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

24 October 1997 (1)

(ECSC — Action for annulment — State aid — Individual decisions authorizing thegrant of State aid to steel undertakings — Misuses of powers — Protection oflegitimate expectations — Incompatibility with Treaty provisions — Discrimination— Inadequate statement of reasons — Breach of rights of the defence — Articles4(b) and (c) and 15 and the first and second paragraphs of Article 95 of theTreaty)

In Case T-244/94,

Wirtschaftsvereinigung Stahl, an association constituted under German law,established in Düsseldorf (Germany),

Thyssen Stahl AG, a company incorporated under German law, established inDuisburg (Germany),

Preussag Stahl AG, a company incorporated under German law, established inSalzgitter (Germany),

Hoogovens Groep BV, a company incorporated under German law, established inIjmuiden (Netherlands),

represented by Jochim Sedemund and Frank Montag, Rechtsanwälte, Cologne, and,as regards Hoogovens Groep BV, by Eric Pijnacker Hordijk, of the Brussels Bar,with an address for service in Luxembourg at the Chambers of Aloyse May,31 Grand-Rue,

applicants,

v

Commission of the European Communities, represented by Bernd Langeheine andBen Smulders, of its Legal Service, acting as Agents, with an address for service inLuxembourg at the office of Carlos Gómez de la Cruz, Wagner Centre, Kirchberg,

defendant,

supported by

Council of the European Union, represented by Rüdiger Bandilla, Director in itsLegal Service, and Stephan Marquardt, Administrator in its Legal Service, actingas Agents, with an address for service in Luxembourg at the office of AlessandroMorbilli, General Manager of the Legal Affairs Directorate of the EuropeanInvestment Bank, 100 Boulevard Konrad Adenauer,

Italian Republic, represented by Umberto Leanza, Head of the Legal Service,Ministry of Foreign Affairs, acting as Agent, assisted by Pier Giorgio Ferri,Avvocato dello Stato, with an address for service in Luxembourg at the ItalianEmbassy, 5 Rue Marie-Adélaïde,

Ilva Laminati Piani SpA, a company incorporated under Italian law, established inRome, represented by Aurelio Pappalardo, of the Trapani Bar, and MassimoMerola, of the Rome Bar, with an address for service in Luxembourg at theChambers of Alain Lorang, 51 Rue Albert I,

interveners,

APPLICATION for the annulment of Commission Decision 94/259/ECSC of 12April 1994 concerning aid to be granted by Italy to the public steel sector (Ilvagroup) (OJ 1994 L 112, p. 64),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (First Chamber, ExtendedComposition),

composed of: A. Saggio, President, A. Kalogeropoulos, V. Tiili, A. Potocki andR.M. Moura Ramos, Judges,

Registrar: H. Jung,

having regard to the written procedure and further to the hearing on 25 February1997,

gives the following

Judgment

Legal background

1.

    The Treaty establishing the European Coal and Steel Community ('the Treaty‘)prohibits in principle State aid to the steel industry by providing in Article 4(c) that'subsidies or aids granted by States, or special charges imposed by States, in anyform whatsoever‘ are recognized as incompatible with the common market for coaland steel and are accordingly to be abolished and prohibited within the Community,as provided in the Treaty.

2.

    The first and second paragraphs of Article 95 of the Treaty provide: 'In all casesnot provided for in this Treaty where it becomes apparent that a decision orrecommendation of the Commission is necessary to attain, within the commonmarket in coal and steel and in accordance with Article 5, one of the objectives ofthe Community set out in Articles 2, 3 and 4, the decision may be taken or therecommendation made with the unanimous assent of the Council and after theconsultative Committee has been consulted.

Any decision so taken or recommendation so made shall determine what penalties,if any, may be imposed‘.

3.

    In order to meet the needs of restructuring the steel sector, the Commission reliedon the first two paragraphs of Article 95 of the ECSC Treaty in order to establish,as from the beginning of the 1980s, a Community system of aid authorizing thegrant of State aid to the steel industry in a limited number of cases. That systemhas been subject to successive amendments in order to resolve the specificeconomic difficulties of the steel industry. Thus, the Steel Aid Code in force duringthe period under consideration in this case was established by Commission DecisionNo 3855/91/ECSC of 27 November 1991 establishing Community rules for aid tothe steel industry (OJ 1991 L 362, p. 57; hereinafter 'the Aid Code‘). The recitalsin the preamble to that decision show that that code, like its predecessors,establishes a Community system, inasmuch as it is designed to cover aid, whether

specific or non-specific, financed by Member States in any form whatsoever. TheCode does not authorize either operating or restructuring aid, save in the case ofaid for closure.

The facts

4.

    In view of the deterioration of the economic and financial situation in the steelindustry, the Commission presented a restructuring plan to the Council and theEuropean Parliament on 23 November 1992, in its Communication SEC (92) 2160final, entitled 'Towards greater competitiveness in the steel industry: the need offurther restructuring‘. That plan was based on the finding of continuing structuralovercapacity and was aimed primarily at achieving, through the voluntaryparticipation of steel companies, a substantial and definitive capacity reduction ofthe order of at least 19 million tonnes. With that aim in view, it proposed a seriesof accompanying measures in the social field, together with financial incentivesincluding Community aid. In parallel with that plan, the Commission gave anexploratory mandate to an independent expert, Mr Braun, former Director Generalfor industrial affairs at the Commission, his essential task being to list projects forthe closure of steel undertakings for the period envisaged in the abovecommunication, which covered the years 1993 to 1995. On 29 January 1993, MrBraun, having contacted the heads of some 70 steel undertakings, submitted hisreport, entitled 'Current or Planned Restructuring in the Steel Industry‘.

5.

    In its Conclusions of 25 February 1993, the Council welcomed the broad outlinesof the Commission's programme following the Braun Report, with a view toachieving a substantial reduction in excess production capacity. The enduringrestructuring of the steel industry was to be facilitated by 'a package of supportingmeasures of limited duration which strictly comply with the rules on control of Stateaids‘, it being understood in relation to such aid that 'the Commission [confirmed]its commitment to rigorous and objective application of the aids code and [would]ensure that any derogations proposed to the Council under Article 95 of the Treatycontribute fully to the required overall effort to reduce capacity. The Council[would] act promptly on [those] proposals, on the basis of objective criteria‘.

6.

    Accordingly, the Council and the Commission indicated in their joint statemententered in the minutes of the Council meeting of 17 December 1993 — which referto the global agreement reached within the Council to grant the assents for theState aid for the public undertakings Sidenor (Spain), Sächsische EdelstahlwerkeGmbH (Germany), Corporación de la Siderurgia Integral (CSI, Spain), Ilva (Italy),EKO Stahl AG (Germany) and Siderurgia Nacional (Portugal) — that they'[believed] that the only way to secure a healthy EC steel industry, able to competeon the world market, [was] to put a permanent end to state subsidization of thesteel industry and to close loss-making capacity. In giving its unanimous consentto the current Article 95 proposals, the Council [reaffirmed] its commitment to astrict application of the Steel aids code [...] and, in the absence of authorization

under the Code, Article 4(c) of the ECSC Treaty. Without prejudice to the rightof any Member State to request a decision under Article 95 of the ECSC Treaty,and in accordance with the Council conclusions of 25 February 1993, the Council[declared] its firm commitment to avoid any further Article 95 derogations inrespect of aid for any individual companies‘.

7.

    On 22 December 1993 the Council gave its assent in accordance with the first twoparagraphs of Article 95 of the Treaty as regards the grant of the abovementionedaid intended to accompany the restructuring or privatization of the publicundertakings concerned.

8.

    It was against that legal and factual background that, on 12 April 1994, followingthe Council's assent, the Commission adopted six ad hoc decisions on the basis ofthe first and second paragraphs of Article 95 of the Treaty, which authorize thegranting of State aid not meeting the criteria permitting derogation, pursuant to theAid Code, from Article 4(c) of the Treaty. In those six decisions the Commissionauthorized, respectively, grant of the aid which Germany planned to grant to EKOStahl AG, Eisenhüttenstadt (Decision 94/256/ECSC, OJ 1994 L 112, p. 45), the aidwhich Portugal planned to grant to Siderurgia Nacional (Decision 94/257/ECSC, OJ1994 L 112, p. 52), the aid which Spain planned to grant to Corporación de laSiderurgia Integral (CSI) (Decision 94/258/ECSC, OJ 1994 L 112, p. 58), the grantby Italy of State aid to the public steel sector (Ilva steel group) (Decision94/259/ECSC, OJ 1994 L 112, p. 64), the aid which Germany planned to grant toSächsische Edelstahlwerke GmbH, Freital Sachsen (Decision 94/260/ECSC, OJ1994 L 112, p. 71) and the aid which Spain planned to grant to Sidenor, anundertaking producing special steels (Decision 94/261/ECSC, OJ 1994 L 112, p. 77).

9.

    Those authorizations were made the subject, in accordance with the Council'sassent, of 'obligations corresponding to net capacity reductions of at least 2 milliontonnes of crude steel and a maximum of 5.4 million tonnes of hot-rolled products(disregarding the possible construction of a wide strip mill at Seatão and anincrease in the capacity of EKO-Stahl above 900 000 tonnes after mid-1999)‘ onthe basis of the Commission's Communication to the Council and the EuropeanParliament of 13 April 1994 (COM (94) 125 final), presenting an intermediatereport on the restructuring of the steel industry and making suggestions for theconsolidation of that process in the spirit of the conclusions reached by the Councilon 25 February 1993.

Procedure

10.

    It was in those circumstances that, by application lodged at the Registry of theCourt of First Instance on 24 June 1994, the association WirtschaftsvereinigungStahl and the companies Thyssen Stahl AG, Preussag Stahl AG and Hoogovens

Groep BV applied under Article 33 of the Treaty for the annulment of Decision92/259/ECSC, cited above, concerning the Ilva group.

11.

    In parallel, two other actions were brought, one by the European IndependentSteelworks Association (EISA) against the six decisions adopted by the Commissionon 12 April 1994 (Case T-239/94) and the other by British Steel against Decisions94/258/ECSC and 94/259/ECSC authorizing the granting of State aid to theundertaking CSI and to the Ilva steel group respectively (Case T-243/94).

12.

    In these proceedings, the Council, the Italian Republic and Ilva Laminati Piani SpA(hereinafter 'Ilva‘) lodged applications at the Court Registry on 24 October, 8November and 29 November 1994 respectively for leave to intervene in support ofthe defendant. By orders of 9 March 1995 the President of the Second Chamber,Extended Composition, of the Court of First Instance granted those applications.

13.

    Upon hearing the report of the Judge-Rapporteur it was decided to open the oralprocedure without any preparatory inquiries. The parties presented oral argumentand answered the questions put to them orally at the hearing on 25 February 1997.

Forms of order sought

14.

    The applicants claim that the Court should:

—    annul Commission Decision 94/259/ECSC of 12 April 1994;

—    in the alternative, annul the contested decision to the extent to which it doesnot impose an obligation to reduce Ilva's production capacity by more than2 million tonnes per year;

—    order the Commission to pay the costs.

15.

    The defendant, supported by the Council and the Italian Republic, contends thatthe Court should:

—    dismiss the application;

—    order the applicants to pay the costs.

16.

    The intervener Ilva contends that the Court should:

—    dismiss the application as unfounded;

—    order the applicants to pay the costs in their entirety, including thoseincurred by Ilva.

Substance

17.

    The applicants put forward in support of their application for annulment sevenpleas in law alleging, first, breach of the Aid Code; second, infringement of theconditions for the application of Article 95 of the Treaty; third, breach of theprinciple of proportionality; fourth, breach of the principle of non-discrimination;fifth, breach of the obligation to state reasons; sixth, irregularity of the decision-making procedure, and, seventh, breach of the rights of the defence.

The first plea in law: breach of the Aid Code

18.

    The applicants maintain that authorization for aid not provided for in the Fifth AidCode is illegal. This plea comprises two parts. By authorizing the grant of aid notmeeting the conditions laid down by the Aid Code, the Commission, first, misusedits powers and, second, infringed the principle of the protection of legitimateexpectations.

The alleged misuse of powers

— Arguments of the parties

19.

    The parties consider that, in so far as State aid is prohibited by Article 4(c) of theTreaty, the Aid Code, adopted on the basis of the first and second paragraphs ofArticle 95 of that Treaty, determines bindingly and definitively the conditions underwhich such aid may nevertheless be authorized to attain the objectives set out inArticles 2, 3 and 4 of the Treaty. They state that certain doubts may be expressedas to the competence of the Commission to adopt the Aid Code, which derogatesfrom Article 4(c) of the Treaty, on the basis of the first and second paragraphs ofArticle 95 of that Treaty but they make it clear that they do not wish to raise thatissue. They merely maintain that the aid does not meet the conditions laid downby the Aid Code which, in any event, are incompatible with the common marketand are caught by the prohibition laid down in Article 4(c) of the Treaty.

