JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber,Extended Composition)

19 June 1997(1)

(Air transport — Continuation of an exclusive concession on domestic routes —Regulation (EEC) No 2408/92 — Articles 5 and 8 — Rights of the defence — Audialteram partem — Principle of good faith — Principle of proportionality — Article90(2) of the EC Treaty)

In Case T-260/94,

Air Inter SA, a company incorporated under French law, having its registered officein Paray Vieille Poste, France, represented by Jean-Pierre Spitzer, of the Paris Bar,with an address for service in Luxembourg at the Chambers of Aloyse May, 31Grand-Rue,

applicant,

v

Commission of the European Communities, represented by Rolf Wägenbaur,Principal Legal Adviser, and Lucio Gussetti, of its Legal Service, acting as Agents,with an address for service in Luxembourg at the office of Carlos Gómez de laCruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

supported by

TAT European Airlines,represented by Antoine Winckler, of the Paris Bar, andRomano Subiotto, Solicitor, with an address for service in Luxembourg at theChambers of Elvinger and Hoss, 2, Place Winston Churchill,

and

United Kingdom of Great Britain and Northern Ireland,represented by John E.Collins, of the Treasury Solicitor's Department, acting as Agent, and RichardPlender QC, with an address for service in Luxembourg at the United KingdomEmbassy, 14 Boulevard Roosevelt,

interveners,

APPLICATION for annulment of Article 1 of Commission Decision 94/291/EC of27 April 1994 on a procedure relating to the application of Council Regulation(EEC) No 2408/92 (Case VII/AMA/IV/93 — TAT — Paris (Orly)-Marseille and Paris(Orly)-Toulouse) (OJ 1994 L 127, p. 32),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Second Chamber, ExtendedComposition),

composed of: C.W. Bellamy, President, C.P. Briët and A. Kalogeropoulos, Judges,

Registrar: J. Palacio Gonzáles, Administrator,

having regard to the written procedure and further to the hearing on 13 November1996,

gives the following

Judgment

The legal background

1. With a view to the gradual establishment of the internal market for air transport,the Community legislature adopted three sets of measures in 1987, 1990 and 1992which were known as 'packages‘ on account of the fact that they consisted ofseveral documents. The third 'package‘, adopted on 23 July 1992, consists of fiveregulations which aim to ensure the freedom to provide air transport services andthe application of the Community competition rules in that sector.
   
   
2. One of those five regulations is Council Regulation (EEC) No 2408/92 of 23 July1992 on access for Community air carriers to intra-Community air routes (OJ L240, p. 8, hereinafter 'Regulation No 2408/92‘ or 'the Regulation‘), which enteredinto force on 1 January 1993 pursuant to Article 16 thereof.
   
   
3. Article 3(1) sets out the principle that 'subject to this Regulation, Community aircarriers shall be permitted by the Member State(s) concerned to exercise trafficrights on routes within the Community‘.
   
   
4. Article 5 provides as follows:
   
   'On domestic routes for which at the time of entry into force of this Regulation anexclusive concession has been granted by law or contract, and where other formsof transport cannot ensure an adequate and uninterrupted service, such aconcession may continue until its expiry date or for three years, whichever deadlinecomes first.‘
   
   
5. Article 8 provides as follows:
   
   '1.    This Regulation shall not affect a Member State's right to regulate withoutdiscrimination on grounds of nationality or identity of the air carrier, thedistribution of traffic between the airport within an airport system.
   
   2.    The exercise of traffic rights shall be subject to published Community,national, regional or local operational rules relating to safety, the protection of theenvironment and the allocation of slots.
   
   3.    At the request of a Member State or on its own initiative the Commissionshall examine the application of paragraphs 1 and 2 and, within one month ofreceipt of a request and after consulting the Committee referred to in Article 11,decide whether the Member State may continue to apply the measure. TheCommission shall communicate its decision to the Council and to the MemberStates.
   
   4.    Any Member State may refer the Commission's decision to the Councilwithin a time-limit of one month. The Council, acting by a qualified majority, mayin exceptional circumstances take a different decision within a period of one month.
   
   [...]‘.
   
   
6. Pursuant to Article 2(m) in conjunction with Annex II to the Regulation, the'airport systems‘ referred to in Article 8(1) include, as regards France, 'Paris-Charles de Gaulle/Orly/Le Bourget‘.
   
   
7. Article 11 provides that the Commission is to be assisted by an AdvisoryCommittee composed of the representatives of the Member States and chaired bythe representative of the Commission.
   
   
8. Article 12 lays down that, in carrying out its duties under the Regulation, theCommission may obtain all necessary information from the Member States and aircarriers concerned.
   
   Facts
   
   The administrative procedure
   
   
9. By letter of 21 June 1993 TAT European Airlines ('TAT‘), established at Tours,France, applied to the Directorate-General for Civil Aviation in the FrenchMinistry of Transport for a licence to operate on the Paris (Orly)-Toulouse andParis (Orly)-Marseille routes, referring, in its application, to the Regulation.
   
   
10. By letter of 21 July 1993 the Director-General of Civil Aviation rejected thatapplication, basing his rejection on Article 5 of the Regulation. In his letter heindicated to TAT that under that provision the French authorities could maintainthe exclusivity which they had granted to Air Inter by an agreement of 5 July 1985signed by the French State and that company (hereinafter 'the 1985 Agreement‘). At that time, Air France, in which the French State had a shareholding in excessof 99%, held more than 70% of the share capital of Air Inter.
    
    
11. On 28 September 1993 TAT lodged a complaint with the Commission claiming thatthere had been an infringement of Articles 3(f), 86 and 90 of the EC Treaty anda failure to comply with an agreement concluded on 30 October 1990 between theCommission, the French Government and Air France (hereinafter 'the 1990Agreement‘) aimed at opening up, inter alia, the Paris-Toulouse and Paris-Marseille routes to competition. In the alternative, TAT claimed that there hadbeen an infringement of the Regulation. It submitted that the monopoly of the AirFrance group on the Paris (Orly)-Marseille and Paris (Orly)-Toulouse routes shouldhave come to an end on 1 March 1992, as provided for in the 1990 Agreement. Nor was Article 5 of the Regulation applicable, since Air Inter had not enjoyedexclusivity on those two routes, as TAT provided a service from Roissy-Charles deGaulle airport (hereinafter 'CDG‘) on those same routes. Finally, thediscrimination against TAT was incompatible with Article 8(1) of the Regulation.
    
    
12. By letter dated 13 October 1993 to the Director-General of the Commission'sDirectorate-General for Transport (hereinafter 'DG VII‘), TAT supplemented itssubmissions on Articles 5 and 8(1) of the Regulation and requested theCommission to adopt a decision on the basis of Article 8(3) of the Regulation.
    
    
13. By letter of 20 October 1993 the Commission's Directorate-General forCompetition (hereinafter 'DG IV‘) sent a copy of TAT's complaint to the Frenchauthorities and to the Air France group asking for their comments, if any. Thesupplement to the complaint lodged by TAT was not annexed to that letter.
    
    
14. By letter of 22 October 1993 the Director-General of DG VII also notified theFrench authorities of TAT's complaint, but did not send a copy of it to them. Healso informed them that, at first sight, he considered TAT's submissions to be wellfounded.
    
    
15. Neither the complaint nor the supplement to the complaint was sent by theCommission to Air Inter.
    
    
16. In a letter dated 21 December 1993 — addressed to the Secretary-General of theCommission with copies to DG IV and DG VII — the French authorities sent theirobservations on TAT's complaint. They submitted that Article 5 of the Regulationwas applicable, since, with the exception of the Nice service, the opening up ofcompetition provided for by the 1990 Agreement concerned only routes to or fromCDG, so that Air Inter had retained exclusivity for the routes to or from OrlyAirport. Its reply did not mention Article 8 of the Regulation.
    
    
17. By letter of 21 January 1994 the Director-General of DG VII notified the Frenchauthorities of the lodging by TAT of a supplement to the complaint and pointedout that Article 8(3) of the Regulation empowered the Commission to adopt adecision.
    
    
18. On 16 February 1994, in reply to that letter, the French authorities sent to theCommission a letter summarizing their position.
    
    
19. After that exchange of correspondence, the Advisory Committee provided for inArticle 11 of the Regulation met on 28 February 1994. During that meeting thedelegations of the Member States were able to give their views on the draftdecision based on Article 8(3) of the Regulation, which had been sent to them bythe Commission on 10 February 1994.
    
    
20. The Advisory Committee's opinion was in the following terms:
    
    'The majority of the members present are of the following opinion: from theinformation available to the Committee, it appears that the misapplication ofArticle 5 by France has led to discrimination. A majority of the members is,however, against a decision adopted on the basis of Article 8 of the Regulation‘.
    
