‘rental method’, is used when there is direct evidence that the property actually generates rental income.

– The second method, known as the ‘tone of the list method’, foresees that the NAV of a property depends on the NAVs, as they appear on the valuation list relating to the same rating authority area in which that property is located, of other properties comparable to that property. That method can be used where the rental method is not available. However, that method does not apply in the specific exercise of revaluation that commenced in 2005, which consists precisely in establishing new valuation lists and therefore cannot rely on existing valuation lists.

– The third method, known as the ‘contractor’s method’, is a method relying on the notional costs of constructing or providing the property or part used for commercial purposes. In accordance with that method, the NAV of a property is set at an amount equal to 5% of the aggregate of the replacement costs, depreciated where appropriate, of the property or part used for commercial purposes.

6 The case-law of the Irish courts has developed a fourth method, known as the ‘receipts and expenditure method’, which applies to properties that are seldom let or are difficult to replicate That method essentially consists in estimating the NAV based on the thought process that a putative tenant might go through when assessing the profitability of a commercial venture involving the renting of a property. He or she would estimate future receipts and deduct future costs. From the resulting amount, the tenant would deduct the return which he or she wishes to retain, the remainder representing the maximum rent which that tenant would be prepared to pay.

Administrative procedure

7 In its complaint of 4 February 2016 (see paragraph 2 above), the IWFA argued that, as a result of the choice of valuation method used by the VOI for the purposes of determining the NAV when calculating business rates in Ireland, and the manner in which that method was applied, fossil fuel electricity generation facilities, to which the ‘contractor’s method’ was applied, were treated more favourably than wind farms, to which the ‘receipts and expenditure method’ was applied.

8 In that regard, the IWFA argued that the choice of a different method, combined also with the broad discretion enjoyed by the VOI in applying the ‘contractor’s method’, had led to an underassessment of the NAV of fossil fuel electricity generation facilities, with the result that the operators of those facilities had enjoyed a tax advantage, in the form of a reduction in the amount of business rates payable, over operators of other facilities, such as wind farms (‘the contested measure’). Whilst being unable to quantify precisely the amount of that alleged advantage, the IWFA argued that operators of fossil fuel electricity generation facilities had, in 2015, paid approximately three times less in business rates than other producers of electricity. The IWFA added that, even if the VOI had chosen to apply the ‘receipts and expenditure method’ to all producers of electricity, this would not have automatically eliminated the advantage to operators of fossil fuel electricity generation facilities, since the VOI also enjoyed a broad discretion in applying that alternative method.

9 On 8 April 2016, the Commission services forwarded the IWFA’s complaint and a request for information to the Irish authorities. The Irish authorities submitted observations in response on 9 June 2016. In their response, the Irish authorities contested the very existence of State aid in view of the application of a general scheme and the existence of an objective justification for the application of different methods.

10 By letter of 15 July 2016, the Commission informed the IWFA of its preliminary assessment of the complaint, namely that the contested measure did not constitute State aid within the meaning of Article 107(1) TFEU. The Commission stated that that was not a definitive position and that the IWFA could challenge that assessment or provide further new information that might be useful. It also informed the IWFA that, in the absence of any reaction on the part of the IWFA within one month, it would deem the complaint to have been withdrawn.

11 By letter of 4 August 2016, the IWFA provided the Commission with additional information and requested the Commission to adopt a formal decision. Following an exchange of emails dated 20 October 2016, it became apparent that that letter of 4 August 2016 had been forwarded to the case handler at the Commission only belatedly, for which reason the Commission did not reply to it until January 2017.

12 By letter of 12 January 2017, the Commission replied to the IWFA stating that it considered that there was no selective advantage that would make it possible to classify the contested measure as State aid. The Commission stated that that was not a definitive decision and that the IWFA could challenge that assessment or provide further new information that might be useful. It also informed the IWFA that, in the absence of any reaction on the part of the IWFA within one month, it would deem the complaint to have been withdrawn.

13 By letter of 12 February 2017, the IWFA submitted a 16-page document containing additional information to the Commission. By the latter, it reiterated its position that the contested measure constituted State aid that could not be justified. It also requested the Commission to adopt a decision on that matter.

14 In an exchange of emails with the Commission on 5 April 2017, the IWFA again provided additional information.

15 By email of 23 May 2017, the IWFA asked the Commission to suspend the case temporarily until November 2017, pending the publication, in September 2017, of NAV Valuation Certificates for a number of installations, which could provide useful additional information for the case. By email of 24 May 2017, the Commission granted the requested suspension.

16 By letter of 31 October 2017, the IWFA submitted updated information to the Commission. It included a table showing the differences in valuation of fossil fuel electricity generation facilities and other competitors in one of the Irish counties as an example. By that letter, the IWFA reiterated its position as to the classification of the contested measure as State aid and invited the Commission to reconsider its position.

17 The Commission sent a third letter to the IWFA on 25 October 2018, stating that the additional information provided by the IWFA did not contain any basis for reversing its previous conclusion. It therefore maintained its view that the contested measure did not constitute State aid. The Commission also noted that the IWFA could challenge that assessment or provide further new information that would allow the contested measure to be regarded as State aid. It also informed the IWFA that, in the absence of any reaction on the part of the IWFA within one month, it would deem the complaint to have been withdrawn.

18 By letter dated 23 November 2018, the IWFA submitted further comments to the Commission. In those comments, the IWFA clarified certain elements of its complaint and also referred to the analysis of the results of the assessment it had submitted on 31 October 2017 (see paragraph 16 above). Finally, the IWFA asked the Commission to reconsider the qualification of the contested measure and not to consider the complaint to have been withdrawn.

19 By application lodged at the Registry of the General Court on 4 January 2019, the applicants, the IWFA, Carrons Windfarm, Foyle Windfarm and Greenoge Windfarm, brought an action for annulment of the Commission’s letter of 25 October 2018. That action was dismissed as inadmissible by order of 31 January 2020, Irish Wind Farmers’ Association and Others v Commission (T‑6/19, not published, EU:T:2020:30).

20 On 22 May 2019, the Commission sent the Irish authorities the IWFA’s comments and a new request for information. The Irish authorities submitted observations in response on 14 June 2019.

