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 — Lack of competence — Protection oflegitimate expectations — Incompatibility with Treaty provisions — Discrimination— Inadequate statement of reasons — Breach of the rights of the defence —Articles 4(b) and (c) and 15 and the first and second paragraphs of Article 95 ofthe Treaty)

In Case T-243/94,

British Steel plc, a company incorporated under English law, established inLondon, represented by Richard Plender QC, of the Bar of England and Wales,and by William Sibree, Solicitor, with an address for service in Luxembourg at theChambers of Elvinger, Hoss and Prussen, 15 Côte d'Eich,

applicant,

supported by

SSAB Svenskt Stål AB, a company incorporated under Swedish law, established inStockholm, represented by John Boyce and Philip Raven, Solicitors, with an addressfor service in Luxembourg at the Chambers of Elvinger, Hoss and Prussen, 15 Côted'Eich,

Det Danske Stålvalseværk A/S, a company incorporated under Danish law,established in Frederiksværk (Denmark), represented by Jonathan Alex Lawrence,Solicitor, with an address for service in Luxembourg at the Chambers of ErnstArendt, 8-10 Rue Mathias Hardt,

interveners,

v

Commission of the European Communities, represented by Nicholas Khan 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 John Carbery, Legal Adviser, acting as Agents, with an addressfor service in Luxembourg at the office of Alessandro Morbilli, Manager of theLegal Affairs Directorate of the European Investment Bank, 100 Boulevard KonradAdenauer,

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,

Kingdom of Spain, represented by Alberto Navarro González, Director Generalfor Community Legal and Institutional Coordination, assisted initially by GloriaCalvo Díaz, Abogado del Estado, and then by Luis Perez de Ayala Beccerril,Abogado del Estado, with an address for service in Luxembourg at the SpanishEmbassy, 4-6 Boulevard Emmanuel Servais,

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 94/258/ECSC of 12April 1994 concerning aid to be granted by Spain to the public integrated steelcompany Corporación de la Siderurgia Integral (CSI) and Commission Decision94/259/ECSC of 12 April 1994 concerning aid to be granted by Italy to the publicsteel sector (Ilva group) (OJ 1994 L 112, pp. 58 and 64 respectively),

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 cases not provided for in this Treaty where it becomes apparent that adecision or recommendation of the Commission is necessary to attain, within thecommon market in coal and steel and in accordance with Article 5, one of theobjectives of the Community set out in Articles 2, 3 and 4, the decision may betaken or the recommendation made with the unanimous assent of the Council andafter the consultative 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 Treaty in order to establish, fromthe beginning of the 1980s, a Community scheme under which the grant of Stateaid to the steel industry could be authorized in a limited number of cases. That

scheme has been subject to successive amendments in order to resolve the specificeconomic difficulties of the steel industry. Thus, the Community Steel Aid Codein force during the period under consideration in this case is the fifth in the series,having been established by Commission Decision No 3855/91/ECSC of 27November 1991 establishing Community rules for aid to the steel industry (OJ 1991L 362, p. 57; hereinafter 'the Aid Code‘). The recitals in the preamble to thatdecision show that that code, like its predecessors, establishes a Community systemintended to cover aid, whether specific or non-specific, financed by Member Statesin any form whatsoever. The Code does not authorize either operating orrestructuring aid, save in the case of aid 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 prompted by the finding that structuralovercapacity persisted, 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 Generalof the Directorate-General for industry at the Commission, his essential task beingto list projects for the closure of steel undertakings over the period envisaged in theabove communication, which covered the years 1993 to 1995. On 29 January 1993Mr Braun, 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 programme submitted by the Commission following the Braun Report, witha view to achieving a substantial reduction in excess production capacity. Theenduring restructuring of the steel industry was to be facilitated by 'a package ofsupporting measures of limited duration which strictly comply with the rules oncontrol of State aids‘, it being understood in relation to such aids that 'theCommission [confirmed] its commitment to rigorous and objective application ofthe aids code and [would] ensure that any derogations proposed to the Councilunder Article 95 of the Treaty contribute fully to the required overall effort toreduce capacity. The Council [would] act promptly on [those] proposals, on thebasis 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 assents under the first

and second paragraphs of Article 95 of the Treaty for State aid for the publicundertakings Sidenor (Spain), Sächsische Edelstahlwerke GmbH (Germany),Corporación de la Siderurgia Integral (CSI, Spain), Ilva (Italy), EKO Stahl AG(Germany) and Siderurgia Nacional (Portugal) — that they '[believed] that the onlyway to secure a healthy EC steel industry, able to compete on the world market,[was] to put a permanent end to State subsidization of the steel industry and toclose loss-making capacity. In giving its unanimous consent to the current Article95 proposals, the Council [reaffirmed] its commitment to a strict application of theSteel Aid Code [...] and, in the absence of authorization under the Code, Article4(c) of the ECSC Treaty. Without prejudice to the right of any Member State torequest a decision under Article 95 of the ECSC Treaty, and in accordance with theCouncil conclusions of 25 February 1993, the Council [declared] its firmcommitment to avoid any further Article 95 derogations in respect of aid for anyindividual 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 and with a view to facilitatingfurther restructuring of the steel industry that, on 12 April 1994, following theCouncil's assent, the Commission adopted six ad hoc decisions on the basis of thefirst 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, the aid which Germany planned to grant to EKO StahlAG, Eisenhüttenstadt (Decision 94/256/ECSC, OJ 1994 L 112, p. 45), the aid whichPortugal planned to grant to Siderurgia Nacional (Decision 94/257/ECSC, OJ 1994L 112, p. 52), the aid which Spain planned to grant to Corporación de la SiderurgiaIntegral (CSI) (Decision 94/258/ECSC, OJ 1994 L 112, p. 58, hereinafter 'Decision94/258‘), the grant by Italy of State aid to the public steel sector (Ilva steel group)(Decision 94/259/ECSC, OJ 1994 L 112, p. 64, hereinafter 'Decision 94/259‘), theaid which Germany planned to grant to Sächsische Edelstahlwerke GmbH,Freital/Sachsen (Decision 94/260/ECSC, OJ 1994 L 112, p. 71) and the aid whichSpain planned to grant to Sidenor, an undertaking 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‘on the 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 the

consolidation 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 27 June 1994, British Steel plc (hereinafter 'BritishSteel‘) applied under Article 33 of the ECSC Treaty for the annulment ofDecisions 94/258 (concerning the Spanish undertaking CSI) and 94/259 (concerningthe Ilva group) of 12 April 1994, referred to above.

11.

    In parallel, two other actions were brought, one by the European IndependentSteelworks Association (EISA) against the six decisions referred to above — 94/256to 94/261 — (Case T-239/94), and the other by Wirtschaftsvereinigung Stahl, ThyssenStahl AG, Preussag Stahl AG and Hoogovens Groep BV against Decision 94/259,authorizing the granting of State aid to the Ilva group (Case T-244/94).

12.

    In these proceedings the Council, the Italian Republic, the Kingdom of Spain andIlva Laminati Piani SpA (hereinafter 'Ilva‘) lodged applications at the Registry ofthe Court of First Instance on 25 October, 11 and 13 November and 19 December1994 respectively for leave to intervene in support of the defendant. On 8 and 15December 1994 respectively SSAB Svenskt Stål AB and Det Danske StålvalseværkA/S lodged applications for leave to intervene in support of the applicant. Byorders of 13 February and 6 March 1995, the President of the Second Chamber,Extended Composition, of the Court of First Instance granted those applicationsto intervene in support of the defendant and the applicant.

13.

    On 28 October 1994 British Steel lodged an application at the Registry of theCourt of First Instance for measures of organization of procedure under Article64(4) of the Rules of Procedure to the effect that the Court should order theCommission to produce the expert's reports drawn up by W.S. Atkins at theCommission's request concerning the feasibility of the plans for the restructuringof Ilva and CSI and the reports concerning those undertakings which Italy andSpain are required to submit to the Commission twice a year pursuant to Article4 of the contested decisions to enable it to monitor compliance with the conditionslaid down by those decisions. After receiving the observations of the Commissionlodged on 9 December 1994, the Court of First Instance put a series of questionsto the applicant, the Commission and Ilva concerning, first, the need to have accessto the abovementioned reports in order to assess the propriety of the contesteddecisions and safeguard the rights of the defence and, secondly, the confidentialnature or otherwise of the information contained in those reports, and invited theinterveners to submit their observations on the applicant's request. The applicant,the Commission and Ilva replied to the questions and the interveners lodged theirobservations within the prescribed time-limit. In addition, as regards the questionof confidentiality, the Commission forwarded to the Court of First Instance on 30

June 1995 the Atkins expert's report concerning CSI, with the information whichthe latter considered confidential deleted from it. The Commission explained thatthat report had been drawn up on the basis of an SRI expert's report and thereforedid not contain the same kind of detailed analyses as the Atkins report on Ilva,which examined the possibilities of restructuring that undertaking on the basis ofconfidential commercial information, that being the reason for which a non-confidential version of it could not be disclosed. The Court took the view that thecase should proceed before any decision was given on the application for measuresof organization of procedure and notified that decision to the applicant by letterfrom the Registry of 20 July 1995.

14.

    On 8 August 1995 British Steel lodged a second application for measures oforganization of procedure to the effect that the Court should order the Commissionto produce the Atkins expert's report concerning Ilva and the SRI expert's reportconcerning CSI, if necessary after the two companies had respectively deleted allconfidential information. The interveners were given an opportunity to submit theirobservations. The Court considered that it was unnecessary to give a decision onthe second request at that stage of the procedure and notified that decision to theapplicant by letter from the Registry of 26 October 1995.

