I. Legal background and facts

In view of the deterioration of the economic and financial situation in the steel industry, on 12 April 1994 the Commission adopted, as part of a comprehensive plan for long-term restructuring of the steel industry and substantial reduction of production capacity in the Community, six individual decisions authorizing the grant of aid to accompany the restructuring of certain public undertakings with a view to their privatization. Those decisions authorized the aid which Germany envisaged giving to the steel undertakings EKO Stahl AG and Sächsische Edelstahlwerke GmbH, the aid which Portugal envisaged giving to Siderurgia Nacional, the aid which Spain envisaged giving to the public integrated steel undertaking Corporación de la Siderurgia Integral (CSI) and the aid which Italy envisaged giving to the Ilva steel group.

Those authorizations were made the subject of obligations corresponding to net capacity reductions intended to bring about a lasting improvement in the present imbalance between supply and demand on the Community steel market. The aid thus approved was limited to the amount strictly necessary to restore the viability of the beneficiary undertakings and enable them to be privatized.

Competitors of the publicly owned steel undertakings which received the aid brought an action before the Court of First Instance for annulment of the decisions of 12 April 1994.

II. Findings of the Court

The purpose and scope of the Aid Code and of the contested individual decisions

Although the under the ECSC Treaty State aid is in principle prohibited (Article 4), the Commission is empowered by virtue of the first and second paragraphs of Article 95 of the Treaty to authorize such aid by way of exception where, it is compatible with the objectives of the Treaty, in order to cope with unforeseen situations. Thus, the Commission, by means of a general decision, adopted the "Aid Code" which made an exception to the prohibition of State aid with regard to specified categories of aid. Subsequently, it adopted individual decisions authorizing specific aid not falling within the categories covered by the Aid Code.

The Aid Code and the contested decisions have the same legal basis. The Code constitutes a binding legal framework only for the types of aid enumerated by it. Aid not falling within the categories specifically mentioned in the Code may benefit from an individual derogation from that prohibition if the Commission considers that such aid is necessary for attainment of the objectives of the Treaty.

The Court considered that the decisions at issue authorizing State aid for the restructuring and privatization of large public steel groups in certain Member States in circumstances constituting an exceptional crisis did not fall within the scope of the Aid Code.

Compliance with the conditions laid down for the application of Article 95 of the ECSC Treaty

In this case the contested decisions were intended to rationalize the European steel industry and safeguard continuity of employment in regions where there was under-employment, so as to avoid provoking a fundamental and persistent social and economic crisis. They thus reconciled various objectives of the Treaty with a view to safeguarding important interests and were necessary to attain the objectives which they pursued.

Consequently, the Court of First Instance rejected the applications.

NOTE: an appeal, limited to points of law, may be brought before the Court of Justice of the European Communities within two months following notification of the judgment.

Solely for media use - Unofficial document not binding on the Court of First Instance

For further information, or to obtain a copy of the judgment, please contact Tom Kennedy - Telephone 00352 4303 3355.