Contested decision

21 On 9 July 2019, the Commission adopted Decision C(2019) 5257 final concerning State aid SA.44671 (2019/NN) – Ireland, in which it decided that the contested measure did not involve a selective advantage and therefore did not constitute State aid within the meaning of Article 107(1) TFEU.

22 In particular, the Commission considered, first, that it had not been established that the contested measure had conferred an advantage on operators of fossil fuel electricity generation facilities and, second, that, even if an advantage has been derived from the valuation method used by the VOI to determine the NAV of certain properties used for commercial purposes, that advantage is not selective but is explained by whether or not detailed and reliable financial information is available.

Procedure and forms of order sought

23 By application lodged at the Court Registry on 30 September 2019, the applicants brought the present action.

24 In the application, the applicants requested that the Court invite the Commission, in the context of a measure of organisation of procedure adopted under Article 89(3)(d) of its Rules of Procedure, to produce the request for information addressed to the Irish authorities by letter of 22 May 2019, together with the latter’s response of 14 June 2019 (see paragraph 20 above).

25 On 28 January 2020, by way of the measures of organisation of procedure provided for in Article 89(3)(d) of the Rules of Procedure, the Court requested that the Commission produce the request for information addressed to the Irish authorities by letter of 22 May 2019, together with the latter’s response of 14 June 2019. The Commission produced the requested documents within the period prescribed.

26 On 24 November 2020, by way of measures of organisation of procedure provided for in Article 89(3) of the Rules of Procedure, the Court requested that the Commission produce the documents annexed by the Irish authorities to their reply of 9 June 2016 and put a number of questions to the parties. The parties acceded to these requests within the period allowed.

27 The parties presented oral argument and answered the oral questions put to them by the Court at the hearing on 26 January 2021, at which it was decided to invite the applicants to produce a copy of the judgment of the Valuation Tribunal (Ireland) of 6 February 2018 on which they relied.

28 By letter lodged at the Court Registry on 29 January 2021, the applicants complied with that request.

29 The oral part of the procedure was closed on 17 February 2021.

30 The applicants claim that the Court should:

– annul the contested decision;

– order the Commission to pay the costs.

31 The Commission contends that the Court should:

– dismiss the action;

– order the applicants to pay the costs.

Law

32 In their single plea in law, the applicants claim, in essence, that the contested decision infringed Article 108(2) TFEU and Article 4(4) of Regulation 2015/1589 and, therefore, their procedural rights, on the ground that, in the present case, the Commission was required to initiate the formal investigation procedure.

33 The single plea is divided into five parts. By the first part, the applicants claim that the contested measure was not correctly identified in the contested decision. By the second part, they claim that the Commission should have had doubts following the preliminary examination phase. By the third part, they claim that the Commission failed to understand certain fundamental elements of the complaint. By the fourth part, they claim that the Commission did not adequately examine all the information provided by the IWFA in the context of the complaint. Lastly, by the fifth part, they criticise the duration of the preliminary examination.

Applicable principles

34 As a preliminary point, it should be noted that, in the context of the procedure for reviewing State aid, the preliminary phase of the procedure for reviewing aid under Article 108(3) TFEU, which is intended merely to allow the Commission to form a prima facie opinion on the notified measure, must be distinguished from the formal investigation procedure under Article 108(2) TFEU.

35 According to settled case-law, the procedure under Article 108(2) TFEU is essential whenever the Commission has serious difficulties in determining whether a measure constitutes State aid (judgment of 22 December 2008, British Aggregates v Commission, C‑487/06 P, EU:C:2008:757, paragraph 185; see also judgment of 16 September 2013, Orange v Commission, T‑258/10, not published, EU:T:2013:471, paragraph 31 and the case-law cited).

36 The Commission may therefore confine itself to the preliminary phase set out in Article 108(3) TFEU for the purpose of taking a decision favourable to a State measure only if it is in a position to satisfy itself, on an initial examination, either that the measure in question does not constitute aid within the terms of Article 107(1) TFEU or, if it is to be classified as ‘aid’, that it is compatible with the Treaty. If, by contrast, the initial examination leads the Commission to the opposite conclusion or even if it does not enable it to resolve all the difficulties involved in assessing the measure concerned, the Commission is under a duty to carry out all the requisite consultations and for that purpose to initiate the procedure under Article 108(2) TFEU (judgment of 22 December 2008, British Aggregates v Commission, C‑487/06 P, EU:C:2008:757, paragraphs 186 and 187).

37 That obligation follows directly from Article 108(3) TFEU, as interpreted by the case-law, and is confirmed by the provisions of Article 4(4) of Regulation 2015/1589, when the Commission finds, after a preliminary examination, that the measure in question raises doubts as to its compatibility with the internal market (see, by analogy, judgment of 15 October 2018, Vereniging Gelijkberechtiging and Others v Commission, T‑79/16, not published, EU:T:2018:680, paragraph 89 and the case-law cited). Accordingly, it is for the Commission to decide, on the basis of the factual and legal circumstances of the case, whether the difficulties involved in assessing the notified measure require the initiation of the formal investigation procedure. That decision must satisfy three requirements (see judgment of 10 February 2009, Deutsche Post and DHL International v Commission, T‑388/03, EU:T:2009:30, paragraph 89 and the case‑law cited).

38 First, Article 108 TFEU restricts the Commission’s power to rule on the existence of aid at the end of the preliminary examination phase solely to aid measures that raise no serious difficulties; that criterion is thus exclusive. Accordingly, the Commission may not decline to initiate the formal investigation procedure in reliance on other circumstances, such as third-party interests, considerations of economy of procedure or any other ground of administrative or political convenience (see judgment of 10 February 2009, Deutsche Post and DHL International v Commission, T‑388/03, EU:T:2009:30, paragraph 90 and the case‑law cited).

39 Second, where it encounters serious difficulties, the Commission must initiate the formal procedure, having no discretion in this regard (see judgment of 16 September 2013, Orange v Commission, T‑258/10, not published, EU:T:2013:471, paragraph 36 and the case-law cited).