15.

    By letter from the Registry of 3 December 1996 the Court put a series of questionsto the Commission relating essentially to the information of which the applicant,in the alternative, sought disclosure in its first application for measures oforganization of procedure, in the event of the Court's not considering it appropriateto accede to its request for production of the abovementioned expert's reports andto order other measures of organization of procedure. The Commission gaveanswers to those questions within the time allowed. Having regard to thoseanswers, the Court took the view that it had at its disposal all the informationnecessary to assess the pleas in law put forward by the applicant and thatproduction of the Atkins expert's reports concerning Ilva and the SRI reportconcerning CSI or the abovementioned reports from the Member States concernedwas not necessary to ensure that the rights of the defence were safeguarded. Uponhearing 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

16.

    The applicant, supported by SSAB Svenskt Stål, claims that the Court should:

—    annul Decisions 94/258 and 94/259;

—    order the Commission to pay the costs.

17.

    The intervener Det Danske Stålvalseværk claims that the Court should:

—    annul Decisions 94/258 and 94/259;

—    order the Commission to pay the costs, including those of the intervener.

18.

    The defendant, supported by the Council, the Italian Republic, and the Kingdomof Spain, contends that the Court should:

—    dismiss the application;

—    order the applicant to pay the costs.

19.

    Ilva claims that the Court should:

—    dismiss the application as inadmissible and/or unfounded;

—    order the applicant to pay the costs, including those incurred by Ilva.

Admissibility of the application

Arguments of the parties

20.

    British Steel maintains that it is an undertaking which is concerned, within themeaning of the second paragraph of Article 33 of the Treaty, by the contesteddecisions, which enable benefits to be conferred on undertakings in competitionwith it. Accordingly, it rejects Ilva's argument to the effect that the six decisionsmentioned above, adopted by the Commission on 12 April 1994, constitute anindivisible whole resulting from a political compromise within the Council, with theresult that this application, concerned only with the annulment of two of thosedecisions, cannot be regarded as admissible because any annulment of the twocontested decisions would lead to an unacceptable modification of a politicalagreement of the highest level. In particular that argument has no relevance to theadmissibility of the application since the applicant's right to challenge the twodecisions which it considers to be of direct and individual concern to it cannot becalled in question merely because of a political connection between the contesteddecisions and other decisions adopted by the Commission in the same context.

21.

    For its part, Ilva concedes first of all that in its capacity as an intervener it is notentitled to raise the question of the admissibility of the application in this case,since the Commission did not do so in the written procedure. It points outhowever that, under Article 113 of its Rules of Procedure, the Court of FirstInstance may at any time of its own motion consider whether there is any absolutebar to proceeding with the case, and should therefore consider Ilva's arguments.

22.

    In the event, it maintains that the two decisions contested by British Steel constituteimportant aspects of an overall political agreement concluded within the Councilwith a view to restructuring the Community steel industry. The application in thiscase should therefore be declared inadmissible, to the extent to which it is notlimited to challenging the criteria used by the Commission in evaluating theconditions for the grant of the specific aid authorized by the two contesteddecisions but challenges the very basis of the political agreement reached atCommunity level and endorsed by the six decisions adopted by the Commission on12 April 1994. Indeed, the annulment of either or both of the decisions concernedwould lead to a change in the political compromise reached within the Council. Accordingly, in its view, the applicant may only contest all six decisions together.

Findings of the Court

23.

    It is appropriate, before examining whether there is a bar to proceeding with thecase, as suggested by the intervener Ilva, to consider whether in the light of theapplicable Rules of Procedure it is permissible for Ilva to raise such a matter.

24.

    Pursuant to the second paragraph of Article 34 and the first paragraph of Article46 of the ECSC Statute of the Court of Justice, submissions made in an applicationto intervene are to be limited to supporting the submissions of one of the parties. Moreover, Article 116(3) of the Rules of Procedure requires interveners to acceptthe case as they find it at the time of their intervention.

25.

    It follows that, since the defendant did not raise the question of admissibility of theapplication in the written procedure, the intervener Ilva has no standing to submitthat there is a bar to proceeding with the case and the Court of First Instance isnot therefore required to consider the grounds of inadmissibility on which it relies(see, in that connection, Case C-313/90 CIRFS and Others v Commission [1993]ECR I-1125).

26.

    However, under Article 113 of the Rules of Procedure, the Court may at any timeof its own motion consider whether there exists any absolute bar to proceeding witha case, including any raised by the interveners (see, in that connection, JoinedCases C-305/86 and C-160/87 Neotype Techmashexport v Commission [1990] ECRI-2945 and Case C-225/91 Matra v Commission [1993] ECR I-3203).

27.

    A bar to proceeding with the case is absolute only if it relates to an essentialcondition for the admissibility of an action brought under the second paragraph ofArticle 33 of the Treaty.

28.

    In this case the ground of inadmissibility to which the intervener refers does notrelate to any such essential condition and it is not therefore appropriate for theCourt to consider it of its own motion. Essentially, Ilva merely contends that an

undertaking concerned by a decision forming part of a 'package‘ is not entitled tochallenge separately the decision affecting it but is required, in order to contest it,to bring proceedings for annulment against all the decisions in the 'package‘. However, not only is no such condition of admissibility imposed by the relevantprovisions of the Treaty but, in addition, it would conflict entirely with the wordingand spirit of the second paragraph of Article 33 of the Treaty, which expresslyupholds the right of undertakings and associations of undertakings to instituteproceedings against individual decisions concerning them.

29.

    It follows that the Court cannot in any event find the action inadmissible on theground referred to by Ilva, since the alleged condition of admissibility on which itis based is incompatible with the right conferred on undertakings by Article 33 ofthe Treaty to bring proceedings against any individual decisions of concern to them.

Substance

30.

    In support of its action for annulment, the applicant relies on four pleas in law,alleging respectively lack of competence of the Commission to adopt the contesteddecisions, breach of the principle of the protection of legitimate expectations,infringement of the ECSC Treaty or rules of law concerning its application, andinfringement of essential procedural requirements.

The first plea in law: lack of competence of the Commission

Arguments of the parties

31.

    British Steel considers that the Commission was not competent to adopt thecontested decisions. The Aid Code constitutes an exhaustive and binding legalregime, in that it prohibits the authorization of any aid incompatible with itsprovisions. In particular, Article 1 of the Code expressly prohibits all operating andinvestment aid. The Commission therefore lacked the power to authorize the grantof such aid by the two contested decisions. The Commission cannot purport toarrogate such a power to itself under the first paragraph of Article 95 of the Treatysince the Aid Code itself was adopted by the Commission under Article 95 andconstitutes a definitive assessment of what is necessary to achieve the objectives ofthe Treaty, unless it is itself amended by a general decision.

32.

    In that connection, the applicant states that, if the Commission envisagesauthorizing aid not fulfilling the conditions laid down in the Code, it must modifythe actual text of the Code by a general decision applying to all the undertakingsconcerned. Indeed, the Aid Code would become completely useless if it werecircumvented by individual decisions which the Commission was prompted to adoptto take account of particular cases. In this case, the Commission did not amendthe Aid Code but merely adopted decisions which, contravening the rules of the

Code, improperly granted benefits to certain public undertakings at the expense ofcompetitors which were not granted the benefit of State aid.

33.

    The intervener Det Danske Stålvalseværk supports the applicant's view that theAid Code constitutes a binding and exhaustive legal regime. The Commission istherefore required scrupulously to behave in the manner which it itself prescribedunder Article 95 of the Treaty and is not competent to adopt an individual decisionconflicting with the criteria of the Aid Code. That code is intended to regulate asector which is extremely sensitive as far as the proper functioning of the commonmarket in steel is concerned, in that State aid contrary to the fundamentalobjectives of the Treaty is liable to create difficulties for undertakings which haveused their own resources to undertake restructuring and privatization efforts. Itprovides the appropriate legal basis for the adoption of individual decisionsconforming with its provisions. However, in this case, the Commission adopted thecontested decisions on the basis of Article 95 of the Treaty for the sole purpose ofevading the procedure and rules laid down by the Aid Code.

34.

    The Commission states that the various aid codes were adopted under Article 95of the ECSC Treaty and thus have the same legal basis as the contested decisions. The legal value of those measures is therefore the same and the aid code in forcecannot be regarded as definitive and binding. On the contrary, it merely makesclear the Commission's position when it was adopted concerning the aid which itregarded as compatible with the Treaty. The Commission is entitled to examinethe compatibility with the Treaty of other forms of aid not provided for by theCode itself, having regard in particular to the fact that the steel market oftenexperiences extremely serious crises. In this case, the course of amending the AidCode, proposed by the applicant, would not have been practicable in that it wouldhave led to general authorization for restructuring aid, whereas the adoption of thecontested individual decisions, in the Commission's view, constitutes a much morerestrictive route to the authorization of aid. The Commission was therefore notindifferent as between the amendment of the Aid Code and the adoption of thedecisions at issue; each course of action constituted a response to a very differentsituation.

35.

