ORDER OF THE GENERAL COURT (Second Chamber)
21 March 2014 (*)
(State aid – Spirit and spirit-based beverages – Cancellation of a tax debt in a collective bankruptcy procedure – Decision declaring the aid incompatible with the internal market and ordering its recovery – No longer any legal interest in bringing proceedings – Decision repealing and replacing the contested decision – No need to adjudicate)
In Case T‑11/07 RENV,
Frucona Košice a.s., established in Košice (Slovakia), represented by K. Lasok QC, J. Holmes and B. Hartnett, Barristers, and O. Geiss, lawyer,
applicant,
v
European Commission, represented by L. Armati and K. Walkerová, acting as Agents,
defendant,
supported by
St. Nicolaus – trade a.s., established in Bratislava (Slovakia), represented by N. Smaho, lawyer,
intervener,
APPLICATION for annulment of Commission Decision 2007/254/EC of 7 June 2006 on State aid C 25/05 (ex NN 21/05) implemented by the Slovak Republic for Frucona Košice a.s. (OJ 2007 L 112, p. 14),
THE GENERAL COURT (Second Chamber),
composed of M.E. Martins Ribeiro, President, S. Gervasoni and L. Madise (Rapporteur), Judges,
Registrar: E. Coulon,
makes the following
Order
Background to the dispute
1 The applicant, Frucona Košice a.s., is a company incorporated under Slovak law which was active, inter alia, in the production of spirit and spirit-based beverages.
2 On 25 February 2004, Frucona Košice, which had benefited, in the past, from several deferrals of payment of its tax debt, was unable to pay the excise duties for which it was liable in respect of January 2004.
3 Frucona Košice also found itself in a position of indebtedness within the terms of zákon č. 328/1991 Zb. o konkurze a vyrovnaní (Slovak Law No 328/1991 on bankruptcy and arrangement with creditors).
4 On 8 March 2004, Frucona Košice filed an application for the initiation of an arrangement procedure before the Krajský súd v Košiciach (Košice Regional Court, Slovakia), proposing to pay each of its creditors 35% of the sum owed to them (‘the proposed arrangement’). The total debt of Frucona Košice amounted to approximately 644.6 million Slovak koruna (SKK), approximately SKK 640.8 million of which was a tax debt.
5 By decision of 29 April 2004, the Krajský súd v Košiciach authorised the initiation of the arrangement procedure and, inter alia, reproduced the proposed arrangement.
6 On 9 July 2004, Frucona Košice’s creditors, including the local tax office, accepted the proposed arrangement during an arrangement hearing.
7 By decision of 14 July 2004, the Krajský súd v Košiciach confirmed the arrangement and noted, inter alia, that it provided that 35% of the claim of the Slovak tax authorities was to be repaid, that is to say, an anticipated payment of approximately SKK 224.3 million.
8 On 17 December 2004, Frucona Košice, inter alia, paid to the local tax office a sum of SKK 224.3 million, corresponding to 35% of its total debt. By decision of 30 December 2004, the Krajský súd v Košiciach declared the arrangement procedure to be terminated. On 18 August 2006, the Krajský súd v Košiciach reduced the amount to be paid to the local tax office to SKK 224.1 million.
9 On 15 October 2004, a complaint was filed with the Commission of the European Communities concerning alleged unlawful aid in favour of Frucona Košice.
10 By letter of 4 January 2005, the Slovak Republic informed the Commission, following the latter’s request for information, that Frucona Košice may have been granted unlawful aid and asked it to approve that aid as rescue aid to a company in difficulties.
11 After receiving additional information, the Commission, by letter of 5 July 2005, notified the Slovak Republic of its decision to initiate the formal investigation procedure provided for in Article 88(2) EC with regard to the measure in question. That decision was published in the Official Journal of the European Union (OJ 2005 C 233, p. 47).
12 On 7 June 2006, the Commission adopted Decision 2007/254/EC on State aid C 25/05 (ex NN 21/05) implemented by the Slovak Republic for Frucona Košice (OJ 2007 L 112, p. 14, ‘the contested decision’), the operative part of which provides, in Article 1, that the State aid which the Slovak Republic implemented for Frucona Košice, amounting to SKK 416 515 990, is incompatible with the common market, and orders, in Article 2, the recovery of that aid.