40 Third, it is apparent from the case-law that the concept of serious difficulties is objective (judgment of 21 December 2016, Club Hotel Loutraki and Others v Commission, C‑131/15 P, EU:C:2016:989, paragraph 31). The existence of such difficulties must be sought both in the circumstances in which the contested measure was adopted and in its content, in an objective manner, comparing the grounds of the decision with the information which the Commission had or could have had at its disposal when it took a decision on the compatibility of the disputed aid with the internal market (see judgment of 28 March 2012, Ryanair v Commission, T‑123/09, EU:T:2012:164, paragraph 77 and the case-law cited). It follows that judicial review by the Court of the existence of serious difficulties will go beyond simple consideration of whether or not there has been a manifest error of assessment (see judgments of 27 September 2011, 3F v Commission, T‑30/03 RENV, EU:T:2011:534, paragraph 55 and the case-law cited, and of 10 July 2012, Smurfit Kappa Group v Commission, T‑304/08, EU:T:2012:351, paragraph 80 and the case-law cited).

41 It should also be borne in mind that the Commission is required to examine carefully and impartially complaints which it receives concerning State aid, which may require it to investigate a complaint going beyond a mere examination of the facts and points of law brought to its attention by the complainant and to examine elements which have not been raised expressly by the complainant (judgments of 2 April 1998, Commission v Sytraval and Brink’s France, C‑367/95 P, EU:C:1998:154, paragraph 62, and of 2 September 2010, Commission v Scott, C‑290/07 P, EU:C:2010:480, paragraph 90).

42 In the context of State aid control, even though a Member State must, in accordance with the duty of sincere cooperation laid down in Article 4(3) TEU, cooperate with the Commission by providing it with the information that will allow the Commission to take a decision on whether the contested measure involves State aid, the fact remains that the Commission is under an obligation, in the interest of sound administration of the fundamental rules of the Treaty relating to State aid, to carry out a diligent and impartial examination and that that obligation requires, in particular, a careful examination of the information which the Member State provides to the Commission” (see judgment of 22 October 2008, TV2/Danmark and Others v Commission, T‑309/04, T‑317/04, T‑329/04 and T‑336/04, EU:T:2008:457, paragraph 183 and the case-law cited).

43 It is in the light of both the information notified by the State concerned and that provided by any complainants that the Commission must form its assessment in the context of the preliminary examination instituted by Article 108(3) TFEU (judgment of 3 May 2001, Portugal v Commission, C‑204/97, EU:C:2001:233, paragraph 35). In that regard, it must be borne in mind, however, that the Commission is not obliged to adopt a position on all the arguments relied on by the parties concerned. It is sufficient for it to set out the facts and legal considerations which are of essential importance to the decision (see judgments of 1 July 2008, Chronopost and La Poste v UFEX and Others, C‑341/06 P and C‑342/06 P, EU:C:2008:375, paragraph 96 and the case-law cited, and of 3 March 2010, Freistaat Sachsen v Commission, T‑102/07 and T‑120/07, EU:T:2010:62, paragraph 180 and the case-law cited).

44 In addition, it is also apparent from the case-law that, in the context of the preliminary examination phase, the Commission may, in principle, limit itself to the information provided by a Member State, if necessary following a request for additional information, and that it is not required to conduct on its own initiative inquiries into all the circumstances, if the information provided by that State enables it to satisfy itself, after an initial examination, that the measure in question either does not constitute aid within the meaning of Article 107(1) TFEU or, if it is classified as aid, is compatible with the internal market (see judgment of 1 March 2016, Secop v Commission, T‑79/14, EU:T:2016:118, paragraph 76 and the case-law cited).

45 Where an applicant seeks the annulment of a decision to refuse to initiate the formal investigation procedure, either because the Commission considers that the measure at issue does not constitute aid within the meaning of Article 107(1) TFEU or because it considers that the measure, if it is classified as aid, is compatible with the Treaty, it is that party which bears the burden of proving the existence of serious difficulties which should have warranted the opening of the formal investigation procedure, and it may discharge that burden of proof by reference to a body of consistent evidence (see judgment of 19 September 2018, HH Ferries and Others v Commission, T‑68/15, EU:T:2018:563, paragraph 63 and the case-law cited), concerning, on the one hand, the circumstances and duration of the preliminary examination phase and, on the other hand, the content of the contested decision (see judgment of 16 September 2013, Orange v Commission, T‑258/10, not published, EU:T:2013:471, paragraph 38 and the case-law cited).

46 It is in the light of that case-law that the Court must examine the applicant’s arguments seeking to establish the existence of doubts which should have led the Commission to initiate the formal investigation procedure.

47 In that regard, the applicants put forward a body of evidence demonstrating, in their view, the existence of serious difficulties resulting, in essence, first, from the duration of the preliminary examination phase (fifth part of the plea) and, second, from information relating to the contested decision (first to fourth parts of the plea).

The evidence relating to the duration of the preliminary examination phase

48 By the fifth part of the single plea, the applicants claim that the time limits which are a feature of how the preliminary examination phase is conducted reveal the existence of serious difficulties. They submit in that regard that the Commission adopted the contested decision following a formal investigation lasting more than 41 months.

49 The Commission disputes the applicants’ arguments.

50 According to settled case-law, the length of the preliminary examination may, together with other factors, be an indication of serious difficulties encountered by the Commission, if it significantly exceeds what is normally involved in such an examination (see judgment of 16 September 2013, Orange v Commission, T‑258/10, not published, EU:T:2013:471, paragraph 42 and the case-law cited).

51 It is also apparent from the case-law that the reasonableness of the duration of the preliminary investigation phase following the lodging of a complaint must be determined in relation to the particular circumstances of each case and, especially, its context, the various procedural stages to be followed by the Commission and the complexity of the case (see judgment of 8 January 2015, Club Hotel Loutraki and Others v Commission, T‑58/13, not published, EU:T:2015:1, paragraph 61 and the case-law cited).

52 Under Article 12(1) of Regulation 2015/1589, the Commission is to examine without delay any complaint lodged by an interested party pursuant to Article 24(2) of that regulation.