    The Council considers that, in adopting the Aid Code, the Commission did notexhaust its powers under the first and second paragraphs of Article 95 of theTreaty and that it therefore was empowered to authorize the grant of aid of thekind covered by the decisions at issue. According to the Council, cases may arisewhere a further Commission decision is necessary to attain one of the objectives ofthe Community set out in Articles 2, 3 and 4 of the Treaty, even where there is anaid code laying down the rules intended to apply to all State aid to the steelindustry. In particular, the Fifth Aid Code merely set out the measures which theCommission then considered compatible with the Treaty but that was not anexhaustive statement and the Commission was therefore free, should the need arise,to have recourse to Article 95 for other decisions, provided that they conformed

with the conditions laid down by that article. In this case, it was necessary, in theCouncil's opinion, to adopt a global strategy to cope with the increasingly seriouscrisis in the steel industry and to achieve reductions in the capacity of the Europeansteel undertakings; however, such a strategy did not preclude assistance beinggranted to undertakings through the accompanying measures adopted as part of theoverall programme of capacity reductions.

36.

    According to the Italian Republic, the implication of the applicant's view would beto confer on the Aid Code the power to amend substantially the first and secondparagraphs of Article 95 of the Treaty. In other words, according to that view, thatcode has the effect of exhausting the source from which it derives. However,Article 95 is a general provision whose application cannot be prohibited or limitedby a provision of a lower order. It follows that both the Aid Code and thecontested decisions at issue are of the same rank in the hierarchy of norms andhave the same legal status. Moreover, the Aid Code is concerned only with certaincategories of aid, defined in Articles 2 to 5 thereof. No other kind of publicfinancial intervention in favour of steel undertakings is regulated by, or, therefore,subject to, the Aid Code. In conclusion, the legality of the individual decisions atissue can be assessed not by reference to that code but only on the basis of Article95 of the Treaty.

37.

    According to the Kingdom of Spain, the Commission legitimately used the powersconferred on it by the Treaty, without at any time overstepping the prescribedlimits. Article 95 is the appropriate basis for the adoption of decisions intended toremedy situations calling for effective Community action with a view to attainmentof the objectives set out in the Treaty, where the Community institutions are notvested with the requisite powers for that purpose. In that connection, there is aparallel between that article and Article 235 of the EC Treaty. The Aid Code, onthe one hand, and the contested decisions, on the other, have the same legal basisbut differ in scope: they both constitute a response to the market situationprevailing in the steel industry when they were adopted. Against that background,the Commission was empowered (and required) to adopt the measures necessaryto deal with crises, relying on Article 95 as a legal basis, and it cannot be inferredfrom the existence of an aid code that the Commission wished to relinquish itsdiscretionary power.

38.

    Ilva too contends that the Commission was competent to adopt the contesteddecisions under Article 95 of the Treaty. That provision enables it to deal, bymeans of exceptional decisions, whether of a general or individual nature, with anyunforeseeable and extraordinary situation which might arise. Thus, if Article 95constitutes an adequate legal basis for the Aid Code, there is no reason, in Ilva'sview, for the position to be any different regarding the adoption of individualdecisions. It is for the Commission to decide whether it is appropriate to adopt ageneral decision or an individual decision, according to the circumstances. The AidCode is of only limited scope. It indicated that certain categories of aid pursuingcertain Treaty objectives were compatible with the Treaty and was not intended to

prohibit aid not falling within its scope. Consequently, aid not conforming with theprovisions of the Code may be authorized under the procedure provided for inArticle 95 of the Treaty.

Findings of the Court

39.

    It must first be pointed out that, in fact, although alleging that the Commission'lacks competence‘ to adopt the decisions at issue, the applicant maintains,essentially, by its first plea that the two contested decisions run counter to the AidCode and thereby contravene the principle that an act of general applicationcannot be amended by an individual decision.

40.

    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‘.

41.

    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 Steenkolenmijnen in Limburg v High Authority [1961] ECR 1, legalgrounds, part B.I.1.b, at p. 22, in which the Court held that, just as certain non-State financial assistance to coal and steel-producing undertakings, authorized byArticles 55(2) and 58(2) of the Treaty, can be allocated only by the Commission orwith its express authorization, Article 4(c) must similarly be interpreted asconferring on the Community institutions exclusive competence with regard to aidwithin the Community.

42.

    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).

43.

    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, in 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.

44.

    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 any 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.

45.

    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.

46.

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

47.

    It should be borne in mind that the aid code applicable in the period covered bythe contested decisions was established by Commission Decision No 3855/91 of 27November 1991, cited above. This was the Fifth Aid Code which, as provided inArticle 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 Decisions Nos 3484/85/ECSC of 27 November 1985 and322/89/ECSC of 1 February 1989 establishing Community rules for aid to the steelindustry, OJ 1985 L 340, p. 1, and OJ 1989 L 38, p. 8, respectively) by referenceto which it may therefore be interpreted. It may be seen from its preamble (seein particular point I of the grounds of Decision No 3855/91) that it was intendedin the first place 'not to deprive the steel industry of aid for research anddevelopment or for bringing plants into line with new environmental standards‘.

In order to reduce production overcapacity and restore balance to the market, italso authorized, under certain conditions, 'social aid to encourage the partialclosure of plants or finance the permanent cessation of all ECSC activities by theleast 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.

48.

    The two decisions at issue, for their part, were adopted by the Commission on thebasis of the first and second paragraphs of Article 95 of the Treaty for the purpose,according to the preambles to those decisions, of facilitating the restructuring ofpublic steel undertakings experiencing serious difficulties in two Member States,Spain and Italy, in which the steel industry was endangered by the severedeterioration of the Community steel market. With regard more particularly toIlva, the essential aim of the aid in question was privatization of the steel groupwhich had until then benefited from loans granted as a result of the unlimitedliability of the single shareholder provided for in Article 2362 of the Italian CivilCode (points II and IV of the grounds). The Commission made clear that the verydifficult economic situation confronting the Community steel industry wasaccounted for by largely unforeseeable economic factors. It considered thereforethat it was facing an exceptional situation not specifically provided for in the Treaty(point IV of the grounds).

49.

    A comparison of the Fifth Aid Code with the two contested decisions thus makesit clear that those various measures have the same legal basis, namely the first andsecond paragraphs of Article 95 of the Treaty, and derogate from the generalprohibition of aid laid down as a principle by Article 4(c) of the Treaty. Theirscope is different: the Code refers in general to certain categories of aid which itregards as compatible with the Treaty and the contested decisions authorize, forexceptional reasons and on one occasion only, aid which could not in principle beregarded as compatible with the Treaty.

50.

    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 thereforeauthorize 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 and Commission [1979]ECR 1303; Case 120/77 Koyo Seiko and Others v Council and Commission [1979]ECR 1337; Case 121/77 Nachi Fujikoshi and Others v Council [1979] ECR 1363 and

Joined Cases 140/82, 146/82, 221/82 and 226/82 Walzstahl-Vereinigung and Thyssenv Commission [1984] ECR 951, and Joined Cases 33/86, 44/86, 110/86, 226/86 and285/86 Peine-Salzgitter and Hoogovens v Commission [1988] ECR 4309, and CIRFSv Commission, cited above).

51.

    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, paragraph 2), to prohibit certain categories of aid, since sucha prohibition is already imposed by the Treaty itself, in Article 4(c). Aid not fallinginto categories 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 40 to 44 above).

52.

    In this case, the decisions at issue — authorizing State aid for the restructuring oflarge public steel groups in certain Member States — do not fall within the scopeof the Aid Code. The latter introduces, under certain conditions, derogations ofgeneral 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 decisions 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 103 to 109below).

53.

    In those circumstances, the contested decisions cannot be regarded as unjustifiedderogations from the Fifth Aid Code but constitute measures based, like that code,on the first and second paragraphs of Article 95 of the Treaty.

54.

    It follows that the plea alleging lack of competence has no basis: the Commissioncould not in any circumstances, by adopting the Aid Code, relinquish the powerconferred on it by Article 95 of the Treaty to adopt individual measures in orderto deal with unforeseen situations. Since in this case the Aid Code does not coverthe economic situations which prompted it to adopt the contested decisions, theCommission was entitled to rely on Article 95 of the Treaty in order to authorize

the aid in question, provided that it observed the conditions for the application ofthat provision.

55.

    It follows that the decisions at issue are not vitiated by any lack of competence onthe part of the Commission to adopt them.

The second plea in law: frustration of legitimate expectations

Arguments of the parties

56.

    British Steel considers that the decisions at issue contravene the principle ofprotection of legitimate expectations. According to well-established case-law, alegitimate expectation may arise as a result of the legislative measures of theCommission, even in the specific field of the grant of State aid (see Joined Cases205/82 to 215/82 Deutsche Milchkontor and Others v Germany [1983] ECR 2633). In this case, that principle was contravened in so far as the applicant anticipatedthat the Commission would comply with the Aid Code and if necessary amend it,or even replace it, if it wished to depart from it.

57.

    In the applicant's view, the Aid Code is a legislative measure expressly designed toprohibit all forms of subsidy with the exception of those which it treats ascompatible with the Treaty. A steel undertaking is legitimately entitled to expectthat the Commission will not depart from that code whilst it remains in force. Accordingly, any measure contrary to that code should be annulled to the extentto which, in the absence of an overriding public interest, it brings about anunforeseeable change in the situation created by the Code to the detriment of anoperator who has acted reasonably in the expectation that the situation broughtabout by that legislative measure will continue. In this case, British Steel considersthat there was no overriding public interest warranting the grant of the contestedaid.

58.