20.

    That analysis, they say, is confirmed by the preamble to the Aid Code and byArticle 1 thereof, which expressly provides that '[a]id to the steel industry ...financed by Member States ... may be deemed Community aid and thereforecompatible with the orderly functioning of the common market only if it satisfiesthe provisions of Articles 2 to 5‘.

21.

    The Commission is bound by its interpretation, in the Aid Code, of the combinedprovisions of the first and second paragraphs of Article 95 and Article 4(c) of theTreaty. The exercise of the discretion conferred on it by the abovementionedprovisions of Article 95 took the form of adoption of that Code, so that the

Commission cannot derogate from it without contradicting itself and misusing itspowers.

22.

    In particular, an individual decision cannot, without contravening the principle ofnon-discrimination embodied in Article 4(b) of the Treaty, derogate from the AidCode, which is of general application, even if those measures formally occupy thesame rank in the hierarchy of norms. In that connection, the Court has laid downthe principle that an individual decision must meet the conditions of the generaldecision, both in the sphere of anti-dumping measures (see in particular thejudgments of the Court in Case 113/77 NTN Toyo Bearing and Others v Council[1979] ECR 1185 and Case 118/77 ISO v Council [1979] ECR 1277) and in thesphere of State aid (see, in connection with Articles 92 and 93 of the EC Treaty,Case C-313/90 CIRFS and Others v Commission [1993] ECR I-1125). In connectionwith the Treaty, it has held that the Commission was guilty of misuse of powerswhen using those conferred on it by the Treaty in order to evade a procedurespecifically prescribed by the applicable basic decisions and without amending thosedecisions in accordance with the procedure established by the Treaty for dealingwith the circumstances with which it is required to cope (see Joined Cases 140/82,146/82, 221/82 and 226/82 Walzstahl-Vereinigung and Thyssen v Commission [1984]ECR 951 and Joined Cases 33/86, 44/86, 110/86, 226/86 and 285/86 StahlwerkePeine-Salzgitter and Hoogovens v Commission [1988] ECR 4309).

23.

    It follows that the only derogation from the Aid Code which it was open to theCommission to make was to amend it so that the same rules would apply to allundertakings.

24.

    Furthermore, the adoption of an individual decision not fulfilling the conditions laiddown by the Aid Code is contrary to the principle that derogating measures mustbe interpreted restrictively. Derogations from the prohibition of State aid laiddown by Article 4(c) of the Treaty, granted on the basis of the first and secondparagraphs of Article 95 thereof, should be limited to what is strictly necessary. They may be authorized only temporarily and on the condition that they are subjectto specific obligations. Only the Aid Code satisfies those requirements. The firstand second paragraphs of Article 95 of the Treaty cannot therefore be relied uponto adopt an individual decision which nullifies the abovementioned prohibition ofaid.

25.

    The Commission considers that the applicants' view that the Aid Code is bindingand exhaustive disregards the fact that the prohibition of State aid derives fromArticle 4(c) of the Treaty and not from the Aid Code. The latter recognizes thatcertain State aid is in the nature of Community aid and also does no more thanrepeat the prohibition laid down by Article 4(c) of the Treaty. Article 95 of theTreaty may therefore be relied upon for ad hoc decisions authorizing certain aidin special circumstances.

26.

    In that light, the Commission concedes that the wording of the Aid Code might givethe impression that the Council and the Commission itself did not intend applyingArticle 95 of the Treaty in the future. However, because of the new situation ofa serious crisis in the industry, it had become essential to make rational use of thatprovision. It is clear from settled case-law of the Court of Justice that theemergence of a crisis situation may be regarded as an unforeseen difficulty withinthe meaning of that article (see Case 214/83 Germany v Commission [1985] ECR3053).

27.

    The Council states that, under the scheme of the ECSC Treaty, the first and secondparagraphs of Article 95 confer on the Commission a considerable degree oflatitude in order to cope with sudden situations of crisis. In this case, the aid inquestion was authorized to facilitate partial closure of production facilities as partof an overall programme designed to reduce capacity definitively, within the scopeof the objectives of the Treaty. It was thus a case not provided for by the Treaty,within the meaning of the first paragraph of Article 95 thereof.

28.

    Contrary to the applicants' claims, the Aid Code and the contested decision do notconstitute, respectively, a basic decision and an individual decision. On thecontrary, they are legal measures of the same rank, with the same legal basis, a factwhich, moreover, the applicants themselves admit. Furthermore, the aid authorizedby the contested decision does not fall within the scope of the Aid Code.

29.

    The Italian Republic states that the first paragraph of Article 95 of the Treatyprovides a means of action which it is appropriate to use to attain one of theobjectives of the Community in cases not provided for by the Treaty, as in thisinstance. Article 4(c) merely prohibits State aid which is incompatible with theobjectives pursued by the Community. Neither the Aid Code nor the contesteddecision is caught by that prohibition, since they seek to attain those objectives. The Italian Government also rejects the applicants' view that the Aid Coderepresents a binding interpretation of the first paragraph of Article 95 of theTreaty. The Code and the contested decision are based on the same Treatyprovision and therefore have the same legal value. The power conferred on theCommission by the first paragraph of Article 95 is permanent and inexhaustible:that article seeks to ensure that the Commission is at all times and in allcircumstances in a position to deal with situations not provided for by the Treatyby adopting, in agreement with the Council, a measure required in pursuance ofone of the objectives of the Community.

30.

    According to Ilva, the first paragraph of Article 95 of the Treaty is intended toprovide the Commission with the means to overcome exceptional situations whichcould not have been foreseen by the authors of the Treaty. That aim would notbe respected if the adoption of a decision of general scope under that article wereto have the effect of preventing the Commission from using at a later stage thepowers conferred on it by that article. Whether a measure taken by the

Commission on the basis of Article 95 of the Treaty is general or individualdepends on the circumstances with which it must deal. In this case, theCommission regulated certain categories of aid in the Aid Code, whilst at the sametime reserving to itself the power to give decisions case by case on types of aid notprovided for by the Code. If the Aid Code included a provision excluding theadoption of subsequent individual decisions authorizing aid, that provision would,in Ilva's view, be contrary to the Treaty.

— Findings of the Court

31.

    The applicants suggest, essentially, that by authorizing the aid in question in thecontested individual decision the Commission used the powers conferred on it bythe first and second paragraphs of Article 95 of the Treaty in order to evade theconditions laid down by the Aid Code, which is of general application. Their viewis based on the premiss that the Code — whose validity they do not formallychallenge — defines bindingly and exhaustively the categories of State aid which maybe authorized.

32.

    It is appropriate first to consider the legal context of the contested decisions. Article 4(c) of the Treaty prohibits, in principle, State aid within the EuropeanCoal and Steel Community to the extent to which it is liable to undermineattainment of the essential objectives of the Community laid down by the Treaty,in particular the establishment of conditions of free competition. According to thatprovision, '[t]he following are recognized as incompatible with the common marketfor coal and steel and shall accordingly be abolished and prohibited within theCommunity, as provided in this Treaty: ... ((c) subsidies or aids by States ... in anyform whatsoever‘.

33.

    However, the existence of such a prohibition does not mean that all State aidwithin the sphere of the ECSC must be regarded as incompatible with theobjectives of the Treaty. Article 4(c), interpreted in the light of all the objectivesof the Treaty, as defined by Articles 2 to 4 thereof, is not intended to impede thegrant of State aid capable of contributing to attainment of the objectives of theTreaty. It reserves to the Community institutions the right to assess thecompatibility with the Treaty and, if appropriate, to authorize the grant of such aid,in the area covered by the Treaty. That analysis is confirmed by the judgment inCase 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v High Authority [1961]ECR 1, legal grounds, part B.I.1.b, at p. 22, in which the Court held that, just ascertain non-State financial assistance to coal- and steel-producing undertakingsauthorized by Articles 55(2) and 58(2) of the Treaty can be allocated only by theCommission or with its express authorization, Article 4(c) must similarly beinterpreted as conferring on the Community institutions exclusive competence withregard to aid within the Community.

34.

    In the scheme of the Treaty Article 4(c) does not therefore prevent theCommission from authorizing, by way of derogation, aid envisaged by the MemberStates and compatible with the objectives of the Treaty, on the basis of the first andsecond paragraphs of Article 95 in order to deal with unforeseen situations (seeCase 9/61 Netherlands v High Authority [1962] ECR 213, at 233).

35.

    The abovementioned provisions of Article 95 empower the Commission to adopta decision or a recommendation with the unanimous assent of the Council andafter the ECSC Consultative Committee has been consulted, in all cases notprovided for by the Treaty in which such a decision or recommendation appearsnecessary in order to attain, within the common market in coal and steel and inaccordance with Article 5, one of the objectives of the Community set out inArticles 2, 3 and 4. They provide that any decision or recommendation so madeis to determine what penalties, if any, may be imposed. It follows that, to theextent to which, by contrast with the EC Treaty, the ECSC Treaty confers on theCommission or the Council no specific power to authorize State aid, theCommission is empowered, by the first and second paragraphs of Article 95, totake all measures necessary to attain the objectives of the Treaty and, therefore,to authorize, under the procedure thereby established, such aid as seems to it tobe necessary to attain those objectives.

36.

    The Commission is thus competent, in the absence of any specific Treaty provision,to adopt any general or individual decision necessary for attainment of theobjectives of the Treaty. The first and second paragraphs of Article 95, whichconfer that power upon it, do not give a specific indication of the scope of thedecisions which the Commission may adopt. In those circumstances, it is for theCommission to assess in each case which of the two kinds of decision, general orindividual, is the most appropriate to attainment of the objectives pursued.

37.

    In the sphere of State aid, the Commission has used the legal instrumentconstituted by the first and second paragraphs of Article 95 of the Treaty in twodifferent ways. First, it has adopted general decisions — the 'Aid Codes‘ — allowinga general derogation from the prohibition of State aid regarding certain specifiedcategories of aid. Secondly, it has adopted individual decisions authorizing certaintypes of specific aid on an exceptional basis.

38.

    In this case, the problem is, therefore, to determine the respective object and scopeof the Aid Code and of the contested individual decision.

39.

    It should be borne in mind that the aid code applicable when the contesteddecision was adopted was established by Commission Decision No 3855/91/ECSCof 27 November 1991, cited above. This was the Fifth Aid Code which, as providedby Article 9 thereof, entered into force on 1 January 1992 and applied until 31December 1996. Based on the first and second paragraphs of Article 95 of theTreaty, that code was expressly stated to continue the series of earlier codes (see,

in particular, Commission Decision No 3484/85/ECSC of 27 November 1985establishing Community rules for aid to the steel industry and Commission DecisionNo 322/89/ECSC of 1 February 1989 establishing Community rules for aid to thesteel industry, OJ 1985 L 340, p. 1 and OJ 1989 L 38, p. 8, respectively), byreference to which it may therefore be interpreted. It may be seen from itspreamble (see in particular point I of the grounds of Decision No 3855/91) that itwas intended in the first place 'not to deprive the steel industry of aid for researchand development or for bringing plants into line with new environmentalstandards‘. In order to reduce production overcapacity and restore balance to themarket, it also authorized, under certain conditions, 'social aid to encourage thepartial closure of plants or finance the permanent cessation of all ECSC activitiesby the least competitive enterprises‘. Finally, it expressly prohibited operating orinvestment aid, with the exception of 'regional investment aid in certain MemberStates‘. The possibility of such regional aid was available to undertakingsestablished in Greece, Portugal or the former German Democratic Republic.

40.

    The contested decision, for its part, was adopted by the Commission on the basisof the first and second paragraphs of Article 95 of the Treaty for the purpose,according to its preamble, of facilitating the restructuring of the public steelundertaking Ilva, which was experiencing serious difficulties in one of the MemberStates, Italy, in which the steel industry was endangered by the severe deteriorationof the Community steel market. The essential aim of the aid in question in this casewas privatization of the Ilva steel group which had until then benefited from loansgranted as a result of the unlimited liability of the single shareholder provided forin Article 2362 of the Italian Civil Code (points II and IV of the grounds). TheCommission made clear that the very difficult economic situation confronting theCommunity steel industry was accounted for by largely unforeseeable economicfactors. It considered therefore that it was facing an exceptional situation notspecifically provided for by the Treaty (point IV of the grounds).