Procedure and forms of order sought
13 By application lodged at the Registry of the Court of First Instance (now ‘the General Court’) on 12 January 2007, Frucona Košice brought an action for annulment of the contested decision. The action was registered as Case T‑11/07.
14 By document lodged at the Registry of the General Court on 8 June 2007, the company St. Nicolaus – trade a.s. sought leave to intervene in the proceedings in support of the Commission. That application was granted by order of the President of the Second Chamber of the General Court of 11 October 2007.
15 By judgment of 7 December 2010 in Case T‑11/07 Frucona Košice v Commission [2010] ECR II‑5453, the General Court dismissed the applicant’s action as unfounded.
16 On appeal by the applicant under Article 56 of the Statute of the Court of Justice of the European Union, the Court of Justice, by judgment of 24 January 2013 in Case C‑73/11 P Frucona Košice v Commission [2013] ECR, set aside the judgment of 7 December 2010 in Frucona Košice v Commission, cited in paragraph 15 above, and held, in the context of its assessment of the substance of the dispute at first instance, that, by failing to take into account in its assessment of the private creditor test the duration of the bankruptcy procedure, the Commission had committed a manifest error of assessment. The Court of Justice added that, on the assumption that that factor had been taken into consideration by the Commission, the latter had not set out sufficient reasons for its decision. The Court of Justice went on to refer the case back to the General Court for it to give judgment on the pleas raised before it on which it had not ruled, and, lastly, reserved the costs.
17 After it was referred back to the General Court, the case was assigned initially to the Fourth Chamber. Subsequently, the composition of the Chambers of the General Court having changed, the Judge-Rapporteur was assigned to the Second Chamber, to which the case was consequently assigned. Lastly, following the replacement of the Judge-Rapporteur initially designated, the case was reassigned to another Judge-Rapporteur, by decision of the President of the General Court.
18 By letter of 7 March 2013, the Commission requested that the General Court stay the proceedings in the present case pursuant to Article 77(d) of the Rules of Procedure of the General Court. In support of that request it informed the General Court that, following the judgment of 24 January 2013 in Frucona Košice v Commission, cited in paragraph 16 above, and the referral back of the case to the General Court, it was intending, in order to take account of the grounds of that judgment, to propose to the Members of the Commission that they withdraw the contested decision and adopt a new decision on the State aid granted to the applicant by the Slovak Republic. The Commission stated that, should the applicant decide to maintain its action against the contested decision, it would be appropriate, in accordance with the principles of the proper administration of justice and procedural economy, for it to be allowed to modify the form of order sought, in the light of any new decision taken.
19 By letter of 21 March 2013, the applicant submitted its observations on the Commission’s request for a stay of the proceedings in the present case. While not objecting to such a stay, it stated its view that a withdrawal of the contested decision would render the present action purposeless and, therefore, that the case should be brought to a close by order and the Commission ordered to pay the costs incurred by the applicant. Further, it submitted that, in those circumstances, the proceedings in the present case could not be continued on the basis – referred to by the Commission in the letter of 7 March 2013 – of the principles of the proper administration of justice and procedural economy. The Commission was bound by the force of res judicata in relation to the question of the bankruptcy procedure and, moreover, in the context of a decision by the Court of Justice to refer the case back to the General Court, the latter was seised of the case only for the purposes of responding to an outstanding question.
20 The intervener did not lodge observations on the application for the proceedings to be stayed in the present case.
21 By letter of 2 April 2013, the applicant, in accordance with the provisions of Article 119(1)(a) of the Rules of Procedure, lodged a statement of written observations on the further steps to be taken in the proceedings, and claims that the Court should grant the form of order sought in the application.
22 By order of the President of the Fourth Chamber of the General Court of 2 May 2013, the proceedings in the present case were stayed for six months.