    The authorization of State aid by an individual Commission decision, Decision89/218/ECSC of 23 December 1988 concerning aid that the Italian Governmentproposes to grant to the public steel sector (OJ 1989 L 86, p. 76), cited by thatinstitution, is not of such a nature as to affect the applicant's legitimate expectation,in so far as that decision was expressly declared to be exceptional and authorizedonly part of the aid envisaged by the Italian Government. Moreover, that decisionwas adopted before the Fourth and Fifth Steel Aid Codes, which reaffirmed theprinciple that they were exhaustive.

59.

    The applicant in fact reasonably expected, at the time of its privatization in 1988,that it would be able to build on its strongly cost-competitive position. It madeinvestments in the reasonable hope that an efficient, low-cost producer would beable to expand profitably and would not be thwarted by less efficient producers

benefiting from State subsidies. Similarly, in 1991 it reacted to market forces in thelegitimate expectation that they would operate elsewhere in the Community, forcingthe least efficient producers to withdraw from the market and close plant, thusallowing it and other efficient producers to earn adequate profits and fulfil theirshareholders' expectations of a proper return on their investments.

60.

    British Steel contests the Commission's argument that its legitimate expectation wasin any event undermined by the conduct of that institution after 1 January 1992, inso far as several documents from Commission departments, together with theCouncil's conclusions of 25 February 1993, supported the view that the grant ofpublic aid to certain public undertakings was now inevitable as a result of theseriousness of the crisis afflicting the European steel industry. According to theapplicant, even if there was a risk that a political decision might authorize unlawfulaid, it was wholly logical to expect the Commission to bear in mind that the AidCode should be respected without any exception, so as not to give rise todiscrimination between the undertakings concerned.

61.

    The intervener SSAB Svenskt Stål refers to the legal framework established by theagreement on the European Economic Area (hereinafter the 'EEA Agreement‘)and states that, by Decision No 7/94 of 31 March 1994 of the EEA JointCommittee (OJ 1994 L 160), the Fifth Aid Code was integrated into Annex XV tothe EEA Agreement in accordance with Article 5 of Protocol XIV to the EEAAgreement. That code was thus applicable to Swedish undertakings one yearbefore the accession of the Kingdom of Sweden to the European Union and,according to the intervener, bolstered its legitimate expectation that theCommission would not authorize operating or investment aid of the kind grantedby the contested decisions. In reliance on that expectation, the intervener hadundertaken restructuring. By authorizing aid outside the Code, the Commissionthus frustrated its legitimate expectations.

62.

    According to the Commission, a measure of general application such as the FifthAid Code cannot validly give rise to a legitimate expectation. The conditions laiddown by each code depend on the economic circumstances of the Community steelindustry at the relevant time: the situation changed as time went on and becameparticularly serious around 1992. It was wholly justified, according to theCommission, to adopt measures intended to deal with the threat to the very futureof the steel industry in certain countries. Consequently, the mere existence of anaid code could not give rise to legitimate expectations. Furthermore, there isnothing to show that the applicant actually acted in reliance on any legitimateexpectation when it closed certain plants. Finally, even if the Aid Code did actuallycreate a legitimate expectation, it would in the Commission's view have beenvitiated by the subsequent conduct of the Community institutions. In itscorrespondence with British Steel, the Commission often emphasized that recourseto Article 95 could not be excluded, even during the period of application of theAid Code.

63.

    The Council also rejects the view that the applicant could have entertained anylegitimate expectation, in reliance on the Aid Code, that the aid in question wouldnot be authorized. The idea of legitimate expectations cannot be associated witha measure which may be adapted to take account of changes in the economicsituation. Moreover, the applicant contradicts itself in recognizing that the AidCode could have been amended so as to allow the Commission to adopt thecontested decisions under the Code. Since the Aid Code was adopted on the samelegal basis as the decisions in question, the Council does not understand why theCommission could not have legitimately adopted the decisions given that theprocedures would be the same.

64.

    According to the Italian Republic, the principle of the protection of legitimateexpectations cannot be relied on to contest the adoption of a measure, based ona discretionary power, which departs from the existing regime. To admit otherwisewould preclude the adaptation of Community legislation to changes affecting theaims pursued. Moreover, there was no reason for the adoption of the Aid Codeto give rise, on the part of the applicant, to any legitimate expectation which hasbeen encroached upon by the contested decisions, since the latter in no way affectthe matters laid down and governed by the Code.

65.

    The Kingdom of Spain observes that the principle of the protection of legitimateexpectations cannot be so far extended as generally to impede the application ofnew rules to the future effects of situations arising under the previous rules, thepurpose of which necessarily involves constant adjustment to fluctuations in theeconomic situation. In this case, the applicant has produced no evidence ofcircumstances such as to cause it to entertain a legitimate expectation that, becauseof the existence of an aid code, the contested decisions could never be adopted.

66.

    Ilva endorses all the arguments put forward by the Commission and the otherinterveners supporting it. The existence of an aid code cannot legitimately give riseto the expectation that the Commission would authorize no aid measure notcovered by that code. The latter is a manifestation of the discretion afforded to theCommission in order to pursue the objectives of the Treaty and reflects theeconomic conditions prevailing when it was adopted. Furthermore, the applicanthas not demonstrated fulfilment of the strict conditions for legitimate expectationsto arise. It has not proved that, in its conviction that the Aid Code would not beamended, it placed itself in a situation which could not be changed. In addition,even if the Aid Code could in fact give rise to a legitimate expectation, theapplicant has failed to produce any evidence that the contested decisions broughtabout a sudden or unforeseen change in its circumstances and that consequentlyits legitimate expectation was frustrated. The applicant was aware of all therelevant initiatives taken by the Commission before the adoption of the decisionsand of the events which preceded them.

Findings of the Court

Admissibility of the new arguments put forward by SSAB Svenskt Stål based on theEEA Agreement

67.

    The Swedish undertaking SSAB Svenskt Stål, intervening in support of British Steel,has raised arguments concerning the EEA Agreement. As far as frustration oflegitimate expectations is concerned, it refers to the ECSC Aid Code, but in theform in which it was included in Annex XV to the EEA Agreement by Article 5 ofProtocol XIV to the same agreement. Those arguments have not been raised bythe applicant. Furthermore, the intervener alleges only a breach of the principleof protection of legitimate expectations with respect to itself and not with respectto the applicant.

68.

    The question whether an intervener may rely on certain provisions of the EEAAgreement and allege a breach of the principle of the protection of its legitimateexpectations in support of the submissions of an applicant which has not itselfreferred to that agreement in its plea, as a ground for annulment, of breach of theprinciple of the protection of legitimate expectations is a matter of Communitypublic policy. The Court therefore considers it necessary to examine, on the basisof Article 113 of its Rules of Procedure, the admissibility of the new arguments putforward by SSAB Svenskt Stål.

69.

    Pursuant to the second paragraph of Article 34 of the ECSC Statute of the Courtof Justice, submissions made in an application to intervene are to be limited tosupporting the submissions of one of the parties. Moreover, under Article 116(3)of the Rules of Procedure, the intervener must accept the case as he finds it at thetime of his intervention.

70.

    Those provisions have been interpreted by the case-law as meaning that newarguments put forward by an intervener which do not alter the framework of thedispute are admissible (see Case 30/59 De Gezamenlijke Steenkolenmijnen inLimburg v High Authority, cited above, the order of the Court of Justice in Case16/62 Confédération Nationale des Producteurs de Fruits et Légumes and Others vCouncil [1962] ECR 487, at page 488, Case T-459/93 Siemens v Commission [1995]ECR II-1675, paragraph 21, and Joined Cases T-447/93, T-448/93 and T-449/93AITEC and Others v Commission [1995] ECR II-1971, paragraph 122).

71.

    In this case, the point is whether SSAB Svenskt Stål's arguments must be regardedas admissible in the light of the procedural provisions and case-law cited above. In other words, the question to be asked is whether, although falling within thescope of the applicant's submissions (that is to say, the form of order sought by it),those arguments seek to alter the 'framework of the dispute‘ or whether they leaveit untouched in substance.

72.

    The Court observes that the intervener examines the Aid Code in relation to theEEA Agreement, in support of its view that its own legitimate expectations havebeen frustrated. That argument cannot be entertained, since, first, it seeks only toestablish a breach of the principle of legitimate expectations as regards theintervener and not the applicant and, secondly, it relates to the EEA Agreement,thus altering the framework of the dispute as defined by the applicant.

73.

    It follows that the arguments advanced by SSAB Svenskt Stål in connection withthe second plea in law cannot be declared admissible.

— The merits of the plea

74.

    The applicant considers that the contested decisions contravene the principle of theprotection of legitimate expectations in that they have 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.

75.

    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 paragraphs46 to 52 above), the Aid Code does not pursue the same object as the decisions atissue, which were adopted to deal with an exceptional situation. It was not,therefore, in any way capable of giving rise to legitimate expectations as to thepossibility 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 contesteddecisions (see paragraph 48 above).

76.

    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 an 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).

77.

    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-472/93 Campo Ebro and

Others v Council [1995] ECR II-421, paragraph 52). Moreover, the Court of Justicehas also used the term 'prudent and discriminating traders‘ to emphasize that, incertain circumstances, it is possible to foresee the adoption of specific measuresintended to deal with clear crisis situations, with the effect that the principle of theprotection of legitimate expectations cannot be relied upon (Case 78/77 Lührs vHauptzollamt Hamburg-Jonas [1978] ECR 169).

78.