41.

    A comparison of the Fifth Aid Code with the contested decision thus makes it clearthat those various measures have the same legal basis, namely the first and secondparagraphs of Article 95 of the Treaty, and derogate from the general prohibitionof aid laid down as a principle by Article 4(c) of the Treaty. Their scope isdifferent: the Code refers in general to certain categories of aid which it regardsas compatible with the Treaty and the contested decision authorizes, for exceptionalreasons and on one occasion only, aid which could not in principle be regarded ascompatible with the Treaty.

42.

    In that light, the applicant's view that the Code is binding, exhaustive and definitivecannot be upheld. The Code constitutes a binding legal framework only for thetypes of aid enumerated by it which are compatible with the Treaty. In relationthereto, it establishes a comprehensive system intended to ensure uniformtreatment, in the context of a single procedure, for all aid within the categorieswhich it defines. The Commission is only bound by that system when assessing thecompatibility with the Treaty of aid covered by the Code. It cannot therefore

authorize such aid by an individual decision conflicting with the general rulesestablished by that Code (see Case 113/77 NTN Toyo Bearing and Others v Council[1979] ECR 1185 (the 'ball bearings case‘); Case 118/87 ISO v Council [1979]ECR 1277; Case 119/77 Nippon Seiko and Others v Council [1979] ECR 1303; Case120/77 Koyo Seiko and Others v Council and Commission [1979] ECR 1337; Case121/77 Nachi Fujikoshi and Others v Council [1979] ECR 1363 and Walzstahl-Vereinigung and Thyssen v Commission, CIRFS and Others v Commission, andStahlwerke, Peine-Salzgitter and Hoogovens v Commission, cited above).

43.

    Conversely, aid not falling within the categories exempted from the prohibition bythe provisions of the Code may benefit from an individual derogation from thatprohibition if the Commission considers, in the exercise of the discretion which itenjoys under Article 95 of the Treaty, that such aid is necessary for attainment ofthe objectives of the Treaty. The Aid Code is only intended to authorize generally,and subject to certain conditions, derogations from the prohibition of aid for certaincategories of aid which it lists exhaustively. The Commission is not competentunder the first and second paragraphs of Article 95 of the Treaty, which areconcerned only with cases not provided for by the Treaty (see Netherlands v HighAuthority, cited above), to prohibit certain categories of aid, since such a prohibitionis already imposed by the Treaty itself, in Article 4(c). Aid not falling intocategories which the code exempts from that prohibition thus remains subjectexclusively to Article 4(c). It follows that, where such aid nevertheless provesnecessary to attain the objectives of the Treaty, the Commission is empowered torely on Article 95 of the Treaty in order to deal with that unforeseen situation, ifneed be by means of an individual decision (see paragraphs 32 to 36 above).

44.

    In this case, the decision at issue — authorizing State aid for the restructuring oflarge public steel making groups in certain Member States — does not fall within thescope of the Aid Code. The latter introduces, under certain conditions, derogationsof general scope from the prohibition of State aid solely in cases of aid for researchand development, aid for environmental protection, aid for closures and regionalaid for steel undertakings established on the territory or part of the territory ofcertain Member States. However, the operating aid and restructuring aid at issuein this case manifestly fall within none of the abovementioned categories of aid. It follows that the derogations authorized by the contested decision are not subjectto the conditions laid down in the Aid Code and therefore supplement it for thepurpose of pursuing the objectives set out in the Treaty (see paragraphs 77 to 83below).

45.

    In those circumstances the contested decision cannot be regarded as an unjustifiedderogation from the Fifth Aid Code but constitutes a measure based, like thatcode, on the first and second paragraphs of Article 95 of the Treaty.

46.

    It follows that the applicants' view that the contested decision was adopted tofavour the undertaking to which the aid in question was granted, by modifying the

Aid Code covertly, has no basis whatsoever. The Commission could not in anycircumstances, by adopting the Aid Code, relinquish the power conferred on it byArticle 95 of the Treaty to adopt individual measures in order to deal withunforeseen situations. Since in this case the scope of the Code did not cover theeconomic situation which prompted the Commission to adopt the contesteddecision, the Commission was entitled to rely on Article 95 of the Treaty in orderto authorize the aid in question, provided that it observed the conditions for theapplication of that provision.

47.

    Since the applicants have put forward nothing to show that the Commission, byadopting the decision at issue, sought to evade the Aid Code, the complaintalleging misuse of powers must be rejected.

The alleged frustration of legitimate expectations

— Arguments of the parties

48.

    According to the applicants, the contested decision, by authorizing on the basis ofArticle 95 of the Treaty the payment to Ilva of aid allegedly incompatible with theAid Code, is in breach of the principle of the protection of legitimate expectations.

49.

    First, that decision frustrates the expectation which publication of the various aidcodes and the declarations by the Council and the Commission regarding strictobservation thereof legitimately caused the undertakings concerned to entertain. The binding rules in the Code apply to all State aid in the steel industry. They thusprovide undertakings with a legal framework within which they may reasonablyexpect to be treated in the same way and, possibly, where unforeseen events occur,the conditions for granting authorization for aid to be altered by means of ageneral decision taking account of the circumstances of all the operators concerned,without any special treatment for the benefit of one or more undertakings.

50.

    Secondly, the Commission caused Ilva's competitors to entertain a legitimateexpectation when it declared, on authorizing the grant of aid to that undertakingin the past, that further aid could not be envisaged in the future, at least to theextent to which it would be incompatible with the Aid Code which applied to allundertakings. The applicants refer in that connection to Decision 89/218/ECSC of23 December 1988 concerning aid that the Italian Government proposed to grantto the public steel sector (OJ 1989 L 89, p. 76), as amended by Decisions90/89/ECSC of 13 December 1989 (OJ 1990 L 61, p. 19) and 92/17/ECSC of 27November 1991 (OJ 1992 L 9, p. 16) concerning the aid that the ItalianGovernment proposed to grant to the public steel sector, mentioned in thecontested decision. Furthermore, by initiating the procedure under Article 6(4) ofthe Aid Code with regard to the aid granted to Ilva in 1992 (OJ 1992 C 257, p. 4)and in 1993 (OJ 1993 C 213, p. 6) and by taking provisional measures against theItalian Government under Article 88 of the ECSC Treaty (Twenty-third Report on

Competition Policy, 1993, point 491), the Commission confirmed that it sought toensure strict observation of the Aid Code.

51.

    The Commission rejects that argument. The first and second paragraphs of Article95 of the Treaty provide for action by the Community institutions in the event ofunforeseen difficulties. Since such difficulties cannot be foreseen, there can be nolegitimate expectations regarding such decisions. In this case, the Fifth Aid Codereflects the position of the Commission and the Council at the time of its adoption,but does not exclude the possibility that economic circumstances might render adifferent approach necessary (Joined Cases 63/84 and 147/84 Finsider v Commission[1985] ECR 2857).

52.

    Furthermore, quite apart from the question whether any acts or measures ofCommunity institutions may have been such as to give rise to a legitimateexpectation, the Commission considers that, in view of the circumstances of thiscase, any such expectation is excluded in the applicants' case. Decision89/218/ECSC, cited above, was adopted in similar circumstances, on the basis of thefirst and second paragraphs of Article 95 of the Treaty, without the Third Aid Codethen in force being amended. Similarly, Commission Decision 92/411/ECSC of31 July 1992, adopted when the Fifth Aid Code, applicable in this case, was inforce, authorized under that article of the Treaty the grant of aid not covered bythe Code to undertakings established in Denmark and the Netherlands (OJ 1992L 223, p. 28). The applicants were therefore in a position to know that an AidCode could be supplemented by ad hoc decisions.

53.

    According to the Council, there is a breach of the principle of the protection oflegitimate expectations in the sphere of Community economic law 'if, in theabsence of an overriding matter of public interest, a Community institutionabolishes with immediate effect and without warning a specific advantage, worthyof protection, for the undertakings concerned without adopting appropriatetransitional measures‘ (Case T-472/93 Campo Ebro and Others v Council [1995]ECR II-421, paragraph 52). That principle does not mean that in general newrules cannot be applied to the future effects of situations which arose under theearlier rules, particularly where an adjustment is necessary as a result of changesin the economic situation. In this case, the contested decision did not have theeffect of depriving the applicants of an advantage worthy of protection. Under thescheme of the Treaty, the Commission was entitled, under the conditions laid downin the first paragraph of Article 95 of the Treaty, to adopt decisions to deal withcases not provided for. The Aid Code created a legal framework facilitating aflexible reaction to economic fluctuations affecting the Community steel industry. Similarly, the contested decision was adopted in order to take account of a 'changein the economic situation‘. Thus, by virtue of their nature and their objectives,measures adopted on the basis of the first paragraph of Article 95 of the Treatycannot create a binding and immutable legal framework for all economic operators. The nature of the Aid Code was not therefore such that the applicants might

entertain a legitimate expectation that the Commission would not authorize otherderogations from the prohibition of aid laid down in Article 4(c).

54.

    The Italian Republic, for its part, contends that in any event the applicants havenot shown that the alleged capacity of the Aid Code to give rise in theory to alegitimate expectation is reflected in the facts. They merely state that the membersof the applicant association took investment and reorganization decisions andclosed facilities at certain locations, without proving that those decisions weredecisively influenced by the idea that the Community would not authorize aid forrestructuring operations and, in particular, that those decisions would have beendifferent if they had been aware of such a possibility. Moreover, the applicants hadno grounds for any legitimate expectation that the adoption of the Aid Code wouldexclude any other intervention in unforeseen but foreseeable circumstances. Nosuch interpretation has ever been confirmed in Community law. On the contrary,past experience shows that the application of the Aid Code is no obstacle to thegrant of individual authorizations, which have in fact been granted pursuant to thefirst paragraph of Article 95 of the Treaty.

55.

    Ilva, for its part, contends that the applicants cannot credibly claim that they hadno idea of the Commission's intention to authorize new subsidies under Article 95of the Treaty or even of the possibility of such an occurrence. The fact that theCouncil's declaration of 25 February 1993 refers to it and the precedents cited bythe Commission show that the authorization of the aid in question by the contesteddecision cannot be regarded as an isolated or unforeseen case but that, on thecontrary, it forms part of a clear policy which had been brought to the notice of awide sector of the public. All the big European undertakings were thus informedof the Commission's intention to authorize aid under Article 95 of the Treaty, inparticular through Eurofer meetings in which the applicants participated regularly.

— Findings of the Court

56.

    The applicants consider that the contested decision contravenes the principle of theprotection of legitimate expectations in that it has the effect of disturbing thecommon market in steel by introducing, notwithstanding the express prohibition ofState aid and the existence of a very strict aid code, confusion liable to renderineffective the industrial strategies of undertakings not in receipt of aid.

57.

    That argument is based on the mistaken idea — as the Commission and theinterveners supporting it have rightly observed — that the existence of the Aid Codegave the undertakings concerned reason to believe that no specific decisionauthorizing State aid outside the categories covered by the Code would be adoptedin special circumstances. However, as the Court has already stated (see paragraphs38 to 44 above), the Aid Code does not pursue the same object as the contesteddecision, which was adopted to deal with an exceptional situation. It was not,therefore, in any way capable of giving rise to legitimate expectations as to the

possibility of granting individual derogations from the prohibition of State aid, onthe basis of the first and second paragraphs of Article 95 of the Treaty, in anunforeseen situation such as that which prompted the adoption of the contesteddecision (see paragraph 40 above).

58.

    Furthermore, and in any event, it is settled case-law of the Court of Justice that:'whilst the principle of the protection of legitimate expectations is one of thefundamental principles of the Community, traders cannot have a legitimateexpectation that in the existing situation which is capable of being altered by theCommunity institutions in the exercise of their discretionary power will bemaintained‘ (see Case C-350/88 Delacre and Others v Commission [1990] ECRI-395, paragraph 33).

59.

    The proper functioning of the common market in steel clearly involves the obviousneed for constant adjustments to fluctuations in the economic situation andeconomic operators cannot claim a vested right to the maintenance of the legalsituation existing at a given time (see Case 230/78 Eridania v Minister for Agricultureand Forestry [1979] ECR 2749, paragraph 22, and Case T-472/92 Campo Ebro andOthers v Council [1995] ECR II-421, paragraph 52). In particular, for 'prudent anddiscriminating traders‘ the adoption of specific measures, intended to deal withsituations where there is clearly a crisis is, in certain circumstances, foreseeable andcannot contravene the principle of the protection of legitimate expectations (Case78/77 Lührs v Hauptzollamt Hamburg-Jonas [1978] ECR 169, paragraph 6).