    
21. On 4 March 1994 a delegation headed by the Head of Cabinet of theCommissioner responsible for transport received a delegation from Air Inter inorder to discuss the possible implications of a Commission decision, in the light ofthe position adopted, for the future of Air Inter on the Community market. Afterthe meeting Air Inter sent a letter, signed by the Deputy Managing Director, dated7 March 1994, setting out 'Air Inter's situation as the Commission is about to takedecisions in the TAT cases‘. Lastly, by letter of 15 March 1994 addressed to thePresident of the Commission, Air Inter's board of directors expressed its concernregarding the future of Air Inter in view of the liberalization of domestic airtransport and, in particular, of the introduction of competition on the mostprofitable routes in the French network.
    
    
22. On 17 March 1994 the French Government sent a new letter to the Commission,drawing attention to the French delegation's observations at the meeting of theAdvisory Committee regarding in particular, Articles 5 and 8 of the Regulation,Article 90 of the EC Treaty, and the 1985 Agreement and the 1990 Agreement.
    
    
23. At the request of the French Government, the Director of Legal Affairs at theMinistry of Foreign Affairs met the Director-General of the Commission's LegalService on 30 March 1994 in order to discuss TAT's complaint.
    
    
24. On 12 April 1994 the Commissioner responsible for transport met the FrenchPrime Minister in order to discuss the various questions concerning French airtransport and, in particular, the allocation of traffic within the Paris Airport system.
    
    The contested decision
    
    
25. On 27 April 1994 the Commission adopted Decision 94/291/EC on a procedurerelating to the application of Council Regulation (EEC) No 2408/92 (CaseVII/AMA/IV/93 — TAT — Paris (Orly)-Marseille and Paris (Orly)-Toulouse) (OJ1994 L 127, p. 32, hereinafter 'Decision 94/291‘ or 'the contested decision‘),whose operative part is in the following terms:
    
    'Article 1France may not continue to refuse Community air carriers traffic rights on the Paris(Orly)-Marseille and Paris (Orly)-Toulouse routes on the grounds that the Frenchauthorities were applying Article 5 of Regulation (EEC) No 2408/92 on theseroutes.
    
    Article 2This Decision is addressed to the French Republic. (...)
    
    Article 3France is required to give effect to this Decision by 27 October 1994 at the latest.‘
    
    
26. In the statement of reasons for the contested decision the Commission states, firstof all, that it holds powers for the allocation of traffic between airports within anairport system which are conferred on it by Article 8(3) of the Regulation. As faras the complaint lodged by TAT is concerned, it considers it necessary to use thosepowers. The measure by which the French authorities refuse to allow Communitycarriers, and more particularly TAT, to exercise traffic rights on the Paris (Orly)-Marseille and Paris (Orly)-Toulouse routes is discriminatory, to the advantage ofAir Inter alone, in the allocation of traffic between the airports within the Parisairport system.
    
    
27. The Commission then states that the maintenance of Air Inter's exclusiveconcession constitutes a misapplication by the French authorities of Article 5 of theRegulation. That article aims to ensure adequate and uninterrupted transportservices between two points (cities or regions) within the same Member State. Exclusive rights may be maintained only where there is no other way of travellingfrom one city to another, adequately and uninterruptedly, by train or bus or, in thecase of indirect flights or where an alternative airport is available, by plane. Consequently, exclusive rights to a route terminating in an airport system wouldserve their purpose only if they apply to all the airports in that system.
    
    
28. The Commission goes on to observe that the 1985 Agreement itself defines theroutes allocated exclusively to Air Inter as point-to-point rather than airport-to-airport routes and makes no reference whatsoever to the different airports of theParis airport system. In those circumstances, by authorizing TAT to operate on theParis-Marseille and Paris-Toulouse routes to and from CDG with effect from 1March 1992, the French authorities had put an end to the exclusivity enjoyed by AirInter. Furthermore, the Commission considers that upon the entry into force of theRegulation Air Inter did not hold an exclusive concession for the routes in question. As regards the Paris-Marseille route, the 1985 Agreement gave express permissionto the Air Afrique company to operate that same route concurrently with Air Inter. As regards the Paris-Toulouse route (and by extension the Paris-Marseille route),it follows from the 1990 Agreement that Air Inter's exclusivity on that route endedon 1 March 1992 at the latest.
    
    
29. In the alternative, the Commission states that, even if the grant of an exclusiveconcession were theoretically possible for regular air services between Orly airport,on the one hand, and Marseille and Toulouse, on the other, Article 5 cannot beapplied in the present case. There are other forms of transport, besides those airroutes, which could ensure an adequate and uninterrupted service: the existingdirect air services between Paris (CDG) and Marseille and Toulouse respectively.
    
    
30. The Commission states that the effects of the discrimination at issue areconsiderable. Orly airport is the travellers' choice and accounts for between 85%and 90% of French domestic traffic to and from Paris. Moreover, the operationof the Paris-Marseille and Paris-Toulouse routes is more expensive from CDG thanfrom Orly, partly for geographical reasons.
    
    
31. Finally, the Commission accepts that its decision may have major repercussions onthe structure and organization of the routes in questions, which is why it considersit advisable to allow a period for adjustment, expiring on 27 October 1994.
    
    Procedure and forms of order sought
    
    
32. Air Inter brought this action by application lodged at the Registry of the Court ofFirst Instance on 12 July 1994.
    
    
33. By application lodged at the Registry of the Court of Justice on 22 June 1994, theFrench Republic had also brought an action for a declaration that the contesteddecision was void. That action was registered in the Court Registry under CaseC-174/94. By interim order of 26 October 1994 in Case C-174/94 R France vCommission [1994] ECR I-5229 the President of the Court of Justice dismissed theFrench Republic's application for the suspension of operation of the contesteddecision.
    
    
34. By order of 28 October 1994 the Court of First Instance declined jurisdiction in thepresent case, Case T-260/94, pursuant to the second sentence of the thirdparagraph of Article 47 of the EC Statute of the Court of Justice, in order that theCourt of Justice could rule on the application for annulment, which was also soughtin the action brought by the French Republic in Case C-174/94. The orderdeclining jurisdiction was registered in the Registry of the Court of Justice underNo C-301/94.
    
    
35. By orders of 19 January and 8 February 1995 the President of the Court of Justicegave the United Kingdom and TAT leave to intervene in support of the form oforder sought by the Commission in Case C-301/94. Certain confidential documentswere notified to the intervening parties in a non-confidential version produced bythe principal parties.
    
    
36. The Court of Justice decided to open the oral procedure in Case C-301/94 withoutany preparatory inquiry. A report for the hearing was sent to the parties.
    
    
37. Thereafter the French Republic formed the view that it no longer had an interestin annulment of the contested decision and withdrew its action in Case C-174/
    
    
38. Case C-174/94 was therefore removed from the Register of the Court of Justice byorder of 19 March 1996. By order of the Court of Justice of 14 May 1996, CaseC-301/94 was referred back to the Court of First Instance; the costs were reserved.
    
    
39. The proceedings in the present case, T-260/94, were then recommenced before theCourt of First Instance, which ordered certain measures of organization ofprocedure. The oral procedure took place essentially on the basis of the Reportfor the Hearing in Case C-301/94 which had already been distributed.
    
    
40. The parties submitted oral argument and replied to the Court's questions at thehearing on 13 November 1996 before the Court, composed of C.W. Bellamy,President, H. Kirschner, C.P. Briët, A. Kalogeropoulos and A. Potocki, judges.
    
    
41. Following the death of Judge Kirschner on 6 February 1997, the three judges whosesignatures appear below deliberated on the present judgment in accordance withArticle 32(1) of the Rules of Procedure.
    
    
42. The applicant claims that the Court should:
    
    
    • annul Article 1 of Decision 94/291;
      
      
    • order the Commission to pay the costs.

    
    
    

43. The Commission contends that the Court should:
    
    
    • dismiss the application as unfounded;
      
      
    • order the applicant to pay the costs.

    
    
    

44. TAT contends that the Court should:
    
    
    • dismiss the application as unfounded;
      
      
    • order the applicant to pay the costs, including those incurred by TAT.

    
    
    

45. The United Kingdom contends that the Court should:
    
    
    • dismiss the application;
      
      
    • order the applicant to pay the costs, including those incurred by the UnitedKingdom.

    Substance
    
    

46. In support of its application, the applicant relies on a number of pleas contestingboth the formal and the substantive legality of the contested decision. As regardsits formal legality, the applicant complains, principally, that the Commissioninfringed its rights of defence and, in the alternative, that it infringed the audialteram partem principle and the principle of good faith as against the FrenchRepublic. As regards it substantive legality, the applicant complains, principally,that the Commission abused the procedure provided for in Article 8(3) of theRegulation and, in the alternative, that it infringed Article 5 thereof. Again in thealternative, it alleges infringement of Article 90(2) of the Treaty and infringementof the principle of proportionality. Finally, and in the further alternative, it claimsthat the refusal by the French authorities to allow TAT access to the two routes inquestion does not discriminate against that company, since the applicant'sexclusivity on those routes was justified by Article 5 of the Regulation.
    
