The Court of First Instance confirms the decisions of the Commission: State aid granted (and to be granted) by the Land of Bavaria to the German companies, Neue Maxhütte Stahlwerke and Lech-Stahlwerke between 1993 and 1995 are incompatible with the proper functioning of the common market in the steel sector.
In 1994, the Land of Bavaria decided, in the context of a privatisation programme, to transfer its shares in the German companies Neue Maxhütte Stahlwerke GmbH (45%) and Lech-Stahlwerke GmbH (19.7%). In that connection, the German Government notified to the Commission various financial measures which the Land of Bavaria intended to adopt in favour of those companies in order to facilitate the disposal of its holdings. The Commission concluded, in its decision of 4 April 1995, that the planned financial aid of DM 125.7 million (to cover the accumulated losses of Neue Maxhütte), of DM 56 million (to finance certain investments in Neue Maxhütte) and of DM 20 million (to compensation for the reduction in the value of Lech-Stahlwerke as a result of its holding in Neue Maxhütter) amounted to State aid prohibited under the Treaty establishing the European Coal and Steel Community (ECSC Treaty) and could not therefore be granted.
In two other decisions, of 18 October 1995 and 13 March 1996, the Commission reached the conclusion that the loans granted by the Land of Bavaria to Neue Maxhütte (DM 49,895 million between March 1993 and August 1995 and DM 24,1125 million between July 1994 and March 1995) constituted State aid which Germany had to call on the company in question to repay.
The two companies brought three actions for annulment against the decisions of the Commission before the Court of First Instance of the European Communities.
The ECSC Treaty in principle prohibits generally and unconditionally all State aid to companies in the steel sector. However, the Commission may take in this area the decisions which are necessary for the proper functioning of the common market in coal and steel. In order to respond to the demands of restructuring the steel sector, the Commission set up from the early 80s a Community regime ("Code") authorising State aid to the steel industry in certain exhaustively listed cases. In the view of the Commission, the financial loans granted by the Land of Bavaria did not fall within the exceptions specified by the Code. What is more, neither the companies in question nor the Federal Republic of Germany (which was authorised to intervene in the three cases in support of the two applicants) challenged that view before the Court of First Instance. In its three decisions, the Commission categorised the financial measures concerned as "State aid" which was not authorised under Community law on the basis that a normal private investor acting in a market economy system would not have taken such measures.
The Court of First Instance has dismissed the actions brought by the two German companies which essentially challenged that categorisation by the Commission.
The Court considered that the financial loans provided for in the context of the privatisation of Neue Maxhütte and Lech-Stahlwerke, and the loans granted by the Land of Bavaria, amounted to a transfer of public resources to a steel company. In order to determine whether such a transfer amounted to "State aid" within the meaning of the ECSC Treaty, it considered it relevant to determine whether, in similar circumstances, a private investor of similar size to the entities managing the public sector would have been able to make a capital investment of those dimensions.
The Court noted that since 1995 Neue Maxhütte had been accumulating operating losses resulting, in particular, from excess production capacity and excessively high manufacturing costs. The survival of the company was closely linked to capital investments and to the possibility of not subsequently repaying the loans granted by the Land of Bavaria.
The public investor had made capital investments without any prospect of profitability, even in the long term. The Court held that, in those circumstances, the Commission properly took the view that those investments constituted "State aid".
The Court therefore concluded that the Commission had applied Community law correctly.
N.B.: An appeal on points of law only may be brought against this decision of the Court of First Instance before the Court of Justice of the European Communities within two months from the date on which it is served on the parties. Furthermore, the Federal Republic of Germany brought actions for annulment against the three decisions of the Commission before the Court of Justice, which has sole jurisdiction to hear actions brought by a Member State. The Court of Justice stayed proceedings in all three cases until judgment had been delivered by the Court of First Instance in Cases T-129/95, T-2/96 and T-97/96.
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