60.

    In this case it is clear that the applicants should, on any view, having regard to theirvery substantial economic importance and their participation on the ECSCConsultative Committee, have realized that the overriding need to adopt effectivemeasures to safeguard the interests of the European steel industry would arise andjustify the adoption of ad hoc decisions under the first and second paragraphs ofArticle 95 of the Treaty, as had already happened on several occasions whilst theAid Code was in force. In that connection, the Commission rightly refers toDecision 89/218/ECSC of 23 December 1988 and Decision 92/411/ECSC of 31 July1992, cited above, with authorized certain State aid outside the aid code in forceat that time.

61.

    It follows that the contested decision does not contravene the principle of theprotection of legitimate expectations.

The second plea in law: infringement of Article 95 of the Treaty

Arguments of the parties

62.

    The applicants maintain that the contested decision does not fulfil the conditionsfor the application of the first paragraph of Article 95 of the Treaty in that the aid

which it authorizes does not pursue an aim covered by the objectives set out inArticles 2 to 4 of the Treaty and is not necessary to attain those objectives.

63.

    The objective pursued by the contested decision — that of 'providing the Italiansteel industry with a sound and economically viable structure‘ (point 4 of thegrounds of the decision) — does not, in their view, fall within the objectives definedby Articles 2, 3 and 4 of the Treaty, which concern the common market and theCommunity steel industry as a whole, not the industry of a single Member State orindeed the survival of a single undertaking (Case 730/79 Philip Morris v Commission[1980] ECR 2671 and Joined Cases 351/85 and 360/85 Fabrique de Fer de Charleroiand Dillinger Hüttenwerke v Commission [1987] ECR 3639). To support individualundertakings like Ilva through the grant of substantial aid cannot be in conformitywith the objectives of the Treaty where unsubsidized undertakings of other MemberStates must reduce their capacity by their own endeavours. On the contrary, theexclusion from the market of unprofitable steel undertakings or at least reductionof their unused capacity and closure of their uncompetitive plants would contributeto attainment of the objectives of the second paragraph of Article 2 of the Treaty,under which the Community must take care 'not to provoke fundamental andpersistent disturbances in the economies of Member States‘. Moreover, theCommission could only have taken action against such a danger on the basis ofArticle 37 of the Treaty, which provides that '[i]f a Member State considers thatin a given case action or failure to act on the part of the Commission is of such anature as to provoke [such] disturbances in its economy, it may raise the matterwith the Commission‘, and not on the basis of the first and second paragraphs ofArticle 95 (see De Gezamenlijke Steenkolenmijnen in Limburg v High Authority,cited above).

64.

    The authorization given for the grant of aid to Ilva is likewise not justified by theneed to 'safeguard[...] continuity of employment‘ in accordance with Article 2 ofthe Treaty. According to the applicants, the aid in question simply enables theproblems of the Italian market to be shifted to the labour market in other MemberStates, where numerous jobs have been lost and continue to be lost in the steelindustry. The applicants challenge on that point the Commission's view that thecontested decision forms part of a 'global programme‘ for the reduction ofcapacity and restoration of the viability of steel undertakings. In any event, whenimplementing such a global programme, the Commission should satisfy itself thatthere is no discrimination between steel undertakings or between the public and theprivate sectors.

65.

    Moreover, the aid granted to Ilva is not, in any event, 'indispensable‘ forattainment of the objectives of the Treaty purportedly pursued by the contesteddecision. To fulfil the criterion of indispensability or necessity, the aid authorizedmust cause as little harm as possible to competition on the common market in steelin attaining the objective pursued. However, the Commission already authorizedthe grant of aid to Ilva in the sum of ECU 10 900 million for the period 1980 to1985 and ECU 3 250 million in 1988 to 1989. That aid did not restore the viability

of the beneficiary undertaking. The precedents show that, rather than leading toan improvement in competitiveness and restoration of the viability of the Italiansteel industry, the aid in question may be used by Ilva to finance the sale of itsproducts at low prices in order to increase its market share, with seriousrepercussions for the competitiveness of unsubsidized undertakings.

66.

    The Commission, supported by the Italian Republic, which endorses all itsarguments, considers that the contested decision is in conformity with the firstparagraph of Article 95 of the Treaty.

67.

    It maintains, first, that the decision pursues the attainment of certain objectivesmentioned in Articles 2 and 3 of the Treaty, which in particular require theCommunity to safeguard continuity of employment and to avoid provokingfundamental and persistent disturbances in the economies of the Member States. It forms part of a global programme for the reduction of capacity and restorationof the viability of European steel undertakings. It is not thus concerned with thesurvival of a single undertaking in a single Member State, but rather withsafeguarding the Community steel industry as a whole.

68.

    Accordingly, the Commission endeavoured, as part of a very far-reaching politicalcompromise, to reconcile possibly contradictory objectives envisaged by the Treatyas far as it was able. The contested decision seeks in particular to reconcilereorganization of the Ilva group with the shedding of jobs to a 'reasonable‘ extent. The repercussions of the crisis in the Italian steel industry have thus been mitigatedas regards employment, avoiding the loss of more than 38 000 jobs all at once.

69.

    As regards the indispensable nature of the aid, the Commission emphasizes thatin this case there are special circumstances relating in particular to the crisis, theprivatization of Ilva and the fact that there would in the future be no furtherrequests under Article 95 of the Treaty.

70.

    According to the Council, all the conditions required for the application of Article95 of the Treaty were complied with in this case. The contested decision forms anintegral part of the restructuring plan and the restructuring plan as a whole is inline with the objectives of the Treaty, in particular the general objective of 'takingcare not to provoke fundamental and persistent disturbances in the economies ofthe Member States‘ (second paragraph of Article 2 of the Treaty). The Councilobserves that, under the first paragraph of Article 33 of the Treaty, the Court'sreview may not include evaluation of the situation resulting from economic facts orcircumstances underlying the contested decision, unless there has been a misuse ofpowers or the Commission has 'manifestly failed to observe the provisions of [the]Treaty or any rule of law relating to its application‘. In this case, however, theapplicants have produced no evidence to show that the Commission's assessmentin the contested decision is manifestly erroneous (see Case C-280/93 Germany vCouncil [1994] ECR I-4973, paragraphs 90 and 95).

71.

    For its part, Ilva maintains that there is nothing in the second paragraph of Article2 of the Treaty to justify the interpretation advocated by the applicants to the effectthat that provision draws a distinction between a priority objective, namely the mostrational distribution of production, and secondary objectives such as safeguardingcontinuity of employment and the need to avoid fundamental and persistentdisturbances of the economies of the Member States. Furthermore, theCommission cannot be criticized for pursuing only those Treaty objectives which itregarded as enjoying priority in the light of the particular circumstances of this case,unless it is shown that it relied on manifestly erroneous assessments.

Findings of the Court

72.

    It must be borne in mind at the outset that, as held earlier in this judgment(paragraphs 31 to 46), the Commission is empowered, by virtue of the first andsecond paragraphs of Article 95 of the Treaty, to authorize State aid within theCommunity whenever the economic situation in the steel industry renders theadoption of measures of that kind necessary with a view to attainment of one of theobjectives of the Community.

73.

    That condition is fulfilled in particular where the sector concerned is experiencingexceptional situations of crisis. In that connection, the Court of Justice emphasizedin its judgment in Case 214/83 Germany v Commission [1985] ECR 3053, paragraph30, that 'there is a close link, for the purposes of the implementation of the ECSCTreaty, between the granting of aid to the steel industry and the restructuring whichthat industry is required to undertake‘. The Commission, for the purpose of suchimplementation, considers in its discretion whether aid intended to accompany therestructuring measures is compatible with the fundamental principles of the Treaty.

74.

    In this case, it is not disputed that, at the beginning of the 1990s, the Europeansteel industry was beset with a sudden and serious crisis through the combinedeffect of several factors such as the international economic recession, loss oftraditional export outlets, a steep increase in competition from steel industries indeveloping countries and the rapid growth of Community imports of steel productsfrom the member countries of the Organization of Petroleum Exporting Countries(OPEC). It is against the background of that crisis that, in this case, it should beconsidered whether the aid in question was necessary, as required by the first andsecond paragraphs of Article 95 of the Treaty, with a view to attaining thefundamental objectives of the Treaty.

75.

    The contested decision clearly indicates, in point IV of its grounds, that its purposeis to reorganize the steel industry in the Member State concerned. It states that'providing the Italian steel industry with a sound and economically viable structurecontributes to achieving the objectives‘ of the Treaty.

76.

    It is necessary, therefore, first to verify whether that aim is in line with theobjectives of the Treaty and, second, whether authorization for the aid in questionwas necessary with a view to attaining those objectives.

77.

    As to whether, first, the reorganization of the beneficiary undertaking is conduciveto attaining the objectives of the Treaty, it is expressly stated in the grounds of thecontested decisions that that aim was complex and comprised several components. The aid in question was intended to facilitate the privatization of the beneficiaryundertaking, the closure of certain plants, the reduction of excess capacity andreduction of the work force within acceptable limits (see point II of the grounds ofthe contested decision). It was that body of objectives which, once realized, wasto provide the undertaking concerned with a sound and profitable structure.

78.

    The contested decision thus pursues a wide variety of objectives and it is necessaryto verify whether, in the context of the crisis experienced by the steel industry (seeparagraphs 72 to 74 above), they are within the scope of the objectives laid downby Articles 2 and 3 of the Treaty, specifically referred to in the grounds of thecontested decision.

79.

    Against that background, it must be borne in mind first of all that, in view of thediversity of the objectives determined by the Treaty, the Commission's role consists,according to settled case-law, in ensuring that those various objectives arereconciled at all times, exercising the discretion available to it in order to meet therequirements of the common interest (see Case 9/56 Meroni v High Authority [1958]133, Part B, grounds 3-5, Case 8/57 Groupement des Hauts Fourneaux et AciériesBelges v High Authority [1958] ECR 245, Part B, ground 3, and Joined Cases 351/85and 360/85 Fabrique de Fer de Charleroi and Dillinger Hüttenwerke v Commission[1987] ECR 3639, paragraph 15). In particular, in Joined Cases 154/78, 205/78,206/78, 226/78, 227/78, 228/78, 263/78, 264/78, 31/79, 33/79, 83/79 and 85/79Valsabbia and Others v Commission [1980] ECR 907, paragraph 55, the Court ofJustice held '[i]f the need for a compromise between the various objectives isimperative in a normal market situation, it must be accepted a fortiori in the stateof crisis justifying the adoption of exceptional measures which derogate from thenormal rules governing the working of the common market in steel and whichclearly entail non-compliance with certain objectives laid down by Article 3, if onlythat objective (contained in paragraph (c)) which requires that the establishmentof the lowest prices be ensured‘.

80.

    In this case, the Court finds that the contested decision reconciles various objectivesof the Treaty, with a view to safeguarding important interests.

81.

    The rationalization of the European steel industry through the restructuring ofcertain groups, including Ilva, the closure of obsolete or uncompetitive plant, thereduction of excess capacity, privatization of the Ilva group in order to ensure itsviability and the shedding of jobs within 'reasonable‘ limits — to use the

Commission's words — mentioned in that decision contribute to attainment of theobjectives of the Treaty, having regard to the sensitive nature of the steel industryand the fact that continuation, or indeed aggravation, of the crisis was liable to giverise to extremely serious and enduring disturbances of the economies of theMember States concerned. It is not disputed that the industry is of essentialimportance in a number of Member States, in particular Italy, by reason of thelocation of steel plants in regions where there is low employment and theimportance of the economic interests at stake. In those circumstances, anydecisions to close plant and shed jobs, and the transfer of control of theundertakings concerned to private companies acting exclusively in accordance withthe logic of the market, would have been likely to create, without support measuresby the public authorities, difficulties of the greatest public importance, particularlyby exacerbating the problem of unemployment and creating the risk of a majoreconomic and social crisis.

82.