53 In addition, it is apparent from paragraphs 71 and 72 the Code of Best Practices for the conduct of State aid control procedures (OJ 2018 C 253, p. 14) that ‘the Commission services endeavour to investigate a formal complaint within a non-binding time limit of 12 months from when they are registered’ and that ‘if a complaint is unsubstantiated, the Commission services will try to inform the complainant within 2 months from its registration that there are insufficient grounds for taking a view on the case’. In that case, the Commission services must invite the complainant to submit further comments within one month. In the absence of observations made within that period, the complaint will be deemed to have been withdrawn.

54 In the present case, the IWFA lodged a formal complaint on 4 February 2016, which the Commission sent to the Irish authorities on 8 April 2016, who submitted observations in reply on 9 June 2016. Following those comments and its preliminary assessment of the complaint, the Commission informed the IWFA by letter of 15 July 2016 that it considered that the contested measure did not constitute State aid within the meaning of Article 107(1) TFEU and invited it to submit observations within one month.

55 The IWFA submitted further observations on 4 August 2016, to which the Commission replied on 12 January 2017.

56 The IWFA submitted further observations on 12 February 2017. Following those observations, without waiting for a reply from the Commission, the IWFA sent further information on 5 April 2017, then asked the Commission to suspend the procedure temporarily on 23 May 2017 and, finally, sent further information on 31 October 2017. Thus, in 2017, the IWFA, on its own initiative, sent the Commission extensive information and requested a suspension of the procedure for more than five months.

57 The Commission again informed the IWFA by letter of 25 October 2018 that it considered that the contested measure did not constitute State aid within the meaning of Article 107(1) TFEU. The Commission again invited the IWFA to submit observations within one month, which it did on 23 November 2018.

58 Following that date, the Commission adopted the contested decision within seven and a half months, in which time it sent the IWFA’s observations to the Irish authorities together with a further request for information, to which the latter replied within one month.

59 It is apparent from all the factors mentioned in paragraphs 54 to 57 above that they in fact contributed to prolonging the duration of the preliminary examination and explain, to a large extent, the period of more than three years which elapsed between the lodging of the IWFA’s complaint and the adoption of the contested decision, without, however, showing, as such, the existence of doubts capable of justifying the initiation of the formal investigation procedure. In that regard, it should be noted that the total length of the procedure may in part be explained by the requests and observations regularly submitted by the IWFA and by its request for a suspension of the procedure. Furthermore, the content of the exchanges between the Commission and the Irish authorities does not reflect the existence of serious difficulties encountered by the Commission in its examination of the contested measure.

60 However, it should be noted that the number of exchanges between the Commission and the IWFA during the administrative procedure may be explained by the fact that, on many occasions, the Commission informed the IWFA that, in the absence of a response from the IWFA within one month, it would consider the complaint to be withdrawn. Faced with such a demand, and so as not to have its complaint rejected outright, the IWFA had no alternative but to provide the Commission with further explanations.

61 Thus, in the present case, although the duration of the preliminary examination was longer than what is normally required for such an examination, that can be explained mainly by the intensity of the exchanges between the IWFA and the Commission during the administrative procedure. That duration therefore cannot be regarded as evidence of serious difficulties allegedly encountered by the Commission.

62 In any event, it should be borne in mind that a period which exceeds what is normally required in order to examine the preliminary phase cannot in itself constitute strong evidence of the existence of serious difficulties unless that evidence is supported by other factors.

63 It follows from the foregoing that the evidence put forward by the applicants relating to the length of the preliminary examination phase is not sufficient to reveal the existence of serious difficulties justifying the initiation of the formal investigation procedure.

The evidence relating to the contested decision

64 The applicants claim that a number of elements pertaining to the contested decision and to the conduct of the procedure revealed evidence that the preliminary examination of the contested measure presented serious difficulties and, thus, ought to have raised doubts as to the classification of that measure as State aid.

The evidence associated with the incorrect identification of the contested measure (first part of the single plea)

65 By the first part of the single plea, the applicants claim that the Commission did not correctly identify the contested measure. In that regard, they argue that, in recital 14 of the contested decision, the Commission, erroneously described the contested measure as ‘one aspect of the calculation of the business tax rates’, whereas the IWFA had complained that the reduced business rates paid by producers of fossil fuel electricity entailed the grant of State aid.

66 The Commission disputes the applicants’ arguments.

67 In the present case, it must first of all be observed that, in recital 1 of the contested decision, the Commission referred at the outset to the alleged existence of ‘alleged unlawful State aid granted to producers of fossil fuel electricity in Ireland in the form of reduced business tax rates (resulting from the methodology applied to calculate the Net Annual Value of the property)’.

68 Next, it should be noted that recitals 24, 25 and 27 of the contested decision, by which the Commission presented the IWFA’s claims concerning the existence of an advantage within the meaning of Article 107 TFEU, faithfully reproduce the IWFA’s arguments, as set out in particular in point 6, II, and in point 7.2 of its complaint.

69 Lastly, in Section 5 of the contested decision and, in particular, in recitals 51 and 59 of that decision, the contested measure is described as having essentially the form of a reduction in the amount of land taxes payable by undertakings producing electricity from fossil fuels, brought about by the valuation method used by the VOI to determine the NAV of those installations, which results in an artificially low assessment of their tax base compared with that of competing producers of electricity having recourse to other production technologies, foremost among which are wind farms.

70 It follows that the Commission’s description of the contested measure, notwithstanding a terminological approximation in recital 14 of the contested decision which has no bearing on the analysis carried out subsequently, does indeed correspond to that presented by the IWFA in its complaint and during the administrative procedure, and by the applicants in the present case.

71 Consequently, the applicants’ claim that the contested measure was not correctly identified in the contested decision has no factual basis and must be rejected.

The evidence associated with the existence of doubts following the preliminary examination phase (second part of the single plea)

72 By the second part of the single plea, the applicants claim that, if the Commission had correctly assessed the information which had been provided to it by the IWFA, and if it had independently examined the answers provided by the Irish authorities, it would have had doubts and could not have considered, as it nonetheless did, that it had succeeded in dispelling all doubts at the end of the preliminary examination phase.