    In that context, the applicant should, on any view, having regard to its verysubstantial economic importance and its participation on the ECSC ConsultativeCommittee, have realized that an overriding need to adopt effective measures tosafeguard the interests of the European steel industry would arise and that recourseto Article 95 of the Treaty might justify the adoption of ad hoc decisions by theCommission, as had already happened on several occasions whilst the Aid Codewas in force. In that connection, the Commission rightly refers to Decision 89/218of 23 December 1988, cited above, and Decision 92/411/ECSC of 31 July 1992 onthe granting of aid to steel undertakings by the Danish and Dutch Governments(OJ 1992 L 223, p. 28), which authorized certain State aid outside the aid code inforce at the time of their adoption.

79.

    It follows that the decisions at issue do not contravene the principle of theprotection of legitimate expectations.

The third plea in law: infringement of Article 95 of the Treaty and breach of theprinciples of non-discrimination and proportionality

80.

    It is appropriate to examine in turn the applicant's arguments concerning, first,infringement of the Treaty and, second, breach of the fundamental principles reliedupon.

The alleged infringement of the first and second paragraphs of Article 95

Arguments of the parties

81.

    According to British Steel, a measure cannot be validly adopted on the basis of thefirst two paragraphs of Article 95 unless it is necessary to attain the objectives setout in the Treaty. In this case, the only objective identified in the preamble to thecontested decisions is to provide the Italian and Spanish State-owned steelindustries with a sound and economically viable structure. The grant of State aidto such industries does not contribute to providing them with such a structure inthe long term. The aid granted to the undertakings concerned in the past neverattained that objective and it is highly improbable that the aid in question will doso in the future. Conversely, such aid prolongs the existence of inefficientproduction plants and allows excess capacity to be maintained, thus giving rise toa fall in prices and a loss of profitability in the European steel industry as a whole.

British Steel refers in that connection to the aid granted in the past to the Italianundertakings Ilva and its predecessor Finsider, and to the Spanish undertaking CSI:notwithstanding the aid authorized by the Commission in 1989 for Ilva and in 1987for CSI, their viability was not restored, as the Commission implicitly recognizes inthe preamble to the contested decisions.

82.

    More specifically, the aid authorized by the contested decisions will not enable theviability of Ilva and CSI to be assured, firstly because of the specific economicsituation of those two undertakings, which, according to press articles, sufferedheavier losses than expected in 1992 and 1993, being forced as a result either toslow down the necessary rationalization or to increase their borrowings, thuscompromising their future viability. Secondly, the ineffectiveness of such aid isapparent from the general prospects of the Community steel industry, which ischaracterized by excess production capacity. In those circumstances, the only effectof the aid in question will be to enable the recipients of it to increase their marketshares by selling their products at prices below the actual production costs, to thedetriment of more efficient undertakings.

83.

    Accordingly, the applicant contests the evaluation made by the Commission of Ilva'sand CSI's restructuring plans on the basis of the expert's reports prepared byAtkins and CSI (see paragraph 13 above), which are referred to by implication inpoint III of the grounds of the contested decisions, where mention is made of theassistance of external experts. It submits that there are several alternatives to theState aid option and relies for that purpose on a report drawn up at its request byProfessor T.A.J. Cockerill (Annex 9 to the application), which envisages variousother means of attaining, in the cases of Ilva and CSI, the objectives pursued. Inparticular, that report advocates the sale of all or part of the assets of theundertakings in question, the conclusion of joint venture agreements and the saleof individual production units and transfer thereof to steel works establishedoutside the European Union.

84.

    SSAB Svenskt Stål states that the contested decisions affect trade between theCommunity and the EFTA countries, covered by the EEA Agreement. TheCommission thus failed to comply with the decision-making procedure provided forin Article 97 of the EEA Agreement, which in particular requires that thecontracting party concerned inform the other contracting parties of amendmentsto its domestic legislation and that the EEA Joint Committee should conclude thatthe amended legislation does not detract from the proper functioning of theagreement.

85.

    The Commission states, first, that the applicant's arguments in fact constitute adisguised attempt to secure a review of the merits of the economic analysis onwhich the contested decisions are based, thereby going beyond the scope of thegrounds for annulment provided for in Article 33 of the Treaty. Review of thelegality of decisions adopted under Article 95 should be limited to the question

whether the Commission committed a manifest error in its appreciation of thenecessity of the aid authorized for furtherance of the aims of the Treaty.

86.

    The contested decisions are intended to provide the undertakings concerned witha sound and economically viable structure by means of restructuring measuresbased on capacity reductions. They thus involve Community aid, in that theypursue objectives that are defined by the Treaty and are compatible with the soundfunctioning of the Community steel market. The Community's policy on aid for therestructuring of the steel industry must also take account of certain objectives ofa social nature defined in Article 3(c), (d), (e) and (g) of the Treaty. In order todeal with the crisis, the Commission thus reconciled the requirements ofsafeguarding continuity of employment and the need to limit intervention andmaintain normal conditions of competition.

87.

    From that standpoint, the criticisms made of the contested decisions in theCockerill report are based on a purely theoretical analysis of the economics of thesteel industry and an incomplete knowledge of the facts. Moreover, the report failsto acknowledge the complexity and diversity of the aims which the Commissionmust take into account.

88.

    The Council endorses the Commission's argument that the applicant shoulddemonstrate that an error was committed in assessing the need for the aid inquestion to be granted, with a view to attainment of the objectives of the Treaty. The applicant, it maintains, has failed to produce any evidence to that effect.

89.

    The Italian Republic supports all the Commission's arguments. It emphasizes thatthe contested decisions took account of the difficulties being experiencedthroughout the Community steel industry. Neither the circumstances of theiradoption nor their content provide any basis for the view that they were influencedby the fact that the undertakings concerned were State-owned. Moreover, theapplicant's criticisms concerning the objectives pursued by the contested decisionsand the grounds on which it contests their legality go beyond the limits of judicialreview defined by Article 33 of the Treaty.

90.

    According to the Kingdom of Spain, the Commission sought to reconcile severalof the essential objectives mentioned in the Treaty, with a view to reorganizing thesectors concerned, which constitute an essential part of the Community steelindustry. It is exclusively for the Commission to assess the need for measures andto determine the content of them. It is incumbent upon the applicant to prove theexistence of a manifest error or misuse of powers in order to overturn thepresumption of legality attaching to acts of the Community institutions.

91.

    Ilva contests the use made by British Steel of the economic criteria relied on in theCockerill report. Many of the applicant's criticisms regarding the content of thecontested decisions merely seek to cast doubt on the facts on which theCommission based its assessment. However, the Community judicature is not

entitled to substitute its assessment for that of the competent authority but mustlimit its review to ensuring that there has been no manifest error or misuse ofpowers, relying on the information available when the contested decisions wereadopted. In any event, the applicant's allegations that the aid granted to Ilva doesnot enable the objectives pursued to be attained have no basis. On the contrary,that aid made it possible to achieve a higher ratio between the gross operatingmargin and the turnover of the beneficiary undertaking, well above the Europeanaverage. That the aid received by Ilva was properly used was officially confirmedin a report drawn up by an independent consultant appointed by the Commission. Ilva's viability was therefore restored as a result of intervention which will helpdefend the common market in steel from the disastrous consequences of the worldcrisis affecting the sector. It should also be borne in mind that, having fulfilled theconditions imposed by the Commission for authorization of the aid, Ilva fullyimplemented the restructuring plan, and in so doing sold 100% of the capital ofIlva and of Acciai Speciali Terni to private undertakings. As to the argument thatIlva could continue to sell at any price in order to remain in business, theintervener states that the aid authorized by the Commission cannot be used for thepurposes of unfair competition and that Article 5(2) of the contested decisionrelating to it provides for the opening of an investigation pursuant to Article 60 ofthe ECSC Treaty.

Findings of the Court

—    Admissibility of the new arguments put forward by SSAB Svenskt Stål onthe basis of the EEA Agreement

92.

    The Swedish undertaking SSAB Svenskt Stål, intervening in support of British Steel,put forward in its statement in intervention arguments relating to the EEAAgreement: with respect to the plea alleging infringement of Article 95 of theTreaty and breach of the principles of proportionality and non-discrimination, itcomplained ex novo that there had been a breach of the procedure provided for inArticle 97 et seq. of the EEA Agreement, a complaint which was not put forwardby the applicant.

93.

    The entitlement of an intervener to rely on provisions of the EEA Agreement insupport of the submissions of an applicant which did not itself mention thatagreement, in the context of an action for annulment, is a matter of Communitypublic policy. The Court therefore considers it necessary to examine, on the basisof Article 113 of the Rules of Procedure, the admissibility of the new argumentsraised by SSAB Svenskt Stål.

94.

    According to the second paragraph of Article 34 of the Statute of the Court ofJustice, submissions made in an application to intervene are to be limited tosupporting the submissions of one of the parties. Moreover, pursuant to Article

116(3) of the Rules of Procedure, an intervener must accept the case as he findsit at the time of his intervention.

95.

    Having regard to those procedural provisions, as interpreted by the judgments citedin paragraph 70 above, the question to be asked is whether SSAB Svenskt Stål'sarguments, although falling within the scope of the applicant's submissions (that isto say, the form of order sought by it), seek to alter the framework of the disputeor whether, on the contrary, they leave it untouched in substance and maytherefore be regarded as admissible.

96.