    In those circumstances the contested decision, by seeking to resolve thosedifficulties by reorganizing the Ilva steel group, is incontestably designed tosafeguard 'continuity of employment‘ and to avoid provoking 'fundamental andpersistent disturbances in the economies of the Member States‘, as required by thesecond paragraph of Article 2 of the Treaty. Moreover, it pursues the objectivesembodied in Article 3 concerning, inter alia, 'maintenance of conditions which willencourage undertakings to expand and improve their production potential‘(paragraph (d)) and the promotion of 'orderly expansion and modernization ofproduction, and the improvement of quality, with no protection against competingindustries‘ (paragraph (g)). It is designed to rationalize the European steelindustry, in particular through definitive closure of obsolete or uncompetitive plant(for example in Bagnoli) and the irreversible reduction of production capacity forcertain products (for example at Taranto, in Italy) with a view to dealing withexcess capacity (see Article 2 of the contested decision). It, together with the otherfive individual decisions mentioned above, authorizing State aid and adopted on thesame day, thus form part of a comprehensive programme for restructuring of thesteel industry on an enduring basis and reduction of production capacity in theCommunity (see paragraphs 4 to 6 above). Accordingly, it must be emphasizedthat the aim of the aid in question is not simply to ensure the survival of thebeneficiary undertaking — which would run counter to the common interest — butto restore its viability whilst keeping the impact of the aid on competition to aminimum and ensuring compliance with the rules of fair competition, in particularregarding the conditions for privatization of the Ilva group.

83.

    It follows that the contested decision is intended to safeguard the common interest,in accordance with the objectives of the Treaty. The applicants' view that thedecision is not conducive to the attainment of those objectives must therefore berejected.

84.

    It having been found that the contested decision pursues Treaty objectives, it isnecessary, secondly, to verify whether it was necessary in order to attain those

objectives. As the Court of Justice held in Germany v Commission, cited above, theCommission 'was under no circumstances entitled to authorize the granting ofState aid which was not necessary to attain the objectives of the Treaty and wouldbe likely to give rise to distortions of competition on the common market in steel‘(paragraph 30).

85.

    It must be pointed out in that connection that the first paragraph of Article 33 ofthe Treaty provides that '[t]he Court of Justice may not ... examine the evaluationof the situation, resulting from economic facts or circumstances, in the light ofwhich the Commission took its decision or made its recommendations, save wherethe Commission is alleged to have misused its powers or to have manifestly failedto observe the provisions of this Treaty or any rule of law relating to itsapplication‘.

86.

    With regard to State aid, the Court of Justice has consistently held that 'theCommission has a discretion the exercise of which involves economic and socialassessments which must be made in a Community context‘ (Case 730/79 PhilipMorris v Commission [1980] ECR 2671, paragraph 24, Matra v Commission, citedabove, and Joined Cases T-244/93 and T-486/93 TWD v Commission [1995] ECRII-2265).

87.

    As far as the present plea in law is concerned, involving as it does a complexeconomic and technical assessment, the Court's review must, according to settledcase-law, therefore be limited to verifying that the facts are materially accurate andthat there has been no manifest error of assessment (see Case T-266/94Skibsværftsforeningen and Others v Commission [1996] ECR II-1399, paragraph 170;Case T-17/93 Matra Hachette v Commission [1994] ECR II-595, paragraph 104, andCase T-9/93 Schöller v Commission [1995] ECR II-1611, paragraph 140).

88.

    In this case, in support of their view that the aid granted to Ilva is 'not necessary‘,the applicants insist that, in view of past experience and of the excess productioncapacity in the steel industry, any attempt to restore the viability of the undertakingin question by means of State aid will inevitably fail, with serious repercussions forcompetition.

89.

    However, the applicants have adduced no specific evidence to show that theCommission committed a manifest error in assessing whether the aid in questionwas necessary and, in particular, whether it could facilitate reorganization of thebeneficiary undertaking.

90.

    A mere assertion, referring only to the ineffectiveness of earlier aid, that the aidin question will probably not be capable of producing the intended resultsconstitutes nothing more than purely speculative and hypothetical conjecture. Anyattempt to extrapolate for the future results obtained in the past, without examiningin detail the specific conditions imposed by the contested decision in order to

achieve reorganization of the beneficiary undertaking in order to ensure its viability,cannot constitute evidence of failure by the Commission to comply with the Treaty.

91.

    The Court also finds that, contrary to the applicant's assertions, the antecedents tothe contested decision and the statement of the reasons on which it is based reveala thorough analysis of the present crisis in the European steel industry and of themost appropriate means for dealing with it. The Commission directed that aninvestigation be carried out by an independent expert, Mr Braun, whose task wasto list plans for the closure of steel undertakings; his report was submitted on 29January 1993. That report, produced by the Commission, corroborates theinformation contained in the communication from the Commission to the Counciland the European Parliament of 23 November 1992 (see paragraph 4 above). Moreover, it is clear from documents before the Court that the Commission, withthe assistance of outside experts, considered very carefully the restructuring planaccompanying the aid programme envisaged by the Member State concerned interms of its capacity to ensure the viability of the beneficiary undertaking (point IIIof the grounds of the contested decision).

92.

    Moreover, it is apparent from the Commission's communications to the Council inthe course of the procedure leading to the adoption of the contested decision thatthe Commission analysed in detail the conditions under which the undertakingreceiving the aid in question would be viable. In particular, Chapter 2 of theCommission's communication to the Council and to the ECSC ConsultativeCommittee of 15 December 1993 (SEC(93)2089 final) requesting the assent of theCouncil and the opinion of the ECSC Consultative Committee under Article 95 ofthe ECSC Treaty contains an analytical description of the prospects of viability ofthe undertakings (ILP and AST) resulting from privatization of the Ilva group(points 2.5 and 2.6), as accepted by the Council, and a reference to the activitiesof an independent expert instructed to identify 'the hot-rolling mills which couldbe closed without jeopardizing the viability of either of the new companies, be itILP or AST‘ (ibid., point 2.9). It is clear from the document in question that theexpert took account of six options involving different possibilities of closures andreduction of capacity, the second of which was chosen by the Italian Government. Option 2 is described as follows: 'eliminating one of the four reheating furnacesbelonging to the No 1 mill and one of the three furnaces belonging to the sheetmill at Taranto and closing down completely the facilities at Bagnoli‘ (ibid., point2.9). On the basis of those details, the Commission considered that ILP and ASTwould be viable. In particular, on the basis of the criterion that a steel undertakingbecomes viable 'if it is able to show a return on its equity capital in the range of1-1.5% of turnover‘ it emphasized that ILP's profits would be of the order of 1.4to 1.5% of turnover, (ibid., point 3.3.2., p. 20), even if financial charges were toincrease. As regards the production levels needed in order not to undermine theviability of ILP and AST, points 2.5 and 2.6 of the document concerned (pp. 5 to8) contain an economic analysis of the conditions needed to achieve a satisfactorysituation no later than the end of 1996; those results were used to define thecontent of Article 2 of the contested decision.

93.

    As regards the applicants' arguments concerning the impact of the contesteddecision on competition, they too are without any foundation. The applicants failto take into account the precautions taken by the Commission in the contesteddecisions with a view to ensuring Ilva's viability, in particular by resolving theproblem of its debts (see point II of the grounds of the contested decision), whilstat the same time limiting the financial restructuring measures to the amountsstrictly necessary, so as not to 'affect the conditions of trade in the Communitysteel industry to an extent which is incompatible with the common interest‘ havingregard in particular to the present difficulties in the steel market (point VI of thegrounds of the contested decision). In that respect, the Court finds that theCommission, in order not to provide the beneficiary undertaking with an undueadvantage over other undertakings in the sector, took care in the contested decisionin particular to ensure that that undertaking concerned did not at the outset haveits net financial charges reduced below 3.5% of annual turnover (3.2% in the caseof AST) which, according to the Commission, which has not been contradicted onthat point by the applicants, represents the present average for Community steelundertakings. More generally, Article 2 of the contested decision imposes certainconditions intended to ensure that the financing aid is limited to what is strictlynecessary. In view of those considerations, the applicants' argument designed toshow that in the present situation of overcapacity the aid in question would merelyenable the beneficiaries to sell their products at below production cost is entirelyunfounded.

94.

    In those circumstances, the applicants have adduced no evidence to show that theCommission committed a manifest error of assessment by considering that the aidin question, on the terms laid down in the contested decision, was necessary inorder to attain certain objectives of the Treaty.

95.

    It follows that the contested decision is not rendered unlawful by any breach of theconditions for the application of the first and second paragraphs of Article 95 ofthe Treaty.

The third plea in law: breach of the principle of proportionality

Arguments of the parties

96.

    The applicants maintain that the contested decision failed to require the beneficiaryundertaking to reduce its steel production sufficiently. They challenge theCommission's position that Ilva's obligation to reduce its production capacity by 2million tonnes per year represents a sufficient coounterpart for the grant of the aidin question and the distortions of competition which it is likely to cause.

97.

    In particular, they criticize the Commission for applying, in order to determine theamount of that reduction of capacity, a 'criterion similar to that used in the other

cases of aid for steel undertakings‘. In their view the Commission should havetaken account of the special circumstances of this case with regard, in particular,to the profitability of the beneficiary undertaking's plant and the restructuring effortwhich it had undertaken before receiving the aid, the fact — of essential importance— that the undertaking had already received aid and the manner in which it wasused, and, finally, its share of excess production capacity. On the basis of thosecriteria, the grant of the aid in question should have been subject to an obligationto reduce capacity by far more than 2 million tonnes per year.

98.

    In any event, in the applicants' view, if the Commission had applied the samecriterion as that applied when authorizing the aid paid to East Germanundertakings, the volume of the capacity reductions to be undertaken by Ilva wouldnecessarily have been at least 3 million tonnes.

99.

    In addition, the Commission should not have included in the reduction of capacityimposed on Ilva the 'earlier closures‘, since in Ilva's case they constituted on eachoccasion the counterpart for aid already received in the past.

100.

    In addition, the Commission's view that it is appropriate to refer to maximumpossible production (MPP) to determine the capacity reductions to be effectedshould be rejected since it does not allow a real decrease to be achieved in thebeneficiary undertaking's production, which, in the applicants' view, is the onlypossible way of compensating for distortions of competition provoked by such aid. In this case, it would be necessary to reduce capacity by much more than 4 milliontonnes of hot-rolled products in order to have an impact on the market, since Ilva'spresent capacity exceeds its actual production by at least 4 million tonnes.

101.

    Against that background, the applicants maintain that the contested decision doesnot even guarantee the capacity reduction of 2 million tonnes required by theCommission. That reduction would include closure of the Bagnoli steelworks,where nothing has been produced since mid-1992 (see the Commissioncommunication to the Council of 15 December 1993, pp. 22 and 23), and thecapacity reduction of 1.7 million tonnes at Taranto, whose official capacity (3.5million tonnes) far exceeds its actual production (about 2 million tonnes).

102.

    The Commission contests all the arguments put forward by the applicants. Thecapacity reduction required in this case, which amounts to around 750 000 tonnesper year and per ECU 1 000 million of aid granted, is appropriate. Moreover, the'other cases of aid for steel undertakings‘ mentioned by the Commission in itscommunication to the Council of 15 December 1993 were authorized by the fiveother decisions mentioned above, adopted on the same day as the contesteddecision under Article 95 of the Treaty. They, with the contested decision,constitute all the measures then taken to facilitate reorganization of the steelindustry. In that regard, the Commission states that, of the 5.5 million tonnescapacity reduction imposed by those six decisions, 2 million tonnes relate to Ilva.

103.

    In this case, the Commission took account in particular of the special circumstancesof the Ilva group. It took account not only of the reduction of production capacityto be made but also of other factors varying from one region of the Community toanother, such as the restructuring effort undertaken before 1981, the regional andsocial problems caused by the crisis in the steel industry, technical developmentsand adaptation by undertakings to market requirements.

104.

    In those circumstances, the Commission cannot be criticized for failing to takeaccount of the aid previously granted to Ilva. In that regard, the applicants haveprovided no specific evidence in support of their allegations to show that the aidwas inappropriately used by the beneficiary undertaking.

105.

    Ilva, for its part, states that the Commission applied to this case criteria ofassessment similar to those employed by it in relation to the other undertakingsreceiving aid. The six decisions mentioned above, adopted on 12 April 1994,fulfilled all the same requirements, pursued the same objectives and conformed tothe same criteria of assessment laid down in the general plan for restructuring ofthe Community steel industry. The capacity reductions imposed on Ilva merelyreflect a particularly strict and rigorous application of those criteria. Although theCommission is not required to ensure a strict ratio between capacity reductions andthe amount of aid, it endeavoured so far as possible to keep to a constant figureof 750 000 tonnes capacity reduction per year and per ECU 1 000 million of aidpaid. Ilva also contests the applicants' assertions to the effect that the capacityreductions imposed by the contested decision have no practical impact on thecommon market in steel. The present situation justifies the recommissioning,without excessive difficulty, of the Bagnoli plant, whereas, as far as Taranto isconcerned, the argument that, in calculating the closures, the Commission tookaccount of capacity reductions already made in return for earlier investments isunfounded, since the second reheating furnace at Taranto is still operational andthe decision to dismantle it will have important repercussions for the steel market.

