The Court of First Instance interprets "the Code of 1993" relating to the ECSC scheme of State aid to the coal industry and in particular the notion of the need to "improve the economic viability" of that sector.
On the basis of the ECSC (European Coal and Steel Community) Treaty, the Commission has, since 1965, adopted legislation allowing the grant of aid to the coal sector. The last measure in that series of legislation is "the Code of 1993". The Code provides that Member States which intend to grant operating aid (for the 1994 to 2002 coal production years) to coal undertakings are required to submit to the Commission in advance "a modernisation, rationalisation and restructuring plan design[ed] to improve the economic viability of the undertakings concerned by reducing production costs" (Article 3). Member States may not put into effect planned aid until it has been approved by the Commission. In the event of refusal, any payment made in anticipation of authorisation from the Commission is to be repaid in full by the undertaking that received it.
In 1994, the Commission approved a modernisation, rationalisation and restructuring plan for the German coal industry. It then authorised the grant by Germany of aid to the coal sector for 1994, 1995 and 1996. By decision of 10 June 1998, the Commission also authorised German aid to the coal industry for 1997 in the amount of DEM 10.4 thousand million. The aid covered by that decision was paid before it was authorised.
RJB Mining, a privately-owned coal-mining company established in the United Kingdom of Great Britain and Northern Ireland, brought an action before the Court of First Instance on 20 July 1998, challenging the legality of that decision and seeking its annulment. Germany, Spain and RAG Aktiengesellschaft were granted leave to intervene in the proceedings in support of the Commission. (RJB Mining also brought an action against Commission decisions authorising the State aid paid from 1994 to 1998 to the Spanish coal industry. Proceedings in that case are currently stayed.)
Initially, the parties restricted the subject-matter of the action to two main points of law in order to speed up the proceedings.
The competence of the Commission to authorise ex post facto aid already paid
RJB Mining submits that the aid to which the decision relates and which was granted by Germany to the recipient undertakings before it was authorised could not be approved ex post facto by the Commission under "the Code of 1993".
The Court of First Instance finds that no provision of the Code prohibits the Commission from examining the compatibility of planned aid with the common market, solely because the Member State which notified that planned aid has already paid it without waiting for prior authorisation. That finding is also based on the case-law developed by the Court of Justice in the sphere of the EC Treaty according to which breach of a Member State's obligation not to pay planned aid without prior authorisation from the Commission cannot relieve the Commission from the duty of examining the compatibility of aid with Community law.
The Commission was therefore entitled to authorise ex post facto aid already paid.
Interpretation of Article 3 of the Code of 1993
RJB Mining submits that the State aid paid in Germany that has been authorised by the Commission frustrates its attempts to gain access to the German market. It has an artificial influence on world market prices, which prevents its production from becoming more competitive both on the United Kingdom market and on the world market. It states that, after restructuring, without receiving any State aid, it has become very competitive and sells at prices close to the world average. However, it is exposed to competition from German undertakings which, as recipients of such aid, can offer prices lower than its own.
RJB Mining contends that, by approving operating aid under Article 3 of the Code without having examined the economic viability of each of the recipient undertakings, the Commission has infringed the ECSC Treaty and committed a manifest error. It is important to distinguish between operating aid (Article 3) and aid intended to allow a cessation of production (Article 4). Only aid intended for undertakings which have a reasonable chance of becoming viable in the foreseeable future, in view of coal prices on the world market, can be authorised as operating aid. RJB Mining concludes from this that Article 3 of the Code precludes operating aid from being granted to undertakings merely because they plan to reduce their production costs. Where there is no prospect of viability, there is no question of approving operating aid; in such a situation the only possible aid is that under Article 4 of the Code, which is subject to the submission of a closure plan (with a deadline for closure before 2002).
The Court of First Instance states at the outset that no provision of "the Code of 1993" requires that the undertaking in receipt of aid achieve, by the end of a fixed period, long-term economic viability enabling it to compete on the world market without support. It requires only that economic viability "improve", without attaching any precise deadlines to that condition. The reason for that formulation is the economic characteristics of the Community coal sector which, since 1965, has received permanent financial support in the form of State aid. Uncompetitiveness remains a problem for the entire Community coal industry in relation to imports from third countries. In 1998, the Commission noted the persistent lack of any medium-to-long-term prospects of economic viability for the vast majority of the coal industry in the Community. Improvement in the economic viability of a given undertaking in this sector tends, therefore, to be in the form of a reduction in the level of its non-profitability and its non-competitiveness. That improvement must be achieved by a significant reduction in production costs which, in itself, makes possible a degression in the operating aid granted. That condition is essential in order to receive further aid of that type.
The Commission was therefore entitled to consider that the undertakings concerned in the German coal industry had satisfied the criterion of improving their economic viability.
As a result, the application was dismissed in so far as it was based on the two pleas.
N.B. : an appeal, on points of law only, may be brought before the Court of Justice of the European Communities against this decision of the Court of First Instance, within two months of its notification.
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