    The plea of infringement of the applicant's rights of defence
    
    Arguments of the parties
    
    
47. The applicant observes that it is settled law that observance of the rights of thedefence constitutes a fundamental principle of Community law which must beobserved even in the context of an administrative procedure. Consequently, aperson who may be affected by a Commission decision should be placed in aposition in which he may make known his views before the decision is adopted.
    
    
48. The applicant states that, in the present case, although it is the only operatorconcerned by the contested decision, the Commission never formally invited it toappear before it, never sent any documents to it and did not invite it to submitobservations on the matter. The applicant therefore considers that it was not ableto make its view known. It is thus in a similar situation to that of the NetherlandsPTT undertakings examined by the Court of Justice in its judgment in Joined CasesC-48/90 and C-66/90 Netherlands and Others v Commission [1992] ECR I-565. Italso refers to the judgment in Case C-135/92 Fiskano v Commission [1994] ECR I-2885.
    
    
49. Inasmuch as the Commission claims to have given a formal hearing to the applicanton 4 March 1994, the applicant states that that meeting took place at its ownrequest and four months after the Commission had already adopted a position. Furthermore, the purpose of the meeting was purely economic, as was also theapplicant's letter of 7 March 1994. Finally, the letter from the applicant's directorsof 15 March 1994 merely expressed their concerns.
    
    
50. The applicant contests the Commission's argument that the contested decision, farfrom concerning the applicant's specific situation, is of a general nature in that itconcerns the French Government's policy on airports. The national measure inquestion was the French authorities' refusal to grant the traffic rights in questionto TAT, a refusal which directly benefited the applicant. Moreover, the applicantis explicitly concerned by the contested decision, which concerns the legality of theexclusivity granted to the applicant on the routes at issue. Finally, it is wholly anddirectly affected by the consequences of the contested decision.
    
    
51. The applicant observes that Article 8(3) of the Regulation must be interpreted asrequiring the Commission not only to place the Member State concerned in aposition to defend its interests, but also any other party directly concerned, such asthe applicant. Consequently, even in the absence of specific provisions, theCommission was required to make procedural arrangements on its own initiativein such a way as to ensure effective protection. The general principle of protectionof the rights of the defence is applicable where specific rules exist and a fortioriwhere there are no such rules.
    
    
52. If the Court interprets Article 8(3) as authorizing a derogation from the principleof the observance of the rights of the defence of any interested party, the applicantconsiders that the Court should then examine the validity of that provision. AnyCommunity regulation authorizing a derogation from a fundamental principle ofCommunity law is ipso iure in breach of Community law. Consequently, the Courtcould not but declare Article 8(3) void.
    
    
53. Finally, the applicant considers it to be absurd to claim, in this context, that it wassufficient to consult the representatives of the Member States sitting in theAdvisory Committee. That committee's role was not to represent the interests ofprivate undertakings, but to assist the Commission and to inform it of the MemberStates' positions.
    
    
54. The Commission states that the Regulation does not provide for a procedureallowing the undertakings concerned to be involved. Thus, the procedure underArticle 8(3) of the Regulation adopts the broad outline of the procedure underArticle 169 of the Treaty, which does not provide for any obligation to consulteither. The Commission observes, moreover, that under a procedure initiated atthe request of a Member State under Article 8(3) of the Regulation it must takea decision within a period of one month. If there is a large number of airlinesbenefitting from a discriminatory measure, it is practically impossible to complywith that time-limit.
    
    
55. The Commission disputes that the judgments in Netherlands and Others vCommission and Fiskano v Commission are relevant in this case. It argues inparticular that the contested decision concerns the allocation of air routes withinthe Paris airport system and that the applicant suffers the economic effects of thedecision only indirectly and partially. The fact that the French authorities haveclaimed that the applicant enjoys an exclusive concession under Article 5 of theRegulation does not preclude the substantive question from being the questionwhether the general measures adopted by the French Republic might discriminatein the distribution of traffic in the Paris airport system and so affect the rights ofall Community companies. Misuse of that provision could not suffice on its ownto impose an obligation to consult the applicant.
    
    
56. The Commission claims that, in any event, the applicant was given a formal hearingon 4 March 1994 and it made known its point of view, in particular in the letter of7 March 1994, and it was thus unnecessary for the Commission to hear it again. In its rejoinder (p. 6) it explains that the French authorities kept the applicantcontinuously informed of developments in the matter. That flow of informationwas confirmed by those same authorities in the context of the parallel procedurepending before the Court of Justice. In that regard, the Commission refers to page10 of the reply lodged by the French Republic in Case C-174/94 (see paragraph 33above).
    
    
57. The United Kingdom supports the Commission's line of argument and observesthat the judgment in Netherlands and Others v Commission is irrelevant in this casebecause the procedure at issue, far from being opened against the applicant, tookplace between the Commission and the French Republic alone. Moreover, thatjudgment concerns the application of Article 90(3) of the Treaty, which does notestablish special rules regarding the persons to be consulted and the consultationprocedure, whereas, in the present case, Regulation No 2408/92 lays down specificrules.
    
    Findings of the Court
    
    
58. Article 8(3) of the Regulation does not provide for the direct participation of aircarriers in the administrative procedure leading to the adoption by the Commissionof a decision on the distribution of traffic within an airport system. The legalframework requires the Commission to address only the Member State concernedafter consulting the Advisory Committee, composed of representatives of theMember States. Only generally and at its option 'may‘ the Commission obtaininformation from air carriers in order to carry out its duties (Article 12 of theRegulation). It follows that the Regulation does not in itself confer rights ofdefence on an air carrier faced with a situation such as that in which the applicantwas placed in this case.
    
    
59. In so far as the Commission seeks to justify that silence by claiming that theprocedure under Article 8(3) was modelled on the procedure provided for inArticle 169 of the Treaty, in which only the Commission and the Member Stateconcerned participate, it should be observed that, under Article 169 of the Treaty,the failure of a Member State to fulfil its obligations is established only by thejudgment of the Court of Justice, whereas, under Article 8(3) of the Regulation, itis the Commission's decision which imposes the distribution of traffic which theCommission wishes to see. The procedure under Article 169 is therefore essentiallya judicial procedure, whereas the procedure under Article 8(3) is a whollyadministrative procedure. Consequently, the two procedures display substantivedifferences, so that the Commission's argument based on reference to Article 169of the Treaty cannot be accepted.
    
    
60. As regards the procedure initiated under Article 8(3) of the Regulation, which ledto the adoption of the contested decision, it is settled law that respect for the rightsof the defence, in all proceedings which are initiated against a person and whichare liable to culminate in a measure adversely affecting that person, is afundamental principle of Community law which must be guaranteed even in theabsence of any specific rules (see, for example, the judgment in Netherlands andOthers v Commission, paragraph 44). That principle requires that the personconcerned must be placed in a position in which he can effectively make known hisview of the matters on the basis of which the Commission adopted its measure(judgment in Fiskano v Commission, paragraph 40).
    
    
61. In so far as the Commission claims that the judgment in Netherlands and Others vCommission — given in the context of Article 90(3) of the Treaty — is irrelevant tothe present case because the procedure at issue is laid down by specific rulesexcluding the participation of the air carriers who may be affected, it must beobserved that the application of the fundamental principle of the rights of thedefence cannot be excluded or restricted by any legislative provision. Respect forthat principle must therefore be ensured both where there is no specific legislationand also where legislation exists which does not itself take account of that principle(see, to that effect, the judgment in Case C-32/95 P Commission v Lisrestal andOthers [1996] ECR I-5373, paragraph 30). It follows that the Commission'sargument based on the absence of a specific provision in the legislation in questionmust be rejected.
    
    
62. As to the United Kingdom Government's argument that the procedure at issue inthis case was not 'opened against‘ the applicant, it should be observed that,although the procedure in question was not formally commenced against theapplicant as an individual economic operator, that was also not the case in thesituation with which the judgment in Netherlands and Others v Commission wasconcerned, in which, in a procedure initiated under Article 90(3) of the Treaty, theCommission formally addressed only the Kingdom of the Netherlands and not theNetherlands PTT companies. That finding did not, however, prevent the Court ofJustice from conferring rights of defence on those companies on the ground thatthey were the direct beneficiaries of the State measure at issue and that they wereexpressly named in the Netherlands law that had been declared unlawful, that theywere expressly named in the decision at issue and that the economic consequencesof that decision directly affected them (paragraphs 50 and 51 of that judgment).
    