Findings of the Court

106.

    By this plea alleging breach of the principle of proportionality, the applicantsmaintain essentially that the contested decision does not require the beneficiaryundertaking to reduce its capacity sufficiently, as a counterpart for the economicadvantages conferred on it by the aid in question and to the resultant distortionsof competition.

107.

    According to the first paragraph of Article 95 of the ECSC Treaty, decisionsadopted by the Commission to deal with cases not provided for in the Treaty mustconform with Article 5 of the Treaty, according to which the Commission is to carryout its task 'with a limited measure of intervention‘. The latter provision must beinterpreted as embodying the principle of proportionality (see, to that effect, the

Opinion of Advocate General Roemer in Case 31/59 Acciaieria e Tubificio diBrescia v High Authority [1960] ECR p. 71, part B.I.a., at p. 88).

108.

    With regard to State aid, the Court of Justice held in Germany v Commission, citedabove, that the Commission was not entitled to authorize the granting of aid which'would be likely to give rise to distortions of competition on the common marketin steel‘ (paragraph 30). To the same effect, it held in Case 15/57 Compagnie desHauts Fourneaux de Chasse v High Authority [1958] ECR 211, at 227, that thatinstitution 'has a duty to act with circumspection and to intervene only aftercarefully balancing the various interests concerned whilst so far as possiblerestricting the foreseeable damage to third parties‘.

109.

    Moreover, according to settled case-law, the Commission enjoys in this area a'wide discretion ... reflecting the political responsibilities‘ which it exercises (seeCase C-8/89 Zardi [1990] ECR I-2515, paragraph 11). Consequently, only if adecision adopted by the Commission is 'manifestly inappropriate‘ ordisproportionate having regard to the objective pursued will the legality of thatdecision be affected (see Case 265/87 Schräder [1989] ECR 2237, paragraph 22, andCase 179/84 Bozzetti v Invernizzi [1985] ECR 2301).

110.

    In this case, therefore, it is necessary to verify whether, in the light of the case-lawcited, the Commission required the beneficiary undertaking, by means of thecontested decision, to carry out appropriate plant closures and reductions ofcapacity as a counterpart for the aid authorized.

111.

    In that regard, it must be borne in mind that, as held by the Court of Justice, no'exact quantitative ratio‘ has to be established between the 'amount of the aid andthe size of the required cuts in production capacity‘ (see to that effect Germany vCommission, cited above, paragraph 33). On the contrary, the factors which areliable to influence the exact amount of the aid to be authorized 'do not consistsimply in the number of tonnes of production capacity having to be cut; there areother factors, too, which vary from one region of the Community to another‘, suchas the restructuring effort made, the regional and social problems occasioned by thecrisis in the steel industry, technical change and the adaptation of undertakings tosuit market requirements (ibid., paragraph 34). It follows that the Commission'sassessment cannot be subjected to a review based solely on economic criteria. TheCommission may legitimately take account of a wide variety of political, economicand social considerations in exercising its discretion under Article 95 of the Treaty.

112.

    In this case, an analysis of the grounds and of the operative part of the contesteddecision, and of the context of that decision, shows that the Commission imposedon the beneficiary undertaking appropriate conditions as a counterpart to the aidin question in order to contribute to the restructuring of the entire sectorconcerned and to reduction of capacity, whilst at the same time taking into accountthe economic and social objectives pursued by the authorization of that aid (seeparagraph 81 above).

113.

    It is clear from points V and VI of the grounds of the contested decision that theCommission took care to observe the principle of proportionality. In particular itstates in point V that '[s]o as to limit the impact on competition to the minimum,it is important that the Italian public steel sector should make a crucial contributionto the structural adjustment still necessary in that sector, through capacityreductions carried out in return for the aid‘ and that '[t]he granting of operatingaid must be limited to what is strictly necessary‘. Accordingly, in Article 2 of thedecision it requires reductions of production capacity for hot-rolled products of 1.7million tonnes per year in Taranto through the demolition of reheating furnaces —or up to 0.5 million tonnes per year through the demolition of other plants whichmanufactured products of that kind until the date of Ilva's privatization, which nowbelong to the new owner of ILP — and complete closure of the Bagnoli plant. Thetotal reduction of capacity thus imposed was 2 million tonnes per year, accordingto the particulars supplied by the Commission, according to which the figureadopted for closure of the Bagnoli plant — the maximum production capacity ofwhich was 1.25 million tonnes — was only 0.3 million tonnes. It does not appear tobe manifestly disproportionate having regard to the economic and socialcircumstances prevailing in the steel industry of the Member State concerned, inrelation to the overall reduction of 19 million tonnes envisaged by the Commissionin the context of its comprehensive restructuring plan for the European steelindustry, of which the contested decision forms part.

114.

    In particular, the applicants' argument designed to show that the capacityreductions imposed by the contested decision are inappropriate must be rejected. The Court finds, first, that the reductions of capacity specified in the contesteddecision do not cover certain reductions already imposed in earlier decisionsauthorizing the grant of aid to Ilva. On this point, the applicants' assertions areundermined by specific and detailed information provided by the Commissionregarding, first, the actual types of products and plant affected by capacityreductions under earlier decisions and, second, actual implementation of thosereductions under the Commission's control. Similarly, the applicants, whenreferring to the increase in Ilva's production capacity as a result of the investmentsmade during previous years at Taranto and Novi Ligure, failed to take account ofthe fact that the abovementioned Decision 89/218/ECSC, which authorized aid forIlva, did not prohibit that undertaking from making such investments. In any event,the modernization of the plant at Novi Ligure was only carried out in return for acorresponding reduction of capacity, as is clear from the information provided bythe Commission and not disputed by the applicants. In those circumstances, itcannot be contended that, by failing to require, in the contested decision, anadditional reduction of capacity corresponding to those investments, theCommission committed a manifest error of assessment.

115.

    Moreover, the argument that the Commission should have taken account in thecontested decision of the aid paid earlier to Ilva must also be rejected since thegrant of that aid was authorized in circumstances different from those of this case

and it too was made subject, at the time, to the obligation to carry out certaincapacity reductions, as mentioned above. In this case, the contested decision couldonly and was required only to prescribe appropriate capacity reduction havingregard to the amount of aid authorized and the purpose of that aid.

116.

    Second, there is no basis for the applicants' argument that the capacity reductionsimposed in this case are disproportionate in that they take no account of earlierefforts to restructure Ilva, of its profitability and of its share of excess productioncapacity in the steel industry. It must be pointed out, first, that the allegedincreases of production capacity for crude steel on the Italian market are largelyattributable to the big private steel companies established in that country and notto the State-owned undertaking Ilva, as is apparent from the file, and, second, thatIlva in particular reduced its production capacity for cast iron and steel by 5.78million tonnes per year between 1980 and 1986, under the abovementionedDecision 89/218/ECSC. Moreover and in any event, the submission of theapplicants, who suggest that the effort to reduce production capacity must be bornesolely by the undertakings receiving aid and take account of their profitability,leaving other undertakings the right to retain even 'colossal‘ overcapacity as longas their economic situation allows them to do so, misconstrues the very purpose ofthe contested decision. The aid in question was not granted solely to facilitatereduction of overall excess production capacity but was also intended to restoreIlva's viability, in pursuit of certain economic and social priorities, in the specificcontext of the present case. In that context, the capacity reductions required ofIlva by the contested decision were to be determined by reference not only to theneed to contribute decisively to structural adjustment in the steel industry in returnfor the aid in question but also to requirements linked with restoration of itsviability.

117.

    Third, and similarly, the view that the capacity reduction should have been assessedby reference to the actual production of the beneficiary undertaking and not itsmaximum possible production cannot be upheld. As the Commission points out,where there is excess capacity, the quantity produced by an undertaking dependsessentially on economic developments. It thus reflects the market situation ratherthan the production capacity of the undertaking. Only the maximum productioncapacity — which is capable of being mobilized rapidly and at limited cost by theundertaking concerned — represents a constant value allowing an assessment to bemade, unclouded by conjunctural uncertainties, of the capacity actually available tothe undertaking. Moreover, contrary to the applicants' assertions, a reduction ofthat maximum production capacity has an impact on the market in that the closedplant is no longer available where, in particular, other plants fail or there is growthin demand.

118.

    For all those reasons, the applicants' argument based on a comparison of thecapacity reductions imposed in this case with the reductions made in otherdecisions concerning, for example, undertakings established in the former EastGermany, cannot be upheld, since capacity reductions are a reflection of the

specific circumstances prevailing on the market concerned. The applicants not onlydo not identify those 'other decisions‘ to which they refer but, furthermore, theygive no indication concerning either the industry in question or the circumstancesof the undertakings to which those decisions relate. Moreover, in this case, theonly specific reasons put forward by the applicants for which, in their view, theparticular situation of the Italian State-owned steel industry should be subject tocapacity reductions of a significantly greater magnitude than those imposed by thecontested decision are without foundation, as held above.

119.

    It follows that the allegation of breach of the principle of proportionality isunfounded.

The fourth plea in law: breach of the principle of non-discrimination

Arguments of parties

120.

    The applicants consider that the contested decision contravenes the prohibition ofdiscrimination laid down in Article 4(b) of the Treaty, which prohibits measuresand practices giving rise to discrimination between producers, buyers and users. They point out that, in its judgment in Case 304/85 Falck v Commission [1987]ECR 871, paragraph 27, the Court of Justice held that 'although any aid measuresare likely to favour one undertaking in relation to another, the Commission cannotapprove aid the grant of which may result in manifest discrimination betweenpublic and private sectors. In such a case the grant of aid would involve distortionof competition to an extent contrary to the common interest‘.

121.

    The contested decision, in their view, contravenes the principle of non-discrimination in two ways: it leads to unequal treatment of certain undertakingsin the same situation as Ilva and to unequal treatment of the private sector incomparison with the public sector, to which Ilva belongs. In particular, ThyssenStahl, Preussag Stahl and the other undertakings in the German steel industryassociation Wirtschaftsvereinigung Stahl, and Hoogovens Groep BV, all of whichhave substantially less overcapacity than Ilva, are unjustly discriminated against bythe decision authorizing the grant of aid to Ilva. That applies also to the entireprivate sector since in practice aid authorized under the first and secondparagraphs of Article 95 of the Treaty benefits only public undertakings.

122.

    As regards Ilva's claim that the judgment of the Court of First Instance should notupset the balance existing between the positions of the various undertakings inreceipt of aid, the applicants regard it as manifestly incorrect: Ilva would not bediscriminated against if the Court of First Instance were to annul the contesteddecision and if the other decisions continued to stand. There is no equality inillegality nor any entitlement to equal unlawful treatment.

123.

    The Commission, supported by the Italian Republic, contends first that any decisionconcerning the volume of aid is a matter for the Member States, which must notifythe details thereof to the Commission. Its responsibility is limited to verifying thatthe interests of the Community as a whole are safeguarded and that the envisagedaid pursues attainment of the objectives of the ECSC Treaty without distortingcompetition. In this case, the contested decision indisputably contributes to therestructuring of the European steel industry as a whole since it forms part of anoverall plan and includes very strict conditions concerning the privatization of Ilvaand the closure of certain establishments. Accordingly, it is wrong to speak ofdiscrimination between Ilva and competing steel undertakings or between theprivate steel sector and State-owned steel undertakings. Moreover, the closurescarried out by private steel undertakings could also give rise to financial supportmeasures. In particular, a number of undertakings, including the three applicants,sought through Eurofer and obtained, by Commission Decision 94/6/ECSC of 21December 1993 authorizing common financial arrangements in respect of individualprogrammes involving the closure of production capacity in the Community steelindustry for heavy sections, hot-rolled wide coils and strip, and reversing-mill plate(OJ 1994 L 6, p. 30), authorization to set up common financial arrangements witha view to implementing programmes for individual closure of production capacity.

124.

    According to the Council, the contested decision does not infringe the principle ofnon-discrimination. Nothing in the arguments put forward in that respect by theapplicants shows that the contested decision gave rise to an objectively unjustifieddifference of treatment as between Ilva and the applicants.

125.

    According to Ilva, it is not possible to maintain that undertakings receiving aid aretreated differently from their competitors unless it is shown that there is noappropriate counterpart, having regard to the common interest, for the advantagethus afforded them. However, in this case the grant of the aid at issue wasappropriately offset by financial reorganization, reduction of capacity andprivatization.

Findings of the Court

126.

    According to Article 4(b) of the Treaty, 'measures or practices which discriminatebetween producers‘ are recognized as incompatible with the common market forsteel and are accordingly prohibited within the Community.