    In this case the intervener alleges infringement of Article 97 et seq. of the EEAAgreement. The Court considers that, if that argument were to be accepted asadmissible, the framework of the dispute would be widened in that a new andindependent plea in law would be introduced: new because it relates solely to thedecision-making procedure established by Article 97 of the EEA Agreement andwas not raised by the applicant at any stage of the written procedure; andindependent because it has no connection with the infringement of Article 95 of theTreaty and the fundamental principles referred to by the applicant. SSAB SvensktStål is in fact seeking to introduce a new plea alleging infringement of proceduralrules relating to the EEA Agreement, whereas the present proceedings areconcerned solely with the legal context of the ECSC Treaty.

97.

    It follows that the arguments put forward by SSAB Svenskt Stål fall outside theframework of the present dispute and cannot therefore be regarded as admissible.

— The merits of the plea

98.

    It must be borne in mind at the outset that, as held earlier in this judgment(paragraphs 39 to 55), 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.

99.

    That condition is fulfilled in particular where the sector concerned is experiencingsituations of exceptional crisis. In that connection, the Court of Justice emphasizedin its judgment in Case 214/83 Germany v Commission [1985] ECR 3053, paragraph30, that 'in a situation of crisis there is a close link, for the purposes of theimplementation of the ECSC Treaty, between the granting of aid to the steelindustry and the restructuring which that industry is required to undertake‘. TheCommission, for the purpose of such implementation, considers in its discretionwhether aid intended to accompany the restructuring measures is compatible withthe fundamental principles of the Treaty.

100.

    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.

101.

    The contested decisions clearly indicate, in point IV of their grounds, that theirpurpose is to reorganize the steel industry in the Member State concerned. According to the decision concerning aid for CSI, 'providing the Spanish publicintegrated steel industry with a sound and economically viable structure contributestowards the objectives of the ECSC Treaty, in particular Articles 2 and 3‘. InDecision 94/259/ECSC concerning aid to be granted to Ilva, the Commissionexpresses the same idea in slightly different words. It states: 'providing the Italiansteel industry with a sound and economically viable structure contributes toachieving the objectives laid down in the ECSC Treaty‘.

102.

    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.

103.

    As to whether, first, the reorganization of the beneficiary undertakings is conduciveto the objectives of the Treaty, it is expressly stated in the grounds of the contesteddecisions that that aim was complex and comprised several components. The aidin question was intended to facilitate the privatization of the beneficiaryundertakings, 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). The attainment of all those objectives should provide theundertakings concerned with a sound and profitable structure.

104.

    The aim of the contested decisions thus brings together, under one heading, a widevariety of objectives and it is necessary to verify whether, in the context of the crisisexperienced by the steel industry (see paragraphs 98 to 100 above), they comewithin the scope of those laid down in Articles 2 and 3 of the Treaty, specificallyreferred to in the grounds of the contested decisions.

105.

    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]

ECR 133, Part B, grounds 3-5, Case 8/57 Aciéries Belges v High Authority [1958]ECR 245, Part B, ground 3, and Joined Cases 351/85 and 360/85 Fabrique de Ferde Charleroi and Dillinger Hüttenwerke v Commission [1987] ECR 3639, paragraph15). In particular, in Joined Cases 154/78, 205/78, 206/78, 226/78, 227/78, 228/78,263/78, 264/78, 31/79, 39/79, 83/79 and 85/79 Valsabbia and Others v Commission[1980] ECR 907, paragraph 55, the Court of Justice held '[i]f the need for acompromise between the various objectives is imperative in a normal marketsituation, it must be accepted a fortiori in the state of crisis justifying the adoptionof exceptional measures which derogate from the normal rules governing theworking of the common market in steel and which clearly entail non-compliancewith certain objectives laid down by Article 3, if only that objective (contained inparagraph (c)) which requires that the establishment of the lowest prices beensured‘.

106.

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

107.

    The rationalization of the European steel industry through the restructuring ofcertain groups, the closure of obsolete or uncompetitive plant, the reduction ofexcess capacity, privatization of the Ilva group in order to ensure its viability andthe shedding of jobs, within reasonable limits, mentioned in those decisionscontribute to attainment of the objectives of the Treaty, having regard to thesensitive nature of the steel industry and the fact that continuation, or indeedaggravation, of the crisis was liable to give rise to extremely serious and enduringdisturbances of the economies of the Member States concerned. It is not disputedthat the industry is of essential importance in a number of Member States byreason of the location of steel plants in regions where there is low employment andof the importance 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 gravest public importance, particularlyby exacerbating the problem of unemployment and creating the risk of a majoreconomic and social crisis.

108.

    In those circumstances the contested decisions, by seeking to resolve thosedifficulties by reorganizing the steel undertakings benefiting from the aid inquestion, are incontestably designed to safeguard 'continuity of employment‘ andto avoid provoking 'fundamental and persistent disturbances in the economies ofthe Member States‘, as required by the second paragraph of Article 2 of theTreaty. Moreover, they pursue the objectives embodied in Article 3 concerning,inter alia, 'maintenance of conditions which will encourage undertakings to expandand improve their production potential‘ (paragraph (d)) and the promotion of'orderly expansion and modernization of production, and the improvement ofquality, with no protection against competing industries‘ (paragraph (g)). They aredesigned to rationalize the European steel industry, in particular through definitive

closure of obsolete or uncompetitive plant (for example Bagnoli in Italy, Aviles,Gijón, Vizcaya and Ansio in Spain) and the irreversible reduction of productioncapacity for certain products (for example at Taranto, in Italy) with a view todealing with excess capacity (see Article 2 of the contested decisions). They,together with the other four individual decisions mentioned above, authorizing Stateaid and adopted on the same day, thus form part of a comprehensive programmefor restructuring the steel industry on an enduring basis and reduction ofproduction capacity in the Community (see paragraphs 4 to 6 above). Accordingly,it must be emphasized that the aim of the aid in question is not simply to ensurethe survival of the beneficiary undertakings — which would run counter to thecommon interest — but to restore their viability whilst keeping the impact of the aidon competition to a minimum and ensuring compliance with the rules of faircompetition, in particular regarding the conditions for privatization of the Ilvagroup.

109.

    It follows that the contested decisions are intended to safeguard the commoninterest, in accordance with the objectives of the Treaty. The applicant's view thatthe decisions are not conducive to the attainment of those objectives must thereforebe rejected.

110.

    It having been found that the contested decisions pursue Treaty objectives, it isnecessary, secondly, to verify whether they were necessary in order to attain thoseobjectives. 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).

111.

    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‘.

112.

    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).

113.

    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 settled

case-law, therefore be limited to verifying that the facts are materially accurate andthat there has been no manifest error of assessment (see Case T-17/93 MatraHachette v Commission [1994] ECR II-595, paragraph 104, and Case T-9/93 Schöllerv Commission [1995] ECR II-1611, paragraph 140, and Case T-266/94Skibsværftsforeningen and Others v Commission [1996] ECR II-1399, paragraph 170).

114.

    In this case, in support of its view that the aid granted to CSI and Ilva is 'notnecessary‘, the applicant insists in particular that, in view of past experience andof the excess production capacity in the steel industry, any attempt to restore theviability of the undertakings in question in this case by means of State aid willinevitably fail, with serious repercussions for the general balance of the commonmarket.

115.

    In that respect, the Court finds, first, that, contrary to the applicant's assertions, theantecedents to the contested decisions and the statement of the reasons on whichthose decisions are based reveal a thorough analysis of the present crisis in theEuropean steel industry and of the most appropriate means for dealing with it. The Commission directed that an investigation be carried out by an independentexpert, Mr Braun, whose task was to list plans for the closure of steel undertakings;his report was submitted on 29 January 1993. That report, produced by theCommission, corroborates the information contained in the communication fromthe Commission to the Council and the European Parliament of 23 November 1992(see paragraph 4 above). Moreover, it is clear from documents before the Courtand from the answers given by the Commission to the questions put to it by theCourt (see paragraph 15 above) that the Commission, with the assistance of outsideexperts, considered very carefully the restructuring plans accompanying the aidprogrammes envisaged by the Member States concerned in terms of their capacityto ensure the viability of the beneficiary undertakings (point III of the grounds ofeach of the contested decisions).

116.

    Moreover, the applicant has 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 undertakings.

117.

    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 decisions in order toachieve reorganization of the beneficiary undertakings in order to ensure theirviability or profitability, cannot constitute evidence of failure by the Commission tocomply with the Treaty.

118.

    As regards the applicant's arguments concerning the alleged unforeseen lossessuffered by Ilva and CSI in 1992 and 1993, and the prevailing excess production

capacity in the steel industry, they too are without any foundation. The applicantfails to take into account the precautions taken by the Commission in the contesteddecisions with a view to ensuring the viability of Ilva and CSI, in particular byresolving the problem of those undertakings' debts (see point II of the grounds ofthe contested decisions), whilst at the same time limiting the financial restructuringmeasures to the amounts strictly necessary, so as not to 'affect the conditions oftrade in the Community steel industry to an extent which is incompatible with thecommon interest‘ (point VI of the grounds of the contested decisions). In thatrespect, the Court finds that the Commission, in order not to provide thebeneficiary undertakings with an undue advantage over other undertakings in thesector, took care in the contested decisions in particular to ensure that theundertakings concerned did not at the outset have their net financial chargesreduced below 3.5% of annual turnover (3.2% in the case of AST, Acciai SpecialiTerni) which, according to the Commission, which has not been contradicted onthat point by the applicant, represents the present average for Community steelundertakings. More generally, Article 2 of the contested decisions imposes certainconditions intended to ensure that the financing aid is limited to what is strictlynecessary. In view of those considerations, the applicant's 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.