73 In addition, the applicants claim that the legality of a decision concerning State aid falls to be assessed by the EU judicature on the basis of the information which the Commission ‘could have had’ at the time it adopted the decision, and that this includes information which the Commission could have obtained upon request during the administrative procedure. According to the applicants, it is for the Commission, within the framework of its investigative powers, to question the national authorities when investigating a complaint and, where necessary, to examine elements which were not expressly relied on by the complainant. Furthermore, the applicants submit that there is a contradiction between the statements of the Irish authorities contained in their reply of 9 June 2016 and the documents annexed to that reply, and that the Commission’s request for information sent to those authorities on 22 May 2019 (see paragraph 20 above) elicited only an incomplete and inadequate response from the Irish authorities, which should have led the Commission again to ask the Irish authorities to provide the requested information, which it did not do. In the applicants’ submission, that shows that the Commission did not carry out its own examination, but requested the Irish authorities merely to confirm their statements, without any assessment or critical analysis.

74 The Commission disputes the applicants’ arguments.

75 In the present case, it should be noted that, following the IWFA’s complaint and several exchanges with the IWFA, the Commission, on 8 April 2016 and 22 May 2019 respectively, sent two requests for information to the Irish authorities and sent the IWFA’s objections asking them to submit their observations on those objections. In that regard, it should be recalled at the outset that the mere fact that discussions took place between the Commission and the Member State during the preliminary examination phase and that, in that context, the Commission could have asked for additional information about the alleged measures cannot, in itself, be regarded as evidence that the Commission was faced with serious difficulties of assessment (see, by analogy, judgment of 8 January 2015, Club Hotel Loutraki and Others v Commission, T‑58/13, not published, EU:T:2015:1, paragraph 50).

76 It is apparent from the examination of the exchanges between the Commission and the Irish authorities that those exchanges cannot be regarded as particularly frequent or intense, bearing in mind the technical nature of the questions which sought to determine whether the method for assessing the NAV of fossil fuel electricity generation facilities did not confer an undue selective advantage on those facilities.

77 In addition, in their reply of 9 June 2016 to the first request for information, the Irish authorities stated, inter alia, that there were significant differences in the operating costs of the various electricity generation infrastructures, depending on the technology used, so that a comparison between those infrastructures, based on the coefficient expressing the ratio between the NAV and generating capacity, that is to say the NAV/megawatt (MW) coefficient, would be ‘inappropriate and misleading’. Accordingly, the fact, noted by the applicants, that the Irish authorities could, nevertheless, have reproduced in Annex 4 to their response a table in which that coefficient was used solely to compare wind farms between them does not, as the applicants claim, contradict the statements contained in that reply.

78 It should be noted, however, that by the second request for information of 22 May 2019, the Commission asked the Irish authorities to indicate whether, when accurate and reliable financial data were available, the ‘receipts and expenditure method’ had been applied to fossil fuel electricity generation facilities. No explicit answer was received on that question. However, at the hearing, the Commission explained that answers to that question were to be found in the table annexed by the Irish authorities to their reply of 14 June 2019, which showed that certain fossil fuel electricity generation facilities had indeed been valued according to the ‘receipts and expenditure method’.

79 By the second request for information, the Commission also asked the Irish authorities to provide, in respect of fossil fuel electricity generation facilities and wind farms to which the two methods could be applied, that is to say both the ‘receipts and expenditure method’ and the ‘contractor’s method’, the NAV of those facilities, calculated in accordance with each of those two methods, in order to confirm that the two approaches did indeed lead to similar results. In response to that request, the Irish authorities merely stated that ‘when all methods [could] be applied, in rating theory they should result in like valuations’ and that ‘the use of a specific valuation method [depended] on the circumstances of the case and available evidence’.

80 However, it is apparent from the third indent of recital 45(b) of the contested decision that, during the administrative procedure and, in particular, in their reply of 9 June 2016 to the Commission’s first request for information, the Irish authorities had already stated, in essence, that, for a given wind turbine facility, while the application of the ‘contractor’s method’ would have led to a NAV of EUR 203 000, the application of the ‘receipts and expenditure method’ had led to a more favourable NAV of EUR 188 840 and that if the ‘contractor’s method’ had been applied to the wind farms in Limerick (Ireland), 8 out of 10 of those wind farms would have had a slightly higher NAV and therefore a slightly higher property tax.

81 The Commission also took the view in that respect, in recitals 55 and 72 of the contested decision, that the Irish authorities had duly demonstrated, at least for certain wind farms, that the application of the ‘receipts and expenditure method’ and of the ‘contractor’s method’ had led to similar estimates of the NAVs of those installations.

82 Thus, the mere fact that the Commission did not ask the Irish authorities again for more precise answers to the questions asked in the context of the second request for information is not, in itself, such as to indicate the inadequacy or incomplete nature of its examination or the existence of serious difficulties which should have led it to send a third request for information to the Irish authorities or to initiate the formal investigation procedure, since the replies to the first request for information were sufficient to enable it to adopt the contested decision.

83 In those circumstances, the second part of the single plea must be rejected.

The evidence associated with the Commission’s misunderstanding of certain fundamental elements of the IWFA’s complaint and the failure to carry out a proper examination of the contested measure (third part of the single plea)

84 By the third part of the single plea, the applicants maintain that it is apparent from the contested decision that the Commission did not understand certain fundamental elements of the IWFA’s complaint.

85 In particular, the applicants criticise the Commission for finding, in recital 26 of the contested decision, that the IWFA had based its complaint on the alleged existence of discrimination. However, the applicants argue that the complaint lodged by the IWFA was concerned with the fact that the valuation of the NAV for fossil fuel electricity generation facilities resulted in preferential tax treatment for the operators of such facilities, and not with the existence of discrimination. According to the applicants, the contested measure is structured in such a way that, irrespective of the valuation method selected by the VOI, the business rates payable by operators of fossil fuel electricity generation facilities are considerably lower than those payable by producers of electricity using other technologies.

86 In support of their claims, the applicants provide a detailed presentation of the operation of business rates in Ireland. In that regard, the applicants emphasise in particular that that tax was introduced before Ireland gained its independence and that there is a similar system of business rates in the United Kingdom, which, in their view, is a useful reference point given the close historical links between that system and the Irish system.

87 In more detail, the applicants submit that the NAV of property is in essence the annual amount of rent which can reasonably be expected from letting that property, so that, in their view, there is a link between the use of the property and the tax due.