    
63. It is therefore necessary to examine whether the reasoning adopted in the judgmentin Netherlands and Others v Commission, conferring rights of defence in the contextof Article 90(3) of the Treaty, may be transposed to the present case. First of all,the applicant was the direct beneficiary of the State measure at issue, namely thecontinuation, to its advantage, of a privileged position on the two routes inquestion, it not being necessary, at this stage, to ascertain whether it could in facthave claimed legal exclusivity. The applicant's economic position was thereforegoing to be affected by the contested decision, which ordered the Frenchauthorities to open up those two routes to competition by other Community aircarriers. Thus, the applicant was going to bear the economic consequences of thecontested decision directly. Second, the applicant was expressly named in thenational instrument on which it relied for its exclusive traffic rights, namely the1985 Agreement, it not being necessary here to examine the legal effect of thatagreement. Finally, the contested decision repeatedly expressly mentions theapplicant. Consequently, the conditions laid down by the judgment in Netherlandsand Others v Commission are satisfied in this case.
    
    
64. Consequently, the applicant had rights of defence which should have been observedin the procedure culminating in the adoption of the contested decision and it isunnecessary to consider the general question, raised by the Commission, whetherrights of defence exist also in a situation where a procedure initiated under Article8(3) of the Regulation, which has to be completed within a period of one month,would affect an indeterminate number of air carriers.
    
    
65. As regards the question whether the applicant's rights of defence were observedin the present case, the Court of First Instance held in Case T-450/93 Lisrestal andOthers v Commission [1994] ECR II-1177, which concerned the reduction infinancial assistance which the European Social Fund had initially granted to thebeneficiary undertakings in the course of a procedure in which the nationalauthority had been the sole interlocutor of the Fund, that the applicantundertakings had a right to be heard and it pointed out that that right had not beenupheld in dealings between the Commission and the beneficiaries or in thosebetween the national authority and the beneficiaries (paragraphs 49 and 50 of thejudgment).
    
    
66. In the present case it is therefore necessary to examine whether the applicant'srights of defence have been observed in a tangible way, either directly in itsdealings with the Commission or indirectly through the French authorities, orthrough the combination of those two administrative channels.
    
    
67. It was the applicant itself which approached the Commission by sending the letterof 7 March 1994, after having been granted a meeting by the Commission on 4March 1994. In that letter it explained its business situation, in particular withregard to the air services it supplied and its contractual relationship with theFrench State, which had entrusted it with public service tasks. It pointed to itsdifficult financial situation resulting from increased competition from both airlinesand railways. In short, it was particularly opposed to an abrupt and hasty openingof the main air routes which it served from and to Orly airport.
    
    
68. Although, as it has stated before the Court, the applicant only made 'purelyeconomic‘ points on that occasion, nothing prevented it from also submitting legalarguments. The reason for which it refrained from doing so can be explained onlyby the fact that it took the view that the Commission was adequately informed fromthe legal point of view.
    
    
69. The Commission — referring to the French authorities' statements (see paragraph55 above) — has indicated, without contradiction in that regard by the applicant,that the applicant had been kept informed by those authorities of the course of theprocedure. It must therefore be concluded from this that the applicant was at leastaware of the observations submitted by the French authorities to the Commission.
    
    
70. Those observations, in particular those set out in the letters of 21 December 1993and 17 March 1994, concerned in particular the requirements imposed on theapplicant by the 1985 Agreement, the imperilment of the applicant's operation ofthe French domestic air network and of the internal cross-subsidy system if theOrly-Toulouse and Orly-Marseille routes were opened up to competition, theeffects of the 1990 Agreement, which, in the French authorities' opinion, concernedonly multi-designation from CDG, and the alleged waiver of the applicant'sexclusivity as a result of the rights granted to Air Afrique in particular. Moreover,the French authorities stated in those letters that the applicant was an undertakingentrusted with a service of general interest within the meaning of Article 90(2) ofthe Treaty, that provision's rank in the hierarchy of norms being above than thatof Regulation No 2408/92, which carried out harmonization within the Community. Finally, they undertook an in-depth interpretation of Article 5 of the Regulation,which, in their opinion, concerned links between two airports and not betweencities and thus permitted the exclusivity granted to the applicant to be maintained.
    
    
71. The observations submitted by the French authorities thus dealt with the essentiallegal aspects of the present case, as they appear in the contested decision. Theyset out in particular the applicant's specific situation. The applicant has neverclaimed during the course of the proceedings before the Court that theobservations submitted in that regard were incomplete or contrary to its interests. If that had been the case, it would certainly not have failed to supplement the legalarguments submitted by the French authorities.
    
    
72. That finding is not rebutted by the claim, submitted by the applicant in connectionwith another plea, according to which the Commission's interpretation of theconcept of an adequate and uninterrupted service within the meaning of Article 5of the Regulation was submitted for the first time before the Court of FirstInstance, which proves that the applicant was not in a position to adopt a positionin that regard during the administrative procedure (see paragraph 101 below). Asis explained below (paragraph 123), the outcome of the present dispute does notdepend on the interpretation of those terms; they are, moreover, taken intoaccount in the decision only as a subsidiary consideration (OJ, p. 36, right-handcolumn, penultimate paragraph). They are not therefore essential legal aspects ofthe present case.
    
    
73. In those circumstances, the applicant's rights of defence were respected. It followsthat the plea of infringement of those rights cannot be accepted.
    
    The pleas of infringement of the principle of audi alteram partem and of good faithas against the French Republic
    
    Arguments of the parties
    
    
74. The applicant claims that the Commission notified the French Government of itsfavourable position in regard to TAT's arguments even before it had heard theFrench Government regarding the arguments set out by TAT in its complaint andsupplementary complaint. That approach proves the Commission's bias in thatregard. That factual situation could not be changed by the subsequent conduct ofthe procedure at the end of which the Commission did place the FrenchGovernment in a position to submit its defence. The Commission had already infact adopted its decision before hearing that government.
    
    
75. The applicant states that in the present case the Commission did not follow theprocedure for cases involving failures to fulfil obligations or cases falling within thescope of Council Regulation No 17 of 6 February 1962, First Regulationimplementing Articles 85 and 86 of the Treaty (OJ, English Special Edition 1959-1962, p. 132), in which it first informs the Member State, the undertakings orassociations of undertakings in question of its objections and requests them toinform it of their position and then adopts its own position after receiving thearguments submitted.
    
    
76. The applicant observes that examination of Article 5 of the Treaty and Article10(2) of Regulation No 17, and also the case-law of the Court of Justice and of theCourt of First Instance (Order of the Court in Case C-2/88 Imm, Zwartveld andOthers [1990] ECR I-3365, judgments in Case T-24/90 Automec v Commission[1992] ECR II-2223 and Case C-183/91 Commission v Greece [1993] ECR I-3131)that there is a duty of cooperation between the Community institutions and theMember States and that this cooperation must be sincere. The Commission mustact in good faith towards the Member States.
    
    
77. In that context, by claiming that the applicant's exclusivity had been terminated bythe French authorities themselves on 1 March 1992 when they opened the twoParis (CDG)-Marseille and Paris (CDG)-Toulouse routes for TAT, the Commissionacted in bad faith. It must have been aware that it was on account of its demandfor such access in 1990 that the two routes in question had been opened. It cannottherefore claim that the French authorities had terminated the exclusivity,particularly since those authorities and the applicant had always firmly wished toapply the 1985 Agreement for its full term. That agreement did not concern routesbut the network of routes as such.
    
    
78. The Commission contends that from the beginning of the procedure the Frenchauthorities had all the information necessary to ensure their defence. It observesthat the procedure under Article 8(3) of the Regulation provides that its decisionmay not be adopted before the Advisory Committee provided for in Article 11 ofthe Regulation has given its opinion. Within that committee, all the MemberStates, and therefore also the Member State concerned, can express their view onthe issues which are the subject-matter of a draft decision that has beencommunicated to them in good time. In the present case, that draft wascommunicated 15 days before the meeting of the committee and contained an exactand complete explanation of the objections which the Commission intended touphold against France and an exact and complete summary of the legal and factualarguments, including those submitted by TAT.
    
    
79. According to the Commission, when it initiates an investigation on its own initiativeunder Article 8(3), no time-limit is imposed on it and its decision is based on theinformation acquired in the course of its examination, without restriction as to thearea of its investigations and the sources of information. It is not therefore boundby the subject-matter of a complaint.
    
    
80. Finally, referring to the wording of the contested decision (OJ, p. 36), it disputesthat it stated that the exclusivity enjoyed by the applicant had been terminated bythe French authorities themselves on 1 March 1992.
    