119.

    Moreover, it is apparent from the Commission's communications to the Council inthe course of the procedure leading to the adoption of the contested decisions thatthe Commission analysed in detail the conditions under which the undertakingsreceiving the aid in question would be viable. In the case of CSI (Decision 94/258)the Commission, in assessing the viability of the restructuring plan notified by theSpanish Government, used the operational criterion whereby 'a steel undertakingcannot hope to attain lasting financial viability if it cannot achieve, under normalmarket conditions, an annual gross operating result of 13.5% of turnover‘(Commission communication to the Council of 5 November 1992 — SEC(92) 1916final — concerning the restructuring of CSI, point 5.1, page 11, Annex 9 to thedefence). On the basis of that criterion, the Atkins expert's report produced by theCommission finds that the Spanish Government's aid programme was capable ofrestoring CSI's viability by the end of 1996, on the basis of sales forecasts of 3.274million tonnes of flat products and 1.250 million tonnes of long products andreversing-mill plate. It reached the conclusion that 'on an estimated turnover ofPTA 303 171 billion (2.2 BECU) the company should return to positive operatingresults in 1996, with a gross operating return of 17%, financial charges of 5% oversales, depreciation of 10% and a net return of 2%‘.

120.

    As regards Ilva's situation, chapter 2 of the Commission's communication to theCouncil and to the ECSC Consultative Committee of 15 December 1993 (SEC(93)2089 final) requesting the assent of the Council and the opinion of the ConsultativeCommittee under Article 95 of the Treaty contains an analytical description of the

prospects of the undertakings' (ILP and AST) achieving viability as a result ofprivatization of the Ilva group (points 2.5 and 2.6), as accepted by the Council, anda reference to the activities of an independent expert who had been directed toidentify 'the hot-rolling mills which could be closed without jeopardizing theviability of either of the new companies, be it ILP or AST‘ (ibid., point 2.9). It isclear from the document in question that the expert took account of six optionsinvolving different possibilities of closures and reductions of capacity, the secondof which was chosen by the Italian Government. Option 2 is described as follows:'eliminating one of the four reheating furnaces belonging to the No 1 mill and oneof the three furnaces belonging to the sheet mill at Taranto and closing downcompletely the facilities at Bagnoli‘ (ibid., point 2.9). On the basis of those details,the Commission considered that ILP and SAT would be viable. In particular, onthe basis of the criterion that a steel undertaking becomes viable 'if it is able toshow a return on its equity capital in the range of 1-1.5% of turnover‘ (ibid., point3.3.2, page 20), it emphasized that ILP's profits would be of the order of 1.4-1.5%of turnover, even if financial charges were to increase. As regards the productionlevels needed in order not to undermine the viability of ILP and AST, points 2.5and 2.6 of the document concerned (pp. 5 to 8) contain an economic analysis of theconditions needed to achieve a satisfactory situation no later than the end of 1996;those results were used to define the content of Article 2 of the contested decision.

121.

    Finally, as regards the applicant's argument that the Commission had other meansavailable involving less distortion than the aid in question, with a view to restoringthe viability of the undertakings concerned, which shows in its view that the aid wasnot necessary, the Court considers that, even if the alternative solutions wereenvisageable and applicable in practice, which has not been established, theexistence of such options does not in itself suffice to vitiate the contested decisions,since the course adopted by the Commission evinces no manifest error ofassessment or misuse of power. It is not for the Court to examine theappropriateness of the choice made by the Commission since to do so mightinvolve substituting its own assessment of the facts for that made by theCommission.

122.

    It follows that the applicant has put forward no convincing argument to suggest thatthe contested decisions were not adopted in accordance with the conditions laiddown by the first and second paragraphs of Article 95 of the Treaty, particularlyas regards the need to authorize the aid in question in order to attain the objectivesof the Treaty.

123.

    It follows that the contested decisions are not rendered unlawful by anyinfringement of the first and second paragraphs of Article 95 of the Treaty.

The alleged breach of the principles of proportionality and non-discrimination

Arguments of the parties

124.

    As regards the principle of non-discrimination, the applicant states that, byauthorizing the grant of State aid to State-owned undertakings in certain MemberStates, the Commission enabled a limited number of undertakings to embark onrestructuring using public funds, whereas other undertakings, including theapplicant, had to use their own resources for that purpose. The contested decisionswere thus adopted in favour of undertakings owned exclusively by the MemberState concerned to the detriment of the interests of competing private undertakingsor undertakings in other Member States. By virtue of the principle of non-discrimination, comparable situations should not be treated differently and differentsituations should not be treated in the same way, unless such treatment isobjectively justified. In particular, it requires that there should be no distinctiondrawn between the public and private sectors. The Court of Justice has held thatthe Commission is not entitled to authorize aid the grant of which may result inmanifest discrimination between the public and private sectors, since in such a casethe grant of aid would involve distortions of competition contrary to the commoninterest (see Case 304/85 Acciaierie e Ferriere Lombarde Falck v Commission [1987]ECR 871). In British Steel's view, the contested decisions present anotherdiscriminatory element: they were made in favour of undertakings which have failedto engage in radical restructuring, to the disadvantage of those which have done so.

125.

    The contested decisions also, in the applicant's view, contravene the principle ofproportionality, as defined by the Court of Justice. The means employed by theCommission were not consonant with the importance of the objectives pursued andwere not necessary for their attainment. Moreover, according to the applicant, thediscriminatory element in the contested decisions is not only an independent groundfor their annulment but also an important element showing that the contesteddecisions infringe the principle of proportionality, since they impose onundertakings in the same situation as the applicant a competitive disadvantagewhich is wholly disproportionate to the Commission's declared aim, therebyjeopardizing the equilibrium of the market.

126.

    The Commission, supported by the Council, contends that the complaint concerningalleged discrimination should not be addressed to it, since it is for the MemberStates concerned to propose the grant of State aid. In any event, the fact that theaid was granted in a particular instance to public undertakings but not to privateundertakings does not necessarily mean that the principle of non-discrimination hasbeen infringed. Even if it were conceded that the contested decisions favourundertakings which had not engaged in restructuring, they were not discriminatorywithin the meaning of Community law, since they did not have the effect ofdistorting competition contrary to the common interest. The applicant has notshown that the contested decisions are liable to distort competition. Moreover, theCommission notes that British Steel only recently became a private undertaking andthat, in the period from 1981 to 1985, it received aid which enabled it to beprivatized and to establish a sound and profitable structure. The applicant'sassertion that it had to restructure from its own funds takes no cognizance of its

own recent history. As regards the plea alleging breach of the principle ofproportionality, it adds little to the applicant's arguments concerning the need forthe contested decisions to be adopted under Article 95 of the Treaty.

127.

    According to the Italian Republic, the contested decisions would be improper onlyif they had been inspired by the aim of discriminating against certain undertakingsat the expense of others, by treating them differently under the same conditionsand circumstances. But the context of their adoption and their content disclosesnothing to support the view that they were decisively influenced by the fact that theundertakings concerned were public and that, as a result, the decisions would havebeen different had they been private undertakings.

128.

    The Kingdom of Spain also concedes that the Commission may not authorize aidinvolving manifest discrimination between the public and private sectors. That wasnot done in this case. The undertakings involved, namely British Steel and CSI, arenot in comparable situations, the latter being obliged, in consideration of the aidauthorized, to reduce its capacity whereas the former is not engaged in any newrestructuring effort. As regards the alleged breach of the principle ofproportionality, the applicant has not proved any imbalance whatsoever betweenthe means used by the Commission and the aims pursued. Authorization of the aidin question forms part of the Community's strategy to deal with the crisis in thesteel industry.

129.

    Ilva states that the Commission had informed the Community undertakings of therestructuring plan which it proposed implementing, and asked each of them toparticipate in the general effort to reduce capacity so as to achieve genuinereorganization of the European steel industry. The Commission thus did not favourIlva at the expense of its competitors but authorized aid in return for fulfilment ofspecific commitments. There is thus no question of any breach of the principle ofnon-discrimination, since different situations were assessed differently.

Findings of the Court

130.

    The Court considers it appropriate to examine the complaint concerning breach ofthe principle of proportionality before the complaint alleging breach of theprinciple of non-discrimination.

131.

    As regards, first, the alleged breach of the principle of proportionality, theapplicant maintains that the aid in question is disproportionate having regard to itspurpose. It also suggests, essentially, that the contested decisions do not requirethe beneficiary undertakings to reduce their capacity sufficiently, as a counterpartto the economic advantages conferred on them by the aid in question and to theresultant distortions of competition.

132.

    According to the first paragraph of Article 95 of the Treaty, decisions adopted bythe Commission to deal with cases not provided for in the Treaty must conformwith Article 5 of the Treaty, according to which the Commission is to carry out itstask 'with a limited measure of intervention‘. The latter provision must beinterpreted as embodying the principle of proportionality (see, to that effect, theOpinion of Advocate General Roemer in Case 31/59 Acciaieria e Tubificio diBrescia v High Authority [1960] ECR 71, at p. 88).

133.

    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 HautsFourneaux de Chasse v High Authority [1958] ECR 211, at 227) that that institution'has a duty to act with circumspection and to intervene only after carefullybalancing the various interests concerned whilst so far as possible restricting theforeseeable damage to third parties‘.