88 The applicants maintain that, as from 2005, in the context of the revaluation of Irish property values brought about by the adoption of the 2001 Act, all of the elements comprising a property were to be taken into account, so that all electricity generating equipment had to be valued as a whole and on the same basis, irrespective of the technology used. They add that, although different methods for assessing the NAV of property were available to the VOI, each method should have led to the same result. In that regard, they argue that the VOI valuer responsible for re-assessing the NAV of a property is bound by the ‘stand back and look’ principle, which requires the valuer to compare the property valuation arrived at with that of other comparable properties, in order to ensure consistency.

89 The applicants add that, unlike the VOI, the corresponding valuation agency in the United Kingdom of Great Britain and Northern Ireland chose to use the ‘receipts and expenditure method’ to assess all electricity generating installations, irrespective of the technology used.

90 According to the applicants, despite the ‘stand back and look’ principle, the selection of a different method for assessing the NAV of different electricity generating installations on the basis of the technology used meant that operators of fossil fuel electricity generation facilities paid up to three times less in business rates than other producers of electricity. In their reply, the applicants submitted an up-to-date graph representing, for different electricity generating installations, the level of business rates before and after revaluation.

91 At the end of that presentation of how business rates operate in Ireland, the applicants criticise the Commission for not having properly examined the selection of the method for assessing the NAV and the manner in which that method was applied.

92 First, the applicants submit that there is a hierarchy between the different methods for assessing the NAV of properties. In that regard they refer to the case-law of the Valuation Tribunal, which, in a decision of 11 May 2006, recognised that ‘there [was] an accepted hierarchy between the possible methods’ and that ‘in practice the [contractor’s method] [was] regarded as being the method of last resort and its use [was] only to be considered when there [was] insufficient evidence available for the assessment to be made by a more reliable method of valuation’. According to the applicants, the Commission disregarded those arguments relating to the unwritten hierarchy between the different valuation methods and regarded as correct the Irish authorities’ argument that the 2001 Act did not prescribe the method to be applied. However, the applicants submit that, according to the case-law resulting from the judgment of 15 November 2018, Tempus Energy and Tempus Energy Technology v Commission (T‑793/14, under appeal, EU:T:2018:790), the Commission is required to carry out its own impartial, objective and thorough examination of an alleged aid measure, which it failed to do in the present case.

93 The applicants submit that, in a similar previous case concerning the application of business rates to telecommunications infrastructure in the United Kingdom, the Commission had initiated the formal investigation procedure when the question arose as to whether the use of different valuation methods, which seemed to result in a different and disproportionate tax burden among undertakings competing in the telecommunications market, could have entailed the grant of State aid.

94 The applicants also rely on that previous case to observe that the Commission has already stated that the ‘receipts and expenditure method’ was ‘to be applied for properties that are seldom let or are difficult to replicate’, such as utilities. Thus, they argue that that definition applies both to fossil fuel electricity generation facilities and to facilities using other technologies, so that there is no objective justification, which the Commission has not examined moreover, for applying different valuation methods to fossil fuel electricity generation facilities and to wind farms. In that regard, the applicants add that the Irish authorities’ argument that the use of a different valuation method was justified by whether or not detailed and reliable financial information was available should have led the Commission to call into question the Irish authorities’ replies, since, on the one hand, such financial information should have been available to a State body and, on the other hand, if it were not, it would therefore be sufficient for an economic operator to make access to its financial information difficult in order for a more favourable method of valuation of its property to be applied to it, resulting in a reduced amount of business rates being payable.

95 Second, the applicants criticise the Commission for having considered that the Irish authorities had satisfactorily demonstrated that, regardless of the method of valuation applied, the results would have been the same, and for having rejected the line of argument relating to the need to use a metric to compare the various producers of electricity, in the context of the ‘stand back and look’ principle, again taking the Irish authorities’ explanations to be correct, even though in the 1990s the VOI had itself envisaged a ‘realistic’ approach whereby different electricity generating installations were to be compared according to their generating capacity. In that regard, the applicants add that the only valid and objective reference value for comparing the amounts of tax paid by the various producers of electricity is the VAN/MW coefficient, which is confirmed by a decision of the Valuation Tribunal of 6 February 2018. Moreover, the applicants complain that the Commission failed to take into account the situation prior to the implementation of the property revaluation, under which the various types of electricity generating installations enjoyed similar tax treatment.

96 The Commission disputes the applicants’ arguments.

–  The alleged misunderstanding on the Commission’s part of certain fundamental aspects of the IWFA’s complaint

97 As a preliminary point, as regards the argument that the IWFA had not based its complaint on the alleged existence of discrimination (see paragraph 85 above), suffice it to state, in order to reject that argument, that it appears to be purely terminological, given that the applicants themselves, in their application, rely on the ‘more favourable tax treatment’ and the ‘substantially lower’ rates enjoyed by operators of fossil fuel electricity generation facilities which may amount to discriminatory taxation between competing producers of electricity, based on the production technology used.

98 With regard to certain fundamental aspects of the IWFA’s complaint which were not properly understood by the Commission, the following should be noted.

99 First, with regard to the argument that each method for assessing the NAV of property should lead to identical results (see paragraph 88 above), it must be stated that neither the IWFA in its complaint nor the applicants demonstrate that the application of a different method to fossil fuel electricity generation facilities would lead to a valuation of their NAV which is higher than that obtained by applying the ‘contractor’s method’, but that they merely assert, in essence, that the application of different methods to electricity generating installations using different technologies, combined with the broad discretion enjoyed by the VOI when applying those different methods, would result in the grant of a tax advantage to the operators of fossil fuel electricity generating installations.

100 It should be noted, however, that, in the annex to the reply, the applicants produced Annex 4 to the letter from the Irish authorities of 9 June 2016, from which it is apparent that, for 10 wind turbines examined, the coefficient NAV/MW is slightly lower when the ‘receipts and expenditure method’ is applied compared with the result achieved by the ‘contractor’s method’. It follows therefore that, for those wind farms, the NVA obtained is slightly lower when the ‘receipts and expenditure method’ is applied, but that it remains extremely similar to that obtained by applying the ‘contractor’s method’, with the result that it cannot be argued that the application of one method in particular, compared with another, would entail, in one of the two cases, an underassessment.