    Findings of the Court
    
    
81. The applicant has a legitimate interest in claiming an infringement of the principleof audi alteram partem as against the French Republic, in so far as the requestaddressed to that Member State inviting it to submit its observations was anessential procedural requirement within the meaning of Article 173 of the Treaty(see, to that effect, the judgments in Case C-304/89 Oliveira v Commission [1991]ECR I-2283, paragraphs 17 and 21, and in Joined Cases T-432/93, T-433/93 and T-434/93 Socurte and Others v Commission [1995] ECR II-503, paragraph 63).
    
    
82. As to the issue whether the French Republic's rights of defence were observed, thatis to say, whether it was placed in a position effectively to make known its views onthe evidence relied upon by the Commission in adopting the contested decision, itshould be noted that the procedure under Article 8(3) of the Regulation may beinitiated by the Commission either at the request of a Member State or on its owninitiative.
    
    
83. In the present case, the procedure at issue was initiated by the Commission solelyon its own initiative. In the scheme of the provision applied, the initial andsupplementary complaints lodged by TAT were not documents which wereindispensable to the initiation of the procedure but items of evidence which couldhave led the Commission to take the view that there were grounds for it tocommence that procedure on its own initiative.
    
    
84. In those circumstances and in accordance with the principle laid down by thejudgment in Netherlands and Others v Commission (at paragraph 45), theCommission was required to communicate to the French Republic only a full andprecise statement of the reasons for which it had initiated the procedure on its owninitiative. As to TAT's complaints, it could therefore choose to send themunabridged to the French Republic or to include their essential subject-matter inthat statement.
    
    
85. That finding is not inconsistent with the second principle laid down in the judgmentin Netherlands and Others v Commission (at paragraph 46), according to which theMember State in question must be placed in a position in which it may express itsviews 'on the observations submitted by interested third parties‘. The Court didnot exclude, in principle, the possibility of the Commission's summarizing itsobservations and communicating such a summary to the State, provided that it wasexact and complete. In that same judgment (at paragraph 49) it criticized theCommission's procedure only on the general ground that the government inquestion was not given a hearing 'with regard to the consultations which theCommission had had with the ... trade organizations‘ concerned.
    
    
86. In the present case, the Commission informed the French air transport authoritiesby letter of 20 October 1993 of the receipt from TAT of a complaint against theFrench Republic and the Air France group and sent to them a copy of thatcomplaint with a request to submit any comments they might have. Moreover, byletter of 22 October 1993 to the French Government it summarized TAT'scomplaint and gave an initial evaluation of the legal situation, while once morerequesting it to submit any observations. Although, on that latter occasion, theCommission indicated that the arguments put forward by TAT appeared to it 'tobe well founded in the light of the documents then in its possession‘ thatassessment, far from constituting bias against the applicant and the Frenchauthorities, could only be a provisional assessment pending the observations of theFrench authorities. Nothing in the evidence before the Court suggests that thisassessment was not capable of being modified before the adoption of the finaldecision, which in the present case was made six months later.
    
    
87. Second, the Commission informed the French Government by letter of 21 January1994 that TAT had supplemented its initial complaint by basing it also on aninfringement by the French authorities of Article 8(1) of the Regulation. It addedthat TAT was claiming that, by misapplying Article 5 of the Regulation, the Frenchauthorities had in fact discriminated, to the advantage of the applicant, in theallocation of traffic between the airports within the Paris system and that TAT wastherefore asking the Commission to adopt a decision on the basis of Article 8(3). Although it is true that the Commission thus merely gave a summary of thatsupplementary complaint without sending a copy of the complaint to the FrenchGovernment, the applicant does not claim that that summary is wrong orincomplete. In particular, it does not allege that the contested decision containsnew matters clearly taken from the full text of the supplementary complaint, whichhad not been communicated by the Commission in the course of the administrativeprocedure.
    
    
88. Finally, it is not disputed that before the meeting of the Advisory Committee of 28February 1994 a draft decision was sent by the Commission to the Frenchauthorities and that they did not claim that it was wrong or incomplete as regardspresentation of matters of fact and of law. Moreover, several meetings betweenrepresentatives of the Commission and of the French Government took placebefore the contested decision was finally adopted (see paragraphs 13 to 24 above).
    
    
89. In those circumstances, the Commission placed the French Republic in a positionin which it could effectively make known its views on the essential evidence whichit used for the purpose of adopting the contested decision. Moreover, as the Courthas found above (paragraphs 69 and 70), the French Republic did in fact exerciseits rights of defence by commenting on all the essential matters of fact and of lawwhich were relevant for the conduct of the administrative procedure.
    
    
90. Consequently, the plea of infringement of the principle of audi alteram partem asagainst the French Republic must be rejected.
    
    
91. The plea of infringement of the principle of good faith as against the FrenchRepublic will be examined below in the context of the pleas of infringement of therelevant provisions of Regulation No 2408/92 and infringement of Article 90(2) ofthe Treaty.
    
    The pleas of infringement of Regulation No 2408/92
    
    
92. The objections concerning the Commission's application of Regulation No 2408/91should be considered together. This examination will concern the interpretationof Articles 8 and 5 of the Regulation. In that context, it will also deal with thequestion whether the exclusivity reserved for the applicant discriminated to thedisadvantage of other air carriers such as TAT or whether the applicant could — asin its previous plea, claiming in particular infringement of the principle of goodfaith as against the French Republic — rely on the 1985 Agreement and the 1990Agreement in order to justify its exclusivity even under the scheme of theRegulation.
    
    Arguments of the parties
    
    
93. The applicant claims, principally, that the Commission misused the acceleratedprocedure provided for in Article 8(3) of the Regulation in order to put an end,before the period of three years allowed by Article 5 of that regulation, to thecontractual exclusivity which it enjoyed on the Orly-Marseille and Orly-Toulouseroutes under the 1985 Agreement. The question of the existence of exclusiveconcessions is not mentioned or covered by Article 8(1) and (2) of the Regulation. The applicant's situation goes back several decades and is governed by anagreement based on public service requirements aimed at regional developmentand a fair spread of traffic. If the Commission had wished to have the applicant'sexclusivity on its French domestic network brought to an end, it should haveinitiated the procedure under Article 169 of the Treaty.
    
    
94. The applicant claims, in the alternative, that the Commission misinterpreted Article5 of the Regulation. First, the Commission's premise that freedom of air traffic isthe rule and that restrictions to that freedom are the exception should be rejected. Interpretation of Article 5 should not be in terms of principles and exceptions butrather in terms of a common transport policy in which all the different interestsshould be taken into account. The article represents concessions made in theCouncil to those defending general interest tasks.
    
    
95. The applicant concludes from this that Article 5 is manifestly intended to allowsituations legally existing before the entry into force of the Regulation to continuefor a period of three years. Thus, in each Member State which did not wish toexpose its public service to abrupt changes, agreements conferring exclusiveconcessions for air traffic could be continued during that period, which aims to givethe Member States time to establish arrangements ensuring the maintenance of thegeneral interest to an extent compatible with the new Community context and toallow the undertakings concerned a minimum amount of time to make adjustmentsto their operating arrangements.
    
    
96. That interpretation is confirmed by the drafting history of the Regulation. As thelast paragraph of Article 4, the draft provision which was to become Article 5provided for 'transitional arrangements for concessions already existing in regardto public service obligations‘. The Council's intention had therefore been tomaintain such concessions for a period of three years.
    
    
97. In that regard, the applicant states that, by virtue of Article 5, the 1985 Agreementguaranteeing it an exclusive concession could continue until 1 January
    
    
98. Neither of the two parties had terminated that agreement and it had not thereforeexpired. It claims that the fact that that agreement expressly permitted Air Afriqueto operate on the Paris-Marseille route was not of such a nature as to deprive itsconcession of its exclusive character. The departures on the routes operated by AirAfrique were solely from CDG, not from Orly airport. Moreover, the routeoperated by Air Afrique was a mere cabotage route, extended to Africa, whosefrequency was extremely limited (one flight per week).
    
    
99. Nor was the exclusivity enjoyed by the applicant on the two routes in questionended as a result of the fact that TAT operated regularly on the CDG-Toulouseand CDG-Marseille routes. The opening up of those routes constituted anexception imposed by the Commission on the French Government under the 1990Agreement. However, that agreement should be interpreted in the light of theapplicant's exclusive rights. Moreover, the fact that on the occasion of the 1990Agreement the Commission did not require a new agreement to be drawn upconfirms that the correct interpretation is that the applicant retained exclusivityfrom Orly.
    
    
100. The applicant states that its exclusivity concerned a complete network of a numberof routes, since only such a 'network approach‘ allowed the cross-subsidy of tariffsnecessary for the regional development desired by the French State. At thehearing it amplified that argument, pointing out that the establishment of networksis highly typical for France, but difficult to understand for some of its Europeanpartners. The concept of a network is linked to that of public service. Operatorsentrusted with the provision of a public service, such as the applicant, are requiredto provide that service at similar prices throughout France. Since the applicant hadto finance its air transport entirely by itself, without public aid, it needed to cross-subsidize tariffs within the network system. In the context of that cross-subsidy,income from the 'money-spinner‘ routes, such as Paris-Marseille and Paris-Toulouse, were intended to finance the loss-making routes. Such a system ofsubsidies cannot function without a grant of exclusivity on the 'money-spinner‘routes.
     