127.

    According to settled case-law, discrimination arises where like cases are treateddifferently, so that some traders are subjected to disadvantages and others are not,and such difference in treatment is not justified by the existence of substantialobjective differences (Case 250/83 Finsider v Commission [1985] ECR 131,paragraph 8). With respect to aid to the steel industry in particular, the Court ofJustice has held that there is unequal treatment and therefore discrimination wherea decision authorizing aid gives rise 'to different advantages for steel undertakings

placed in the same situation or to identical advantages for steel undertakings placedin appreciably different situations‘ (Germany v Commission, cited above, paragraph36).

128.

    The question of discrimination regarding aid as between the public and privatesectors under the Treaty was examined in the judgment in Falck v Commission,cited above. After emphasizing that the responsibility for granting aid fallsprimarily upon the government concerned, the Court of Justice clarified the roleof the Commission in the following terms: '[i]t is true ... that although any aidmeasure is likely to favour one undertaking in relation to another, the Commissioncannot approve aid the grant of which may result in manifest discriminationbetween public and private sectors. In such a case the grant of aid would involvedistortion of competition to an extent contrary to the common interest‘ (paragraph27).

129.

    In this case, in order to determine whether the contested decision is discriminatory,it is necessary to verify whether it accords to the undertaking to which the aid atissue is granted treatment different from that accorded to other undertakings in thesame situation, or whether it involves distortions of competition to an extentcontrary to the common interest.

130.

    In that regard, it must first be observed that the applicants have advanced noargument capable of showing that the aid in question was the subject of morefavourable treatment by the Commission than other comparable State aid notifiedto it (see paragraph 118 above). Nor have they provided the slightest evidence toshow that the contested decision is liable to distort conditions of competition 'toan extent contrary to the common interest‘ and thereby involves 'manifest‘discrimination against, in particular, private undertakings.

131.

    As the Italian Government states, the context in which the contested decision wasadopted and the decision itself disclose no support for the assertion that it wasdecisively influenced by the fact that the undertaking to which the aid was grantedwas a public undertaking and that, consequently, the decision would have beendifferent had it been a private undertaking. Moreover, the public nature of theundertaking concerned could not lawfully be relied on by the Commission to refuseto grant the aid in question since to do so would contravene the principle of equaltreatment as between public and private undertakings.

132.

    Moreover, it must be borne in mind that, as already held (see paragraphs 112 to121 above), the advantages afforded to the undertaking to which the aid in questionwas granted are proportionate to the objectives pursued, as a result in particularof the counterpart obligations imposed on that undertaking (plant closures andreduction of production capacity). Furthermore, the distortions of competitionresulting from the contested decisions are limited to what is strictly necessary (seeparagraph 93 above) and are justified by the very aim of the decision — restoration

of a sound and profitable structure for the beneficiary undertakings — which hasbeen held to be compatible with the Treaty (see paragraphs 77 to 83 above). Finally, Article 1(3) of the decision states '[t]he aid shall not be used for thepurpose of unfair competition practices‘. Pursuant to Article 6(1) of the contesteddecision, if any of those obligations is not observed, the Commission may requirethe suspension of payment or recovery of the aid in question.

133.

    In those circumstances, the Court finds that the Commission acted in the commoninterest, appraising the various interests involved and ensuring that importanteconomic and social interests were safeguarded, whilst at the same time avoidingunfavourable consequences for other economic operators to the extent to which thevery subject-matter and the purpose of the contested decision allowed.

134.

    This analysis is in conformity with the case-law of the Court of Justice which held,in Valsabbia v Commission, cited above, (paragraph 49) '[t]he Commission isindeed under an obligation by virtue of Article 3 of the Treaty to act in thecommon interest, but that does not mean that it must act in the interest of all thoseinvolved without exception, for its function does not entail an obligation to act onlyon condition that no interest is affected. On the other hand, when taking actionit must weigh up the various interests, avoiding harmful consequences where thedecision to be taken reasonably so permits. The Commission may, in the generalinterest, exercise its decision-making power according to the requirements of thesituation, even to the detriment of certain individual interests‘.

135.

    It follows that the applicant's argument that the contested decision is vitiated bybreach of the principle of non-discrimination must be rejected.

The fifth plea in law: breach of the obligation to state reasons

Arguments of the parties

136.

    The applicants consider that the contested decision does not, in several respects,fulfil the obligation to state reasons laid down in Article 15 of the Treaty.

137.

    First, the contested decision contains no statement of reasons concerning theCommission's entitlement to authorize the aid in question, which is incompatiblewith the Aid Code in force, under conditions and according to procedures notprovided for by that code.

138.

    Second, the Commission does not identify in the contested decision the objectivesset out in Articles 2 and 3 of the Treaty which it seeks to attain by authorizing thegrant of aid to Ilva.

139.

    Third, the Commission did not give a satisfactory statement of reasons concerningthe necessity of the aid authorized in accordance with the case-law of the Court of

Justice concerning the conditions for application of the first and second paragraphsof Article 95 of the Treaty. It takes no account of the fact that substantial aid wasgranted to Ilva on several occasions on condition that it recovered its viabilitywithin a specified period through a restructuring programme and that theundertaking had never discharged that obligation.

140.

    Lastly, the Commission did not state in the contested decision why a capacityreduction of 2 million tonnes per year in return for aid of ECU 2 600 million isreasonable and adequate. Moreover, the decision contains no reference to anyexamination by the Commission of the impact of the aid on competition or the riskof discrimination regarding other steel undertakings.

141.

    The Commission, supported by the Italian Republic, states that the extent of theobligation to state reasons depends on the nature of the measure in question andthe context in which it was adopted (see, for example, Case 13/72 Netherlands vCommission [1973] ECR 27). In this case, the statement of reasons is adequate,having regard both to the context of the contested decision as a whole and to theapplicants' involvement when the Commission considered the reorganization of theCommunity steel industry.

Findings of the Court

142.

    The fourth indent of the second paragraph of Article 5 of the Treaty provides thatthe Community is to 'publish the reasons for its actions‘. The first paragraph ofArticle 15 states '[d]ecisions, recommendations and opinions of the Commissionshall state the reasons on which they are based and shall refer to any opinionswhich were required to be obtained‘. It is clear from those provisions, and fromthe general principles of the Treaty, that the Commission has an obligation to statereasons when adopting general or individual decisions, whatever the legal basischosen for that purpose.

143.

    According to settled case-law, the statement of reasons must be appropriate to theact at issue and must disclose in a clear and unequivocal fashion the reasoningfollowed by the institution which adopted the measure in question in such a way asto enable the persons concerned to ascertain the reasons for the measure and toenable the Community judicature to carry out its review. It is not necessary for thereasoning to go into all the relevant facts and points of law. It must be assessedwith regard not only to its wording but also to its context and to all the legal rulesgoverning the matter in question (Case C-56/93 Belgium v Commission [1996] ECRI-723 and Skibsværftsforeningen and Others v Commission, cited above, paragraph230). Moreover, the statement of the reasons on which a measure is based mustbe appraised in relation, inter alia, to 'the interest which the addressees or otherpersons concerned by the measure for the purposes of the second paragraph ofArticle 33 of the ECSC Treaty may have in obtaining an explanation‘ (Joined

Cases 172/83 and 226/83 Hoogovens Groep v Commission [1985] ECR 2831,paragraph 24).

144.

    In this case, it is necessary to consider successively the applicants' variouscomplaints concerning the alleged inadequacy of the statement of reasons for thecontested decision. As regards, first, the reasons for which the Commissionconsidered that it was empowered to authorize the aid in question not under theAid Code but on the basis of the first and second paragraphs of Article 95 of theTreaty, the decision contains an adequate statement of reasons in points I and IV,stating clearly and in detail that, in view of the sharp deterioration in the steelmarket and the serious difficulties experienced in the industry in several MemberStates, including Italy, the Community found itself faced with an unforeseensituation justifying recourse to that article.

145.

    As regards, second, the reasons for which the Commission considered that the aimof the aid in question, namely a return to viability for the beneficiary undertaking,contributed to attainment of the objectives of the Treaty, it must be emphasizedthat those reasons are set out in point IV and developed throughout the preambleto the decision. More specifically, it is apparent from point IV that, in theCommission's view, it was because of the serious difficulties arising in the steelindustry, in this case in Italy, since the second half of 1990, that the reorganizationof Ilva was to be regarded as conforming with the objectives laid down in Articles2 and 3 of the Treaty. Since the economic and social impact on the steel industryof the Member State concerned of the restoration of the viability of thatundertaking was manifest in the period of crisis described in that decision, thefailure formally to specify the exact provisions of Articles 2 and 3 whoseimplementation was more particularly being pursued in this case cannot beregarded as an inadequacy of the statement of reasons. Moreover, in points V andVI of the grounds of the decision, the Commission states that it is designed amongother things to make a contribution to the structural adjustment of the sectorthrough capacity reductions. It also emphasizes that one of the aims pursued bythe various conditions imposed is to limit to a minimum the impact of the aid inquestion on competition. In those circumstances, the Court considers that thestatement of reasons for the contested decision was sufficient to enable theapplicant to identify the objectives of the Treaty which that decision sought topursue and to assess whether the reorganization of Ilva was consonant with thoseobjectives.

146.

    As regards, third, the aptness of the aid in question to bring about the recovery ofthe undertaking to which the aid was granted, the Court finds that the contesteddecision clearly indicates the means by which Ilva's viability must, in theCommission's view, be restored, where it lists, in particular in point II of thegrounds, the various aspects of the restructuring programme supported by the aid. It is expressly stated that the means used to restore Ilva's viability will beprivatization of the group, that being the essential objective of the aid in question,

and a new reorganization programme, involving in particular the splitting of its corebusiness into two new companies in the manner outlined in the decision.

147.

    Moreover, the Commission makes it clear in the contested decision (point III of thegrounds) that, as part of its examination of the restructuring plan notified to it bythe Italian Government, it used the same criteria as those imposed by it during theprevious restructuring of the Community steel industry. Those criteria could nottherefore have been unknown to the economic operators in that sector, theapplicants in particular. In those circumstances, by specifying the main elementsof the abovementioned restructuring plans, the contested decision sufficientlyindicated the reasons for which the aid in question would, in the Commission'sview, enable Ilva to be provided with a sound and viable structure.

148.

    It follows that, contrary to the applicants' assertions, the reasons for which the aidin question would, in the Commission's view, attain the objectives pursued, unlikethe aid granted to Ilva in the period 1988 to 1991, are clear from the contesteddecision. In point II of the grounds of that decision, the Commission also reviewsthe earlier aid, which 'was supposed, under normal market conditions and on thebasis of strict implementation and rigorous management control, to ensure theviability of the undertaking‘. It emphasizes that, despite a major restructuringeffort, the objective pursued was not obtained by Ilva which, since 1991, hascontinued to build up deficits. In point IV of the grounds of the decision, theCommission links that situation with the sharp deterioration of the steel marketsince mid-1990 in order to justify adoption of the contested decision under Article95 of the Treaty.

149.

    Moreover, the statement of reasons for the contested decision, as far as the viabilityof the beneficiary undertaking is concerned, is substantially supplemented anddeveloped by the documents in the file. In particular, the Commission producedthe full text of its communication to the Council of 15 December 1993 (doc.SEC(93) 2089 final) in which it sought the assent of the Council under the firstparagraph of Article 95 of the Treaty. That communication, repeating in part thecontent of an earlier communication of 10 November 1993 (doc. SEC(93) 1745final) contains a detailed analysis of the conditions for the viability of the companyreceiving the aid in question (see paragraph 92 above).

150.

    Finally, the complaint that the statement of reasons is inadequate regarding, first,the appropriateness of the capacity reductions imposed in return for the aid inquestion and, second, the limitation of the resultant distortions of competition, mustbe rejected. As already stated (see paragraphs 93 and 113 above), those variousaspects were amply examined in the contested decision.

151.

    It follows from all the foregoing considerations that the contested decision is notrendered unlawful by any inadequacy of its statements of reasons.

The sixth plea in law: irregularity of the decision-making procedure

152.

    This plea comprises two parts. It is alleged that the contested decision departsfrom the Council's assent. It is also claimed that the decision was not adopted inaccordance with the procedure laid down by Article 97 et seq. of the Agreementon the European Economic Area ('the EEA Agreement‘).

The alleged failure to adhere to the terms of the Council's assent

— Arguments of the parties

153.