101 As regards the argument that the valuer is required, in accordance with the ‘stand back and look’ principle, to compare the assessment of an asset which he or she has reached with that of other comparable properties, suffice it to note, in order to reject that argument, first, that it is not supported by any evidence and, second, and in any event, that it has not been established or demonstrated that that principle should be applied in the context of a comparison between different electricity generating installations using different technologies.

102 Second, with regard to the argument concerning the similarity to the Irish system of the system in force in the United Kingdom and the choice made by the valuation agency in the United Kingdom corresponding to the VOI to use the ‘receipts and expenditure method’ in order to value all of the electricity generating installations, regardless of the technology used (see paragraph 89 above), suffice it to state, in order to reject that argument, that it does not reveal the existence of serious difficulties justifying the initiation of the formal investigation procedure. Regardless of the situation in the United Kingdom, it has no influence on the functioning of the Irish tax system.

103 Third, with regard to the figures which the IWFA submitted in its complaint and which the applicants consider to be fundamental (see paragraph 90 above), in so far as they show that the operators of fossil fuel electricity generation facilities paid, by MW in 2015, business rates of up to three times less than that paid by the other producers of electricity, it should be noted that, in the contested decision, the Commission referred to it by stating, in recital 73 of that decision, that the proposed comparison between electricity generating installations in terms of the amount of tax expressed in euros per megawatt of installed generating capacity was not relevant, since business rates are not a tax levied on electricity produced, but on an undertaking’s property.

104 In that regard, it must be borne in mind that business rates are a tax on the value of their property, calculated on the basis of a rental value, and that it is not a tax on production. That tax normally applies to all business property and, consequently, to all electricity generating installations. It follows that the fact that that tax, based on the quantity of MW produced annually, is higher for wind farms than for fossil fuel electricity generation facilities, is irrelevant for the purposes of the present case and cannot, in any event, constitute a reliable indicator for the purpose of assessing the fairness of the system of business rates in Ireland. Similarly, the fact that that tax, in absolute terms, is different for wind farms and for fossil fuel electricity generation facilities does not permit, as such, any useful conclusion to be drawn, since those facilities have different NAVs.

105 It must therefore be concluded, as the Commission did, that the comparison proposed between the various electricity generating installations in terms of the amount of tax expressed in euros per MW of installed generating capacity is not relevant for the purposes of the present case.

106 However, according to the metric proposed by the IWFA in its complaint, on the basis of which the applicants have, in the present action, submitted a number of additional figures (see paragraph 90 above), business rates relative to the generating capacity of electricity generating installations have, in comparison with the situation before the revaluation exercise that commenced in 2005, increased for wind farms, whereas, at the same time, they decreased for fossil fuel electricity generation facilities and for hydroelectric plants.

107 However, it must be stated that such a comparison between, on the one hand, the situation before the revaluation exercise and, on the other hand, the newly created situation following that exercise, was never expressly relied on by the IWFA during the administrative procedure and, consequently, had never been the subject of debate with the Commission, which was limited to the claims that the choice of a different method, combined with the broad discretion enjoyed by the VOI in applying the ‘contractor’s method’, had led to an underassessment of the NAV of fossil fuel electricity generation facilities, with the result that the operators of those facilities had enjoyed a tax advantage over wind farm operators.

108 Furthermore, it should be noted that, in the annex to the letter of 31 October 2017 (see paragraph 16 above), the IWFA had attached a table containing certain data reflecting situations before and after the revaluation exercise, without, however, raising any argument relating to a comparison of those data. Moreover, in response to a question put by the Court at the hearing on 26 January 2021, the applicants acknowledged that the IWFA had not developed that argument during the administrative procedure.

109 It follows that the Commission’s silence, in the contested decision, on such a comparison between, on the one hand, the situation before the revaluation exercise and, on the other hand, the newly created situation following that exercise, cannot constitute evidence of the existence of serious difficulties. In addition, it should be noted, as the applicants observed in their replies to the questions put by the Court in the context of the measure of organisation of the procedure of 24 November 2020 (see paragraph 26 above), that a comparison between the old RV values and the new NAVs is irrelevant, since the values used in the old system were obsolete and no longer reflected reality, and the reference criteria that are now used to determine those bases of calculation are different.

–  The alleged failure to carry out a proper examination of the contested measure

110 As regards the applicants’ claim that there was no proper examination of the contested measure, the following should be noted.

111 First, with regard to the argument that there is an ‘accepted’ and ‘unwritten’ hierarchy between the different VAN assessment methods (see paragraphs 92 to 94 above), it should be noted that the existence of such a hierarchy is recognised by both the Irish authorities and by the Commission. The Irish authorities stated during the administrative procedure that it was correct that, when the two methods in question were applicable to a property or a specific category of property, there was a preference for the ‘receipts and expenditure method’. The Commission also considered, in recital 69 of the contested decision, that, in practice, it was only when the three other methods could not be applied that the ‘contractor’s method’ could be applied.

112 Furthermore, it should be noted that the IWFA’s initial premiss, that the NAV of fossil fuel electricity generation facilities is systematically valued in accordance with the ‘contractor’s method’, whereas the NAV of wind farms is valued following the ‘revenues and expenditure’ method, is incorrect. As is apparent in particular from recital 67 of the contested decision, the Irish authorities confirmed, without being contradicted by the applicants, that the ‘receipts and expenditure method’ had also been applied to fossil fuel electricity generation facilities in certain counties in Ireland, in accordance with the availability and reliability of certain financial information. In that respect, the Irish authorities attached to their reply of 14 June 2019 (see paragraph 20 above), inter alia, a table indicating that, on at least three occasions, the ‘receipts and expenditure method’ had been applied to fossil fuel electricity generation facilities.

113 In any event, it is not apparent from any evidence that was available to the Commission when it adopted the contested decision that it would be possible to assert, as the applicants attempt to argue, that the ‘contractor’s method’ would generate a lower NAV than the ‘receipts and expenditure method’ or that the VOI would have made errors when the first of those methods was applied to certain fossil fuel electricity generation facilities, resulting in an underassessment of the VAN and therefore of the rateable value of their property.