     
101. A literal interpretation of Article 5 of the Regulation should be guided by theabovementioned considerations. Thus, 'domestic routes‘ are those defined in theexclusive concessions, namely routes forming part of the abovementioned networkand not routes between cities, as the Commission claims. That interpretation is inconformity with the wording of the Regulation, which makes several references toservices between one airport and another. According to the applicant, if Article5 of the Regulation were interpreted as meaning that the word 'route‘ means aroute from city to city, that provision would be devoid of any substance: it wouldsuffice for there to be two airports in one city for any exclusive concession existingat the date of entry into force of the Regulation to be excluded from the scope ofArticle 5.
     
     
102. The applicant goes on to contest the Commission's arguments that, on any view,there was an 'adequate and uninterrupted service‘ offered by 'other forms oftransport‘, namely the air service between Paris (CDG)-Marseille and Paris(CDG)-Toulouse, the reason for which the Commission claimed that it wasnecessary to exclude the Paris (Orly)-Marseille and Paris (Orly)-Toulouse routesfrom the scope of the exclusivity. In that regard, the concept of 'form oftransport‘ should be understood as meaning 'mode of transport‘, so that air routesare not to be taken into account. In any event, TAT's service on the CDG-Marseille and CDG-Toulouse routes, which since March 1992 had varied betweenone flight per day and one flight per week, cannot be characterized as 'anadequate and uninterrupted service‘ in view of the needs of business circles in theregions concerned.
     
     
103. The applicant also claims that it became aware, for the first time in the defence,of the Commission's interpretation of the 'adequate and uninterrupted‘ criteria. That proves that it was not put in a position to submit observations. Furthermore,TAT is refusing to enter into real competition by developing the market fromCDG, preferring parasitism at Orly. TAT had access to Toulouse and Marseillefrom CDG, which is a larger platform than Orly in terms of size, number ofrunways and passengers. If TAT is in fact refusing to operate the Paris-Marseilleand Paris-Toulouse routes from CDG, that is not because the applicant or theFrench Government has been pursuing discriminatory practices.
     
     
104. Finally, Article 5 of the Regulation leaves the Member States a residuary power inregard to exclusive concessions. It is impossible to maintain exclusivity within themeaning of that provision without barring all other airline companies from accessto the protected route. That provision therefore covers the possibility of imposingthe measures which the Commission has wrongly characterized as discriminatory. In adopting the contested decision, the Commission is trying to impose totalliberalization with immediate effect, whereas that liberalization should beprogressive, measured, and aimed at reconciling the multiplicity of interestsinvolved. On that basis, consideration should be given simultaneously to theprinciple of non-discrimination and the requirements of a public service and, inparticular, the requirements of regional development, social cohesion and consumerrights, as well as environmental and safety requirements.
     
     
105. The Commission states first of all that the French measure at issue is a measuredistributing traffic between the airports of the Paris system, which may be appraisedon the basis of Article 8 of the Regulation. That distribution took the form ofdisguised discrimination. It infringed the principle of non-discrimination laid downin Article 8 of the Regulation, which is why the Commission has the powersprovided for in Article 8(3).
     
     
106. The Commission claims that Article 5 of the Regulation aims to avoid a breakdownin a given service between two points within a Member State. The maintenance,subject to certain conditions, of an exclusive concession is therefore justified by thepublic interest in ensuring continuity of links between two cities, where there is noadequate and uninterrupted transport service. In the present case, those conditionsare not satisfied. As at 1 January 1993 the applicant was no longer the exclusiveconcessionaire on the Paris-Marseille and Paris-Toulouse routes, since TAT hadreceived authorization on 1 March 1992 to operate flights between Paris and thetwo cities in question. On that basis, the 1985 Agreement must be regarded assuperseded. Whatever the cross-subsidy scheme envisaged in 1985 by the FrenchRepublic and the applicant, that scheme must now be evaluated on the basis of theprovisions of Community law and, in particular, of Regulation No 2408/92, whichoverride inconsistent national measures.
     
     
107. The Commission observes, second, that 'domestic routes‘ within the meaning ofArticle 5 of the Regulation are routes between two cities and not airport-to-airportroutes. The term 'route‘ is generic and refers to both routes by air and routes byrail, bus or other means of transport. Moreover, in the present case, 'other formsof transport‘ exist which can ensure 'an adequate and uninterrupted service‘,namely routes by air from and to CDG and several rail links. The concept of'uninterrupted‘ implies the absence of a risk of interruption of the service forclimatic or other reasons; the adequate nature of that service is assessed in the lightof various factors, such as the frequency of the service and the journey time, butalso passenger needs, prices and capacities offered.
     
     Findings of the Court
     
     
     • Interpretation of Article 8(3) of the Regulation

     
     
     

108. Inasmuch as the applicant complains that the Commission adopted a decisionunder Article 8(3) of the Regulation instead of initiating the procedure for failureto fulfil obligations provided by Article 169 of the Treaty, the applicant has notcontested that provision by raising a plea of illegality under Article 184 of theTreaty. It does not therefore claim that the procedure established by Article 8(3)of the Regulation is incompatible as such with higher-ranking Community law, inparticular with Article 169 of the Treaty. Consequently, examination of thiscomplaint is limited to verifying whether the Commission correctly applied thatprocedural rule.
     
     
109. In that regard, it suffices to observe that TAT, which had already been allowed toprovide a service on the Paris-Toulouse and Paris-Marseille routes to and fromCDG, met with a refusal by the French authorities to allow access to Orly airportfor the purposes of exercising traffic rights on the same routes, that refusal havingbeen based on the fact that the provision of services on those routes from and toOrly was reserved solely for the applicant. However, since the two airports formpart of the Paris airport system within the meaning of Article 2(m) and Annex IIto the Regulation, the French authorities' measure was necessarily adopted as partof the distribution of traffic between the airports within that system for thepurposes of Article 8(1) of the Regulation. Consequently, the Commission wasauthorized to rely on the powers conferred by Article 8(3) of the Regulation andto examine the application by the French authorities of Article 8(1).
     
     
110. Moreover, the argument which the applicant bases on the 'accelerated‘ nature ofthe procedure provided for in Article 8(3) is misconceived, since the Commissiondid not initiate the procedure at issue at the request of a Member State — in whichcase it would have to have been terminated within a period of one month — but onits own initiative. In fact, that procedure was initiated on the Commission'sinitiative following a complaint by TAT at the end of September 1993 and wasterminated by the contested decision at the end of April 1994, namely sevenmonths later.
     
     
111. Furthermore, Regulation No 2408/92 was adopted on 23 July 1992. The MemberStates must therefore have been aware, from July 1992, of the possibility of Article8(3) of that regulation being applied in the area of traffic distribution betweenairports within an airport system.
     
     
112. Finally, nothing in Article 8 supports the conclusion that the mere fact that ameasure for distributing traffic within an airport system is part of a scheme ofnational exclusive concessions dating back over several decades, such as that uponwhich the applicant relies, can by itself take that measure outside the scope of theprocedure provided for by that article.
     
     
113. It follows that the Commission neither misused the procedure in deciding to initiatethe procedure at issue nor failed to observe the conditions for the application ofArticle 8(3) of the Regulation. Consequently, the applicant's first objection mustbe rejected.
     
     
     • The relationship between Article 8 and Article 5 of the Regulation

     
     
     

114. As regards the question whether the contested decision, adopted following theabovementioned procedure, can withstand the other objections raised by theapplicant in the alternative, it should be observed, first of all, that the powerconferred by Article 8(1) of the Regulation on the Member States to regulate thedistribution of traffic within an airport system is restricted in so far as they must doso 'without discrimination on grounds of nationality or identity of the air carrier‘. The French authorities' refusal to grant TAT's applications for access to Orlyairport was based on Article 5 of the Regulation, on the ground that that provisionauthorized the continuation of the exclusive concession granted to the applicant onthe Orly-Marseille and Orly-Toulouse routes. That refusal can therefore beconsidered to have been made without discrimination based on TAT's identity onlyif exclusivity reserved to the applicant on the two routes in question was in factauthorized by Article 5 of the Regulation.
     
     
115. In any event, Article 1 of the contested decision merely states that the FrenchRepublic may not continue to refuse access on those two lines 'on the grounds thatthe French authorities were applying Article 5 [of the Regulation] ...‘. Since thesubject-matter of the contested decision was limited in that way, all the applicant'sarguments concerning consumer rights and environmental and safety requirementsmust be rejected as to no avail in the present context, which concerns Article 8(1)and (3) and Article 5 of the Regulation alone.
     