23 On 16 October 2013, the Commission adopted Decision (2013) 6261 final on State aid SA.18211 (C 25/2005) (ex NN 21/2005) implemented by the Slovak Republic for Frucona Košice (‘the decision of 16 October 2013’). As is evident from paragraph 10 of the decision of 16 October 2013, the Commission wished, by that decision, to withdraw the contested decision and to replace it in order to remedy the defects vitiating the contested decision, as identified by the Court of Justice in its judgment of 24 January 2013 in Frucona Košice v Commission, cited in paragraph 16 above. In accordance with the terms of Article 1 of the decision of 16 October 2013, the contested decision was ‘repealed’. Under Article 2 of the decision of 16 October 2013, the Commission declared the aid granted to the applicant by the Slovak Republic incompatible with the internal market. In Article 3 of that decision, the Commission ordered the recovery of that aid and set out the procedures for its recovery.
24 By letter of 13 November 2013, the applicant informed the General Court that the Slovak Government had sent it a copy of the decision of 16 October 2013. It stated that, under Article 1 of that decision, ‘the [contested decision] in Case T‑11/07 RENV (Decision 2007/254 …) has been repealed’. Accordingly, the applicant claimed that, following the decision of 16 October 2013, Case T‑11/07 RENV had been rendered devoid of purpose, and that therefore the present proceedings should be terminated by an order declaring that there was no need to adjudicate and the Commission ordered to pay the costs incurred by the applicant. It stated that it intended to bring an action for annulment of the decision of 16 October 2013.
25 By letter of 16 December 2013, the Commission lodged a statement of written observations on the further steps to be taken in the proceedings, in accordance with the provisions of Article 119(1)(b) of the Rules of Procedure. It thus contended, first, that, in the light of the principles of the proper administration of justice and procedural economy, the Court should not terminate the present proceedings without first sending the applicant a measure of organisation of procedure pursuant to Article 64 of the Rules of Procedure asking the applicant whether it wished to modify its pleas in law and the form of order sought in the present case in the light of the decision of 16 October 2013, a non-confidential copy of which formed the sole annex to the letter of 16 December 2013, and, secondly, that the action should be declared unfounded and the applicant ordered to pay the costs, or at least each party to bear its own.
26 By letter of 7 January 2014, the Commission submitted observations on the application for an order that there is no need to adjudicate contained in the applicant’s letter of 13 November 2013. It reiterated its contention that, in its view, it would be premature to terminate the proceedings in the present case without first inviting the applicant to indicate whether it wished to modify its pleas in law and the form of order sought in the light of the decision of 16 October 2013 ‘replacing the contested decision’.
27 The intervener did not submit any observations on the application for an order that there is no need to adjudicate.
28 The applicant claims that the Court should:
– terminate the case on the grounds that the action has become devoid of purpose;
– failing that, annul the contested decision;
– order the Commission to pay the costs.
29 The Commission contends that the Court should:
– dismiss the action;
– order the applicant to pay all the costs or the parties to bear their own.
30 At the hearing held on 14 October 2009 in the case resulting in the judgment of 7 December 2010 in Frucona Košice v Commission, cited in paragraph 15 above, the intervener submitted, in essence, in support of the form of order sought by the Commission that the Court should dismiss the action and order the applicant to pay the costs.
31 By application lodged at the Registry of the Court on 17 February 2014, the applicant brought an action for annulment of the decision of 16 October 2013. That action was registered as Case T‑103/14.
Law
Arguments of the parties
32 The applicant observes that the decision of 16 October 2013 repealed and replaced the contested decision. Therefore, it maintains that, since the action for annulment of the contested decision has been rendered devoid of purpose, the Court should terminate the present proceedings by ordering that there is no need to adjudicate.
33 The Commission does not contest the fact that the adoption of the decision of 16 October 2013 may have rendered the present action devoid of purpose in that it repeals and replaces the contested decision. Nevertheless it contends that, in the light of the principles of the proper administration of justice and procedural economy, the Court should first invite the applicant, by means of a measure of organisation of procedure adopted pursuant to Article 64 of the Rules of Procedure, to indicate whether it wishes to modify its pleas in law and the form of order sought in the present case, in the light of the decision of 16 October 2013.
Findings of the Court
34 Pursuant to Article 114(1) of the Rules of Procedure, the Court may, if a party so requests, rule on a preliminary plea without going into the substance of the case. In the present case, having regard to the applicant’s application of 13 November 2013 for an order that there is no need to adjudicate, and the Commission’s observations of 7 January 2014 on that application, the Court considers that it has sufficient information available to it from the documents in the file, and the preliminary issue may therefore be determined without an oral procedure, in accordance with Article 114(3) and (4) of the Rules of Procedure.