    The applicants maintain that the contested decision is not in conformity with theassent given by the Council. The time-limit of 30 June 1994 imposed on Ilva forfulfilment of its obligations to reduce capacity and close plant, provided for in thecommunication of 15 December 1993 on which the Council's assent was based, wasnot included in the operative part of the contested decision. It is mentioned onlyin the recitals in the preamble to the decision as a mere element of therestructuring programme submitted by the Italian Government.

154.

    The Commission denies that the contested decision departs from the Council'sassent. Although the time-limit of 30 June 1994 is not expressly mentioned in theoperative part of the decision, the decision lays emphasis on the need to complywith the restructuring programme, to which the eighth paragraph of point II, whichmentions that time-limit, makes reference. And, according to the case-law of theCourt of Justice, the statement of reasons is an essential part of a legal measure(see Case 131/86 United Kingdom v Council [1988] ECR 905, paragraph 37).

155.

    Ilva states that the time-limit laid down by the Council for closure of the plantconcerned appears in the grounds of the decision. It adds that it complied withthat time-limit, so it is pointless to deny that reference to it in the grounds of thedecision is sufficient to ensure attainment of the objective pursued.

— Findings of the Court

156.

    The applicants consider the contested decision to have been adopted in breach ofthe Council's assent prescribed in mandatory terms by the first paragraph of Article95 of the Treaty because the time-limit of 30 June 1994 for fulfilment by Ilva of itsobligation to reduce its production capacity at Taranto appears in the Commissioncommunication of 15 December 1993 (paragraph 3.3.4, p. 24), on which theCouncil's assent of 22 December 1993 was based, but does not appear in theoperative part of the contested decision, but only in the preamble (point II, eighthparagraph).

157.

    It is not disputed that the date of 30 June 1994 appeared in the programme forreorganization and privatization of the Ilva group endorsed by the IstitutoNazionale per la Ricostruzione Industriale (IRI) in September 1993 and notifiedby the Italian Government to the Commission by letter of 13 December 1993 (seepoint II of the grounds of the relevant decision). Nor is it disputed that that dateappeared in paragraph 3.3.4., p. 24, of the communication from the Commissionto the Council of 15 December 1993 on which the Council's assent was based, anddoes not appear in the operative part of Decision 94/259 but only in the preamble(point II).

158.

    Whilst Article 95 provides that the Commission decision must be taken 'with theunanimous assent of the Council‘, it does not lay down the procedures under whichthe Commission must seek that assent: in particular, it does not state clearlywhether the Commission must submit a draft decision to the Council. Since the1960s the Commission's decision-making practice has been to submit acommunication to the Council setting out the basic elements of the national aidprogramme and the broad outlines of the envisaged action. The procedurefollowed for the adoption of the decision concerning Ilva conformed with thatpractice.

159.

    The applicants do not criticize the Commission's practice of submitting acommunication to the Council rather than a draft decision. They merely claim thatan important element of the communication submitted to the Council was notincluded in the operative part of the contested decision.

160.

    That complaint could not bring about annulment of the contested decision ongrounds of infringement of essential procedural requirements unless the Councilwould not have given its assent if it had known that the Commission would insertthe date 30 June 1994 in the preamble rather than the operative part of thedecision which it was to adopt (see Case C-142/87 Belgium v Commission [1990]ECR I-959, and Skibsværftsforeningen and Others v Commission, cited above,paragraph 243).

161.

    The Council itself has stated that 'it clarified ... certain conditions regarding thegrant of aid, and the Commission took account of them‘ and that it 'unreservedlysupported the measures‘ taken by the Commission.

162.

    The Court concludes from this that the Council's assent related to the substanceof the Commission's proposal, leaving the Commission a degree of latituderegarding the precise form that the final decision should take. The operative partof the contested decision (Articles 1(1) and 4(1) and (6)) emphasizes the absoluteneed to comply with the restructuring programme described in point II of thegrounds of the decision, which expressly mentions the date 30 June 1994. In thosecircumstances, it cannot validly be claimed that the contested decision departs inany essential respect from what was approved by the Council.

163.

    It follows that Decision 94/259 is not rendered unlawful by any failure to adhere tothe terms of the Council's assent.

The alleged infringement of Article 97 of the EEA Agreement

— Arguments of the parties

164.

    The applicants claim that the Commission did not observe the decision-makingprocedure provided for in Article 97 et seq. of the EEA Agreement, which requiresin particular that the contracting party concerned inform the other contractingparties of amendments to its domestic legislation and that the EEA JointCommittee conclude that the amended legislation does not detract from the properfunctioning of the agreement. The obligation to observe that procedure derivesfrom the combined provisions of Article 27 of the EEA Agreement and Article 5of Protocol No 14. Since those rules form an integral part of Community law andare binding on the organs of the Community when exercising the discretionconferred on them, any infringement of them constitutes, in the applicants' view,a misuse of powers.

165.

    According to the Commission, the reference to Article 97 et seq. of the EEAAgreement is irrelevant. First, the contested decision does not constitute a case ofamendment of legislation. Second, the applicants cannot derive any individual rightfrom any failure to observe the procedural rules of the EEA Agreement. In anyevent, infringement of the procedural rules can only be raised as an issue inconnection with the EEA, but not in relation to the present dispute.

— Findings of the Court

166.

    It must be emphasized that the provisions of the EEA Agreement relied on by theapplicants contain procedural rules concerning relations between the contractingparties to that agreement, the infringement of which is covered by specificarrangements regarding surveillance (Article 108 et seq. of the EEA Agreement)and the settlement of disputes (Article 111 et seq. of the EEA Agreement). Without its being necessary to examine the merits of the Commission's position,which is that 'the applicants cannot derive any individual right from anyinfringement of the procedural rules of the EEA Agreement‘, it need merely bestated in this case that the adoption of the contested decision manifestly does notconstitute a case of amendment of Community legislation within the meaning ofArticle 97 and Article 99(1) of the EEA Agreement, it being an individual and nota general measure.

The seventh plea in law: breach of the rights of the defence

Arguments of the parties

167.

    The applicants consider that the contested decision infringes the rights of thedefence. Although there is no express provision to that effect in Article 95 of theTreaty, the Commission should have formally called on interested parties to submittheir observations under a consultation procedure or, at least, publish in the OfficialJournal the applications for authorization for aid submitted to it, rather than merelygiving notice that it was initiating a procedure against Ilva. Such an obligation isto be inferred from the general principles of procedural law, having regard to thecase-law of the Court of Justice on Article 93(2) of the EC Treaty (see in particularCase 323/82 Intermills v Commission [1984] ECR 3809, paragraphs 15 to 18). Thatis why Article 6(4) of the Aid Code provides that the Commission must give noticeto the parties concerned to submit their comments before any finding that aid isincompatible with the Treaty; that provision should apply a fortiori to cases notcovered by the Aid Code.

168.

    The applicants contest the Commission's view, owing to the exceptional nature ofad hoc decisions under Article 95 of the Treaty, that there was no obligation tohear the views of Ilva's competitors before adopting the decision; they consider thatthe Commission's view cannot be reconciled with the principle that States are tobe governed by the rule of law or with settled case-law of the Court of Justice. Moreover, mere awareness of the initiation of a procedure for authorization,obtained indirectly through Eurofer or within the ECSC Consultative Committee,is not sufficient. First, the information obtained through Eurofer did not make itpossible to become well acquainted with the detailed facts of the case; second,isolated undertakings have no real opportunity, within the ECSC ConsultativeCommittee, to put forward their own observations.

169.

    The Commission, supported by the Italian Republic, stresses that there are no rulesproviding for competitors to be heard in relation to ad hoc decisions under the firstparagraph of Article 95 of the Treaty. Nor, in view of the exceptional nature ofsuch decisions, does it appear that they are covered by the case-law on Article93(2) of the EC Treaty. Nor was there any infringement of the procedural ruleslaid down in Article 6 of the Aid Code. Where the Commission envisages adoptinga negative decision on aid projects because they are incompatible with Article 4(c)of the Treaty, the procedure is to be initiated in accordance with the provisions ofthe code, whereas when the Commission, with the approval of the Council andafter hearing the Consultative Committee, reaches the conclusion that aid shouldbe granted under Article 95 of the Treaty, the relevant procedure is the procedureunder that article, which provides for no prior hearing of competitors. Accordingto the Commission, the applicants had in any event sufficient opportunity to expresstheir views at all stages of the procedure, the progress of which they were able tofollow through the intermediary of Eurofer and in their capacity as members of theECSC Consultative Committee, which must be consulted by virtue of the firstparagraph of Article 95 of the Treaty. It is apparent from the minutes of the

ECSC Consultative Committee that the representatives of the majority of theapplicants were represented on the Consultative Committee, and that some of themgave their views on the project for the grant of aid.

Findings of the Court

170.

    The contested decision was adopted on the basis of the first and second paragraphsof Article 95 of the Treaty. Those provisions provide for the assent of the Counciland compulsory consultation of the ECSC Consultative Committee. They do notconfer any right to be heard on the addressees of decisions and other interestedparties. For its part, Article 6(4) of the Fifth Aid Code does confer such a right,in so far as it states '[i]f, after giving notice to the interested parties concerned tosubmit their comments, the Commission finds that aid in a given case isincompatible with the provisions of this decision, it shall inform the Member Stateconcerned of its decision‘. That provision was included in all the aid codes priorto the one in force, starting with the first (see Commission Decision 257/80/ECSCof 1 February 1980 establishing Community rules for specific aid to the steelindustry, OJ 1980 L 29, p. 5).

171.

    The applicants consider that the Commission infringed the rights of the defence,in that, even in the absence of an express provision in Article 95 of the Treaty, itshould have initiated an inter partes procedure against them, on the pattern ofArticle 6 of the Fifth Aid Code. They also seek to draw a parallel between Article95 of the ECSC Treaty and Article 93(2) of the EC Treaty, in order to infer ageneral principle that the Commission must systematically involve interested partiesin the procedure whenever it assesses the compatibility of State aid with the Treaty.

172.

    Without its being necessary to consider whether any general principle ofCommunity law confers on interested parties the right to be heard in a decision-making procedure regarding State aid, it must be pointed out that, under theprocedure for the adoption of the contested decision under the first paragraph ofArticle 95 of the Treaty, which provides for consultation of the ConsultativeCommittee, the applicants in any event had an opportunity to make their positionsknown within that Committee. Pursuant to Article 18 of the Treaty, theConsultative Committee consists of members representing producers, workers,consumers and dealers. It is clear from the list of members of that Committee(Annex 5 to the rejoinder) that three of the applicants, namelyWirtschaftsvereinigung Stahl, Preussag Stahl and Hoogovens Groeps, wererepresented at the highest level within the committee. As regards Thyssen Stahl,it was able to make its views known through the association WirtschaftsvereinigungStahl, in which it played an important role, as the Commission has stated withoutbeing contradicted on that specific point by that company. It is not disputed thatthe question of aid to Ilva was discussed at length within the ConsultativeCommittee and that the applicants' representatives were present and gave their

views on the measures proposed by the Commission, either individually or throughthe association Wirtschaftsvereinigung Stahl.

173.

    Moreover, it is not disputed that the applicants had an opportunity to make knowntheir views on the aid in question in this case before the adoption of the contesteddecision under the procedure initiated pursuant to Article 6(4) of the Aid Code,when the Italian Republic had not yet notified to the Commission the newprogramme for reorganization and privatization of the Ilva group (point II of thegrounds of the contested decision). That procedure was closed when the decisionwas adopted, as is clear from point VIII of the decision.

174.

    It follows that the contested decision is not in any event vitiated by illegality as aresult of any infringement of the obligation to initiate the inter partes procedure.

175.

    It follows that the action for annulment must be dismissed.

Costs

176.

    Under Article 87(2) of the Rules of Procedure the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. The applicants have been unsuccessful in their action for annulment ofthe contested decision. Since the Commission and Ilva, the intervener supportingit, have applied for costs, the applicants must be ordered to pay their costs.

177.

    Under the first subparagraph of Article 87(4) of the Rules of Procedure, theMember States and institutions which have intervened in the proceedings are tobear their own costs. It follows that the Council and the Italian Republic, asinterveners, must bear their own costs.

On those grounds,

THE COURT OF FIRST INSTANCE (First Chamber, Extended Composition)

hereby:

1.    Dismisses the application;

2.    Orders the applicants to pay the costs of the defendant and of theintervener Ilva Laminati Piani SpA;

3.    Orders the Council and the Italian Republic to bear their own costs.

SaggioKalogeropoulos Tiili Potocki Moura Ramos

Delivered in open court in Luxembourg on 24 October 1997.

H. Jung

A. Saggio

Registrar

President

1: Language of the case: German.

ECR