     
     • As regards the interpretation of Article 5 of the Regulation

     
     
     

116. The actual wording of Article 5 of the Regulation does not bear out the applicant'scontention that, first, the article is essentially intended to leave in force nationalagreements conferring an exclusive concession and, second, that those agreementshave a decisive influence on the interpretation of the article. Article 5 makes thecontinuation of an existing exclusive concession subject to several specificconditions. Thus the Community legislature did not simply adopt a rule such asthat, referred to by the applicant, contained in the draft of the last paragraph ofan Article 4 of the Regulation, providing for the straightforward continuation ofpre-existing concessions (see paragraph 95 above).
     
     
117. Moreover, the Court of Justice has consistently held that the Community legalorder does not in principle aim to define its concepts on the basis of one or morenational legal systems without express provision to that effect (see, in particular thejudgment in Case 64/81 Corman v Hauptzollamt Gronau [1982] ECR 13, paragraph8). The terms of a provision of Community law which makes no express referenceto the law of the Member States for the purpose of determining its meaning andscope must normally be given an independent and uniform interpretation, whichmust be found by taking into account the context of the provision and the purposeof the relevant regulations (see, in particular, the judgment in Case 327/82 Ekro vProduktschap voor Vee en Vlees [1984] ECR 107, paragraph 11). It follows thatArticle 5 of the Regulation calls for an independent interpretation which takes intoaccount its wording, general scheme and purpose.
     
     
118. Applying those rules of interpretation, it must first be considered whether theexclusive concession on which the applicant relies on the Orly-Marseille and Orly-Toulouse routes was granted for domestic 'routes‘.
     
     
119. The Regulation uses the term 'routes‘ several times and in different contexts,without that term appearing as such in the list of 15 definitions set out in Article2. It is therefore a term whose meaning may sometimes differ according to thecontext in which it is used, in particular according to the specific contextual aim, inorder to signify either an air route between two airports or a transport link, in thegeneric sense, between two cities or regions.
     
     
120. As regards the scheme and purpose of Article 5 of the Regulation, that provisionrefers only to 'routes‘ for which there is no adequate and uninterrupted alternativetransport service. That form of words must mean routes between cities and regionsrather than routes between airports, as the applicant argues. Airports are not thefinal destination for travellers, freight and mail, but rather a necessary point oftransit, the ultimate destination being the city or region served by the airportconcerned. It is therefore clear that Article 5 aims to ensure, on a transitionalbasis, the continuity of air transport services protected by an exclusive concession,provided that, without such exclusivity, users would be faced with an inconvenientloss of connections between particular cities or regions.
     
     
121. As regards Orly and CDG airports, which form part of the Paris airport system,that conclusion is borne out by Article 2(m) in combination with Annex II to theRegulation, according to which those two airports are grouped together in orderto serve Paris or the Paris conurbation. It must also apply in relation to theMarseille and Toulouse airports, which cannot reasonably be regarded as theultimate destination of a journey commenced in Paris and which are also intendedto serve their respective cities or conurbations. It follows that the applicant'sargument that the term 'route‘ refers to an air route, in the technical sense,between two airports must be rejected.
     
     
122. It is therefore only on 'domestic routes‘, defined as traffic links between particularcities or regions, that an exclusive concession could possibly exist, under Article 5,in the applicant's favour. However, even assuming that, under the 1985 Agreementand the 1990 Agreement, the applicant did in fact enjoy exclusivity from and toOrly airport on the Paris-Marseille and Paris-Toulouse routes, it is not disputedthat even before the entry into force of the Regulation airlines other than theapplicant served the same routes, even if only from and to CDG. Article 19 of the1985 Agreement authorized Air Afrique to operate on the Paris-Marseille route('ligne‘). Moreover, the applicant has not disputed the statement in the contesteddecision that the French authorities authorized TAT to operate on the two routesin question from and to CDG as from 1 March 1992 and have not since placed anyobstacle in the way of other Community companies wishing to operate those sameroutes (OJ, p. 36).
     
     
123. Consequently, however the 1985 Agreement and the 1990 Agreement areinterpreted, the applicant cannot claim to have held at the material time anexclusive concession in respect of the two 'domestic routes‘ within the meaning ofArticle 5, namely between the city of Paris and the cities of Marseille and Toulouserespectively.
     
     
124. That conclusion is not affected by the applicant's arguments that the route onwhich Air Afrique operated was a mere cabotage route and that the servicesprovided by TAT from and to CDG are neither adequate nor uninterrupted,inasmuch as they varied between one flight per day and one flight per week. It isclear from the very wording of Article 5 that the question whether 'other forms oftransport can ensure an adequate and uninterrupted service‘ arises only where anexclusive concession exists on the 'domestic routes‘ in question. Since, as theCourt has just found, the applicant did not enjoy such exclusivity, the question ofthe adequacy and uninterrupted nature of the services supplied by Air Afrique andTAT on the Paris-Marseille and Paris-Toulouse routes is irrelevant.
     
     
125. Consequently, the applicant's argument that the Commission set out itsinterpretation of the adequate and uninterrupted criteria for the first time in itsdefence must also be rejected as of no avail (see paragraphs 71 and 101 above).
     
     
126. It follows from the foregoing that Article 5 of the Regulation is not applicable inthe present case. Contrary to the applicant's assertions, that conclusion does notentirely deprive that provision of its substance. Article 5 covers specifically thesituation of an exclusive concession granted on a route between two cities, neitherof which forms part of an airport system, such as the Marseille-Ajaccio or the Nice-Calvi routes, provided that another adequate and uninterrupted form of transportdoes not exist.
     
     
127. Finally, the applicant's argument that if Article 5 were not applicable to the tworoutes in question, the particular French system of internal cross-subsidy of tariffscould be totally undermined is irrelevant in the context of pleas alleginginfringement of the Regulation alone. Article 5 of the Regulation provides for a'route by route‘ examination, to the exclusion of any 'network approach‘ and ofany cross-subsidy of tariffs linked to such a network concept. The questionsrelating to the necessity of the French domestic network and the related cross-subsidy system are therefore examined below, in relation to the plea ofinfringement of Article 90(2) of the Treaty. In any event, the applicant has notclaimed that the authorization for another airline at Orly airport affects, to thedetriment of travellers, the services which it provides on the Paris-Marseille andParis-Toulouse routes.
     
     
128. It follows that TAT, which was refused access to Orly airport, has beendiscriminated against on grounds of its identity within the meaning of Article 8(1)of the Regulation, since that refusal could not be justified under Article 5 of theRegulation. Consequently, any claim that there was no such discrimination mustbe rejected. This is particularly so in regard to the argument by which theapplicant attempts to show that CDG was in reality a more favourable platform forTAT's economic needs than Orly airport. Since Article 5 could not be relied onin order to bar access to Orly airport, it was not for the applicant or for the Frenchauthorities to choose for other airline companies, such as TAT, the platform whichthey considered to be the most economically favourable.
     
     
129. Finally, it follows that the applicant cannot argue, as it does in the second part ofits second plea (see paragraph 76 above), that the Commission acted in bad faithas against the French Republic by adopting the contested decision on 27 April1994. The French authorities must have been aware that Regulation No 2408/92would override any inconsistent contractual term or legislative provision. Thatregulation, adopted on 23 July 1992, does not contain any provision setting out therelationship between these new Community provisions and the special aspects ofFrench policy on regional development, management of the domestic air networkand establishment of a system of tariff cross-subsidy, as relied on by the applicant.
     
     
130. It follows from all the foregoing that the pleas of infringement of the Regulation,and also the plea of lack of good faith as against the French Republic, must berejected.
     
     The plea of infringement of Article 90(2) of the Treaty
     
     Arguments of the parties
     
     
131. The applicant claims that it performs a general interest task, namely itscontribution to the opening up of a large number of French cities and regions inthe context of regional development, based on a cross-subsidy of tariffs, whichenables it to finance about 20 unprofitable domestic air routes thanks, essentially,to the profitability of the Paris (Orly)-Marseille and Paris (Orly)-Toulouse routes. It therefore repeats the arguments set out in the context of the previous pleas (seeparagraph 98 above). It refers here to documents in Annex 6 to the application,which show that the internal subsidies made possible by the exclusivity it holds onthe two routes in question enabled it to finance losses on 27 other routes in
     
     
132. It adds that, under the agreements concluded with the French State, its task ofproviding services meant taking the place of the French State in French regionaldevelopment in the air sector. Consequently, it had to be given the necessarymeans, which were the profits achieved on the two routes at issue.
     