114 Second, as regards the argument concerning the need to use a metric to compare the tax paid by different producers of electricity (see paragraph 95 above), it must be borne in mind that it is apparent from recital 73 of the contested decision, and from the analysis carried out in paragraph 103 et seq. above, that the comparison between electricity generating installations in terms of the amount of tax expressed in euros per megawatt of installed production capacity is not relevant, since business rates are not a tax levied on electricity produced, but on an undertaking’s property.

115 Furthermore, if, as the applicants seek to argue, the VOI did indeed envisage an approach whereby the various electricity generating installations could, for the purposes of their valuation, be compared according to their generating capacities, it must be observed, first, that, in any event, such an approach, which the applicants themselves place in the ‘mid-1990s’, largely predates the adoption of the 2001 Law and, second, that there is no evidence to suggest that the VOI has proceeded in this way since 2001. As regards the fact that that approach was approved by the Irish courts, in particular by a judgment of 2013, suffice it to state that it is in no way apparent from the case-law cited by the applicants that the various electricity generating installations should be compared according to their generating capacity, but only that the assessment of the NAV must include information on the rental market, which entails comparisons with other properties on the market. Moreover, contrary to what the applicants maintain, it is in no way apparent from reading the Valuation Tribunal’s decision of 6 February 2018 that the coefficient VAN/MW is the appropriate metric for comparing different electricity generating installations against each other.

116 It follows from the foregoing that the applicants’ arguments alleging that the Commission misunderstood certain fundamental aspects of the IWFA’s complaint and that there was no proper examination of the contested measure must be rejected.

The evidence associated with the alleged failure to examine all the information provided by the IWFA (fourth part of the single plea in law)

117 By the fourth part of the single plea, the applicants claim that it is apparent from the contested decision that the Commission did not examine all of the information provided by the IWFA in the context of its complaint.

118 In particular, recalling that, according to the line of authority beginning with the judgment of 15 November 2018, Tempus Energy and Tempus Energy Technology v Commission (T‑793/14, under appeal, EU:T:2018:790), the Commission is required to carry out its own impartial, objective and thorough examination of an alleged aid measure, the applicants criticise the Commission, first, for not having carried out an impartial and independent analysis of the contested measure and for having relied solely on the information provided by the Irish authorities, both in its assessment of the existence of an advantage and its assessment of the selectivity of that measure, second, for not having carried out a thorough examination of the information at its disposal, in particular information concerning the NAV on the basis of generating capacity, expressed in megawatts, of the various electricity generating installations and, third, for having considered that it was for the IWFA to provide an assessment of the amount of the alleged aid.

119 The Commission disputes the applicants’ arguments.

120 In the present case, it should be observed that the Commission devoted 29 of the 75 recitals of the contested decision to the assessment of the contested measure. In the course of that assessment, the Commission examined and compared the IWFA’s observations, referred to in recitals 22 to 29 of that decision, with those of the Irish authorities, referred to in recitals 30 to 45 of that decision. In that assessment, the Commission set out its own findings and observations on the relevant factors, in particular that it had not been established that the valuation methods applied to fossil fuel electricity generation facilities had conferred on the latter an economic advantage which they would not have received if a different valuation method had been applied.

121 Moreover, the fact that the Commission did not refute the explanations given by the Irish authorities does not mean that it did not properly assess their relevance and accuracy, as is apparent from the analysis carried out from recital 46 onwards of the contested decision.

122 As regards the argument criticising the Commission for not having carried out an in-depth examination of the factors relating to the coefficient VAN/MW of the various electricity generating installations, it is sufficient to state, in order to reject that argument, that the Commission was right to take the view, in recital 73 of the contested decision, as is apparent from the analysis carried out in paragraph 103 et seq. above, that the proposed comparison between electricity generating installations in terms of the amount of tax expressed in euros per megawatt of installed generating capacity was not relevant, since business rates are not a tax levied on electricity produced, but on an undertaking’s property.

123 Finally, as regards the argument that it was not for the IWFA to quantify precisely the aid granted to competitors, suffice it to note, in order to reject that argument, that, contrary to what the applicants claim, the Commission did not require the IWFA to provide an assessment of the amount of the alleged aid in the contested decision. In that regard, it is apparent from recital 21 of the contested decision that the Commission merely observed that the IWFA had not proposed any quantification of the contested measure, while highlighting, first, that the revaluation exercise had not yet been completed and, second, that certain valuations could be amended following a decision of the Valuation Tribunal.

124 It follows from the foregoing that none of the alleged evidence concerning the matters related to the contested decision put forward by the applicants, taken in isolation or with others, is such as to establish that the Commission was faced with serious difficulties in its assessment of the contested measure and that it was therefore required to initiate the formal investigation procedure provided for in Article 108(2) TFEU. Nor is all of the alleged evidence relating to the duration of the preliminary examination phase capable of supporting that claim.

125 In the light of all the foregoing considerations, it must be held that the applicants have not demonstrated the existence of doubts such as to justify the initiation of the formal investigation procedure. Accordingly, the single plea in law must be rejected and the action dismissed.

Costs

126 Under Article 134(1) 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.

127 Furthermore, under Article 135(2) of the Rules of Procedure, the Court may order a party, even if successful, to pay some or all of the costs, if this appears justified by the conduct of that party, including before the proceedings were brought, especially if that party has made the opposite party incur costs which the Court holds to be unreasonable or vexatious.

128 In the present case, the Commission has been successful and that result should, in principle, lead the Court to order the applicants to pay the costs, in accordance with the form of order sought by the Commission.

129 However, the Court considers, in particular because of the delay in processing the IWFA’s letter of 4 August 2016 (see paragraph 11 above), that the Commission contributed to lengthening the duration of the preliminary examination phase, so that it could, by its conduct, have given the impression that it was experiencing certain difficulties with the examination of the contested measure, thereby contributing to the decision to bring the present action.

130 In those circumstances, the Court considers it fair in the circumstances of the case to order each party to bear its own costs.

On those grounds,

THE GENERAL COURT (First Chamber)

hereby:

1. Dismisses the action;

2. Orders each party to bear its own costs.