35 As regards the applicant’s application for an order that there is no need to adjudicate, it must be noted that it has consistently been held that an applicant’s legal interest in bringing proceedings must, in the light of the purpose of the action, exist at the stage of lodging the action, failing which it will be inadmissible. That objective of the dispute must continue, like the interest in bringing proceedings, until the final decision, failing which there will be no need to adjudicate, which presupposes that the action must be liable, if successful, to procure an advantage to the party bringing it (Case C‑362/05 P Wunenburger v Commission [2007] ECR I‑4333, paragraph 42; see also Case T‑45/06 Reliance Industries v Council and Commission [2008] ECR II‑2399, paragraph 35; and Case T‑299/05 Shanghai Excell M&E Enterprise and Shanghai Adeptech Precision v Council [2009] ECR II‑565, paragraph 43 and the case-law cited).
36 In the present case, first of all, it is common ground between the parties that the decision of 16 October 2013 repealed and replaced the contested decision.
37 Secondly, the Court notes that, in the letter of 13 November 2013, the applicant clearly stated its views on the inference it wished the Court to draw, from a strictly procedural point of view, from the adoption of the decision of 16 October 2013 vis-à-vis the present action and, on that basis, brought a new action for annulment of that decision, as it was entitled to do.
38 Consequently, there is no need to invite the applicant – as the Commission suggests, in particular in the letter of 7 January 2014 – by means of a measure of organisation of procedure, to indicate whether it wishes to modify its pleas in law and the form of order sought in the present case in the light of the decision of 16 October 2013, and the Court finds that the applicant’s original application for annulment of the contested decision has become devoid of purpose.
39 In the light of all the foregoing considerations, there is no need to adjudicate on the present action.
Costs
40 Under Article 121 of the Rules of Procedure, the General Court is to decide on the costs relating to the proceedings instituted before it and to the proceedings on the appeal before the Court of Justice.
41 Under Article 87(6) of the Rules of Procedure, where a case does not proceed to judgment, the costs are to be in the discretion of the General Court.
42 In the present case, it will be recalled that, in points 2 and 3 of the operative part of the judgment of 24 January 2013 in Frucona Košice v Commission, cited in paragraph 16 above, the Court of Justice decided to refer the case back to the General Court and to reserve the costs. It is necessary therefore, in the present case, to decide on the costs incurred both in the proceedings before the General Court and in the proceedings on the appeal before the Court of Justice.
43 On that basis, it must be noted first of all that the fact that the present action has become devoid of purpose and, accordingly, the conclusion drawn in paragraph 39 above that there is no need to adjudicate on this action, flows directly from the Commission’s adoption of the decision of 16 October 2013, by which it repealed and replaced the contested decision.
44 Secondly, in so far as it is not for the General Court to rule on the soundness of the applicant’s decision to make a fresh application for the annulment of the decision of 16 October 2013, instead of modifying the form of order sought and pleas in law in support of the present action in order to take account of the latter decision, account cannot be taken of this circumstance at the stage of the settlement of the costs by the General Court under Article 87(6) of the Rules of Procedure (order in Case T‑36/10 Internationaler Hilfsfonds v Commission [2011] ECR II‑1403, paragraph 54).
45 Thirdly, it is evident from the grounds of the judgment of 24 January 2013 in Frucona Košice v Commission, cited in paragraph 16 above, that the Court of Justice held that the contested decision was vitiated by a manifest error of assessment or at least by an inadequate statement of reasons.
46 Accordingly, in the light of the circumstances of the case, as regards the costs incurred by the parties in the proceedings initiated before the General Court and also in the proceedings on the appeal before the Court of Justice, the Commission must be ordered to bear its own costs and to pay those incurred by the applicant, in accordance with the form of order sought by the applicant, and, moreover, it must be decided that the intervener is to bear its own costs.
On those grounds,
THE GENERAL COURT (Second Chamber)
hereby orders:
1. There is no need to adjudicate on the action.
2. The European Commission shall bear its own costs and pay those incurred by Frucona Košice a.s.
3. St. Nicolaus – trade a.s. shall bear its own costs.
Luxembourg, 21 March 2014.
E. Coulon | | M.E. Martins Ribeiro |