     
133. The applicant accordingly concludes that, for as long as such a public service taskexists, the French Government is entitled to refuse access on the two profitableroutes to competing airline companies. In its view, such an approach is justified inthe light of the judgments of the Court of Justice in Case C-320/91 Corbeau [1993]ECR I-2533 and in Case C-393/92 Municipality of Almelo and Others vEnergiebedrijf IJsselmij NV [1994] ECR I-1477. Consequently, by deciding that theFrench Government was not entitled to refuse the applicant's competitors accessto the profitable lines in question, the Commission infringed Article 90(2) of theTreaty.
     
     
134. The applicant adds that the assertion that Article 4 of the Regulation reproducedthe terms of Article 90(2) of the Treaty is incorrect, since the scope of the latterprovision is wider than that of Article 4. It is incompatible with the hierarchy ofnorms for secondary legislation to permit limits to be placed on a permanentexception contained in a provision of the Treaty. Article 90(2) of the Treatytherefore allows restrictions on competition to be justified and is applicable to thematter dealt with in Article 5 of the Regulation.
     
     
135. TAT is wrong in submitting that exclusivity on the routes in question is notindispensable to enable the applicant to ensure financial equilibrium for its networkand to assume its public service obligations. Finally, it follows from the judgmentsof the Court of Justice in Case 72/83 Campus Oil Ltd and Others v Minister forIndustry and Energy and Others [1984] ECR 2727 and in Case C-353/89 Commissionv Netherlands [1991] ECR I-4069 that restrictions on competition may be justifiedon quite specific grounds. Those grounds are inter alia transparency, universalservice, uniform fixing of fares and the Community interest. All those conditionsare fulfilled in this case by the 1985 Agreement.
     
     
136. The Commission considers that, since the adoption of Regulation No 2408/92,reference should no longer be made directly to the application of Article 90(2) ofthe Treaty in order to meet the requirements of any public service tasks performedunder the legislation in force. Through Article 4 of the Regulation the Council hasgiven substance to the abstract terms of Article 90(2), in relation to air transportservices within the Community, and weighed up the various interests involved. Inso far as the situation referred to in Article 90(2) of the Treaty had thus beenexamined by the Council in regard to the aviation sector, Article 4 of theRegulation had already carried out the purpose of Article 90(2) of the Treaty.
     
     Findings of the Court
     
     
137. Article 90(2) of the Treaty excludes the application of the Treaty rules in so far astheir application would obstruct the performance, in law or in fact, of the'particular tasks‘ assigned to an undertaking 'entrusted with the operation ofservices of general economic interest‘.
     
     
138. As Article 90(2) is a provision which thus permits, in certain circumstances,derogation from the rules of the Treaty, it must be strictly interpreted (judgmentof the Court of Justice in Case 127/73 BRT v SABAM and NV Fonior [1974] ECR313, paragraph 19) and its application is not left to the discretion of the MemberState which has entrusted an undertaking with the operation of a service of generaleconomic interest (judgment of the Court of Justice in Case 41/83 Italy vCommission [1985] ECR 873, paragraph 30).
     
     
139. In the light of those principles it is necessary to examine whether the applicant isentitled to rely on Article 90(2) of the Treaty in the present case.
     
     
140. The applicant is opposed to the application of Articles 5 and 8 of Regulation No2408/92, adopted under Article 84 of the Treaty, as those articles have beeninterpreted above.
     
     
141. The application of those articles could, however, be excluded only in as much asthey 'obstructed‘ performance of the tasks entrusted to the applicant. Since thatcondition must be interpreted strictly, it was not sufficient for such performance tobe simply hindered or made more difficult. Furthermore, it was for the applicantto establish any obstruction of its task (see, to that effect, the judgment of theCourt of Justice in Case 155/73 Sacchi [1974] ECR 409, paragraph 15).
     
     
142. In that regard, the applicant merely asserts that the organization of domestic airtransport was based on a system of cross-subsidy between profitable routes andunprofitable routes and that the exclusivity which had been granted to it on theOrly-Marseille and Orly-Toulouse routes was justified by its obligation to operatethe unprofitable routes regularly and at tariffs that were not prohibitive, in orderto contribute to regional development. It does not put a figure on the probableloss of revenue if other air carriers are allowed to compete with it on the tworoutes in question. Nor has it shown that that loss of income will be so great thatit will be forced to abandon certain routes forming part of its network.
     
     
143. In any event, the domestic air network system combined with the internal cross-subsidy system to which the applicant refers in support of its case did not constitutean aim in themselves, but were the means chosen by the French public authoritiesfor developing the French regions. The applicant has not argued and still lessestablished that, following the entry into force of Regulation No 2408/92, there wasno appropriate alternative system capable of ensuring regional development andin particular of ensuring that loss-making routes continue to be financed (see alsothe order of the President of the Court in Case C-174/94 R France v Commission[1994] ECR I-5229, paragraph 35).
     
     
144. Consequently, the applicant has not shown that the contested decision wouldobstruct the performance in law or in fact of the particular task assigned to it. Itfollows that the plea of infringement of Article 90(2) of the Treaty cannot beaccepted either.
     
     The plea of infringement of the principle of proportionality
     
     Arguments of the parties
     
     
145. The applicant observes that it is settled law (judgments of the Court of Justice inCase 122/78 Buitoni [1979] ECR 677 and Case 114/76 Bela-Mühle [1977] ECR1211) that the principle of proportionality, whereby contested measures areexamined to determine whether they are both necessary and appropriate in thelight of the objectives pursued, may be relied on by natural or legal persons inorder to contest any measure adopted by the Community authorities, whether laiddown by law, regulation or administrative action. In the present case, the FrenchGovernment's decision to draw up a new law on regional development and a newsystem of financing domestic loss-making routes and to allow progressive openingup to competition on the same domestic market was quite proportionate to theobjective of liberalizing air routes. On the other hand, the Commission's decisionto impose the opening up of competition on the profitable routes a few monthsahead of the timetable laid down by the French Government was disproportionatein relation to the objective pursued and failed to take account of the interests ofthe applicant, which needed a transitional period in order to adapt itself.
     
     
146. The Commission argues that the cases cited are not relevant in this case becausethey concerned the procedure under Article 177 of the Treaty, whereas the presentcase concerns a procedure under Article 173 of the Treaty, and that it adopted itsdecision on the basis of a regulation, whose illegality could be put in issue onlyunder Article 184 of the Treaty. As it is, the applicant does not challenge theRegulation in itself but the use of the powers conferred on the Commission by thatregulation.
     
     Findings of the Court
     
     
147. It is settled law that the principle of proportionality requires that the measuresadopted by Community institutions must not exceed what is appropriate andnecessary for attaining the objective pursued; where there is a choice betweenseveral appropriate measures, the least onerous measure must be used (see, forexample, the judgments of the Court of Justice in Case 15/83 Denkavit Nederlandv Hoofdproduktschap voor Akkerbouwprodukten [1984] ECR 2171, paragraph 25 andin Case 265/87 Schräder v Hauptzollamt Gronau [1989] ECR 2237, paragraph 21).
     
     
148. In the present case, it follows from examination of the previous pleas that, inadopting the contested decision, the Commission correctly applied Articles 8 and5 of Regulation No 2408/92. Moreover, the legality of those provisions was notcontested by a plea of illegality raised under Article 184 of the Treaty. Consequently, the contested decision cannot be characterized as excessive,particularly since Article 3 of that decision even gave the French Republic a periodof six months in which to make adjustments.
     
     
149. It follows that the plea of infringement of the principle of proportionality must alsobe rejected.
     
     
150. Since none of the pleas submitted by the applicant has been upheld, the applicationmust be dismissed as unfounded.
     
     Costs
     
     
151. Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs, if they have been asked for in the successful party'spleadings. Since the applicant has been unsuccessful, it must, having regard to theform of order sought by the Commission, be ordered to pay the costs, includingthose incurred by TAT and those relating to the proceedings in Case C-301/94which took place before the Court of Justice. The United Kingdom, which hasintervened, must be ordered to bear its own costs in accordance with Article 87(4)of the Rules of Procedure.
     
     
152. The applicant's claim, submitted for the first time at the hearing, for an order thatthe Commission pay the whole of the costs pursuant to Article 87(3) of the Rulesof Procedure should not be granted. It contains no details as to the existence ofexceptional grounds or the unreasonable or vexatious nature of the costs which theCommission is claimed to have caused the applicant to incur.
     
     On those grounds,

     THE COURT OF FIRST INSTANCE (Second Chamber, ExtendedComposition),

     hereby:

     1. Dismisses the application;
        
        
     2. Orders the applicant to pay the costs, including those of the proceedings inCase C-301/94 which took place before the Court of Justice and thoseincurred by TAT, but not those incurred by the United KingdomGovernment, an intervening party, which shall bear its own costs.
        

     
     
     

BellamyBriët Kalogeropoulos

Delivered in open court in Luxembourg on 19 June 1997.

H. Jung

C.W. Bellamy

Registrar

President

1: Language of the case: French.