134.

    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 179/84 Bozzetti v Invernizzi [1985] ECR 2301 andCase 265/87 Schräder [1989] ECR 2237, paragraph 22).

135.

    In this case, it must be emphasized at the outset that the aid in question contributesto the attainment of certain objectives of the Treaty by restoring the viability of thebeneficiary undertakings and was necessary for that purpose, as held earlier (seeparagraphs 98 to 123 above). In the light of the case-law cited above, and contraryto the applicant's assertions, that aid is not therefore inappropriate having regardto the economic and social objectives pursued through such restoration of viability. However, for the contested decisions to be regarded as in conformity with theprinciple of proportionality, in a market characterized by excess productioncapacity, the question must also be considered whether they require the beneficiaryundertakings to make appropriate closures and reductions of capacity as acounterpart to the aid authorized.

136.

    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 amounts 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 the

crisis 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.

137.

    In this case, the Court finds that, in point IV of the grounds of Decision 94/258concerning CSI, the Commission emphasizes the need for there to be 'adequatecounterpart measures, commensurate with the amount of aid being exceptionallyapproved, so that a major contribution is made to the structural adjustmentrequired in the sector‘. Furthermore, in point VI of the grounds of that decision,it is stated that '[i]t is not only necessary to ensure ... that the aid approved enablesthe company to return to viability by the end of 1996 ... the aid must also be keptto the amount strictly necessary. In that context, it must also be ensured that thecompany does not, as a result of the financial restructuring measures, obtain anunfair advantage over other companies in the sector‘. In points V and VI of thegrounds of Decision 94/259 concerning Ilva, the Commission states that '[s]o as tolimit the impact on competition to the minimum, it is important that the Italianpublic steel sector should make a crucial contribution to the structural adjustmentstill necessary in that sector, through capacity reductions carried out in return forthe aid‘ and that '[t]he granting of operating aid must be limited to what is strictlynecessary‘. The grounds of the two contested decisions thus contain a justificationfor the criteria used to determine the reductions of capacity to be effected. In thecase of Ilva, the reductions of capacity total 1.7 million tonnes per year in Tarantothrough the demolition of reheating furnaces and complete closure of the Bagnoliplant. The decision concerning CSI imposes capacity reductions of the order of 2.3million tonnes of pig iron at Avilés and Vizcaya, 1.423 million tonnes of crude steelat Gijón and Vizcaya, and 2.3 million tonnes of hot-rolled coil at Ansio. Moreover,Article 1(3) of the two decisions states that '[t]he aid shall not be used for thepurpose of unfair competition practices‘, and if it is the Commission may requiresuspension of payments of aid or the recovery of aid already paid, withoutprejudice to any penalties it might impose (Article 6(1) of the decisions).

138.

    It must also be noted that the applicant has put forward no specific argument toshow that the plant closures required by the contested decisions would beinsufficient having regard to the extent of the aid authorized and the objectivespursued.

139.

    In those circumstances, the Court finds no grounds for concluding that theCommission did not impose on the undertakings to which the aid in question wasgranted appropriate conditions as a counterpart for the advantage therebyconferred, in order to contribute to the restructuring of the entire sector concerned,and to the reduction of capacity, in accordance with the objectives of the Treaty.

140.

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

141.

    As regards, secondly, the alleged breach of the principle of non-discrimination, itmust be borne in mind that, according to Article 4(b) of the Treaty, 'measures orpractices which discriminate between producers‘ are recognized as incompatiblewith the common market for steel and are accordingly prohibited within theCommunity.

142.

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

143.

    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).

144.

    In this case, to determine whether the contested decisions are discriminatory it isnecessary to verify whether they involve distortions of competition to an extentcontrary to the common interest.

145.

    It must first be observed that the applicant has advanced no specific argumentcapable of showing that the contested decisions are liable to distort the conditionsof competition 'to an extent contrary to the common interest‘ and thereby give riseto 'manifest‘ discrimination against, in particular, private undertakings.

146.

    As the Italian Government states, the context in which the decisions were adoptedand the decisions themselves disclose no support for the assertion that they weredecisively influenced by the fact that the undertakings to which the aid was grantedwere public undertakings and that, consequently, the decisions would have beendifferent had they been private undertakings. Moreover, the public nature of theundertakings concerned could not lawfully be relied on by the Commission torefuse to grant the aid in question since to do so would contravene the principleof equal treatment as between public and private undertakings.

147.

    Moreover, it must be borne in mind that, as already held (see paragraphs 131 to139 above), the advantages afforded to the undertakings to which the aid inquestion was granted are proportionate to the objectives pursued, as a result inparticular of the counterpart obligations imposed on those undertakings (plantclosures and reduction of production capacity). Furthermore, the distortions ofcompetition resulting from the contested decisions are limited to what is strictlynecessary (see paragraph 118 above) and are justified by the very aim of thedecisions — restoration of a sound and profitable structure for the beneficiaryundertakings — which has been held to be compatible with the Treaty (seeparagraphs 103 to 108 above). Finally, Article 1(3) of the decision states '[t]he aidshall not be used for the purpose of unfair competition practices‘. Pursuant toArticle 6(1) of the contested decisions, if any of those obligations is not observed,the Commission may require the suspension of payment or recovery of the aid inquestion (see paragraph 137 above).

148.

    In those circumstances, the Court finds that the Commission acted in the commoninterest, appraising the various interests involved and ensuring that importantinterests were safeguarded, whilst at the same time avoiding unfavourableconsequences for other economic operators to the extent to which the very subject-matter and the purpose of the contested decisions allowed.

149.

    This analysis is in conformity with the case-law of the Court of Justice which held,in Valsabbia and Others v Commission, cited above, (paragraph 49): '[t]heCommission is indeed under an obligation by virtue of Article 3 of the Treaty toact in the common interest, but that does not mean that it must act in the interestof all those involved without exception, for its function does not entail an obligationto act only on condition that no interest is affected. On the other hand, whentaking action it must weigh up the various interests, avoiding harmful consequenceswhere the decision to be taken reasonably so permits. The Commission may, in thegeneral interest, exercise its decision-making power according to the requirementsof the situation, even to the detriment of certain individual interests‘.

150.

    It follows that the applicant's argument that the contested decisions are vitiated bya breach of the principle of non-discrimination must be rejected.

The fourth plea in law: infringement of essential procedural requirements

151.

    British Steel maintains that the contested decisions were adopted in breach ofessential procedural requirements. This plea may be divided into three parts,concerning, first, inadequacy of the statement of reasons; second, the allegedabsence of a contentious procedure and, third, failure to comply with the Council'sassent.

The alleged inadequacy of the statement of reasons

Arguments of the parties

152.

    According to British Steel, supported by SSAB Svenskt Stål, the Commission failedto fulfil the obligation laid down by Article 15 of the Treaty to state the reasons onwhich its decisions are based. According to settled case-law, even though theobligation to state reasons depends on the nature of the act in question and thecontext in which it was adopted, the conditions laid down by Article 15 are notfulfilled where a contested decision merely states that the prerequisites for applyingthe relevant provisions are satisfied (see, to that effect, Case 185/85 Usinor vCommission [1986] ECR 2079, paragraph 21).

153.

    The statements of the reasons for the contested decisions are virtually identical tothose of each of the decisions adopted by the Commission on the same dateauthorizing aid for steel undertakings. In particular, the Commission does notexplain either why the aid in question enabled CSI and Ilva to be provided with asound and economically viable structure or how the objectives of the Treaty willthereby be attained. Finally, it does not specify which objectives set out in Articles2 and 3 of the Treaty it sought to pursue.

154.

    The applicant understands that the Commission did obtain a report from an outsideexpert, the firm W.S. Atkins, before adopting the contested decisions. Since thecontested decisions hardly refer to that report and to the conclusions to be drawnfrom it, they do not state the reasons on which they are based with sufficientparticularity to enable the parties to protect their rights and to enable the Courtto conduct an effective judicial review.

155.

    Det Danske Stålvalseværk also maintains that the statement of reasons for thecontested decisions is inadequate. In particular, the fact that the Commission didnot identify the objectives pursued and the links between those objectives and theaid in question means that the contested decisions are the result of a politicalprocess.

156.

    The Commission, supported by the Italian Republic, rejects the applicant'sarguments. First, the applicant does not explain why the mere fact that thereasoning of a decision is similar to that of other decisions should mean that it isinsufficient. In this case, the six decisions adopted by the Commission are part ofan overall plan for the restructuring of the steel industry, each being taken at thesame time and against the same background of crisis and inevitable reduction ofcapacity. Secondly, the assertion that the contested decisions do not explain howthe aims of the Treaty can be fulfilled by the grant of State aid is simply atendentious statement since aid can only be duly authorized under the Treaty in theinterest of the Community, which endows it with the character of Community aid. The Commission also states that the failure to refer to the report by W.S. Atkinsdoes not substantively change the statement of reasons because point III of thegrounds of each decision expressly refers to the fact that it was assisted by outside

experts. Finally, in examining the statement of reasons of the contested decisions,account must be taken of the fact that the Commission did not impose any penaltyon the applicant and that, moreover, the applicant was closely involved in theprocedure that leading to the adoption of the decisions, as evidenced by theminutes of the meetings of the ECSC Consultative Committee.

157.

    The Council considers that, in the case of Ilva and CSI, the aid authorized by theCommission was clearly of a Community character and formed part of therestructuring programme for the steel industry proposed by the Commission andaccepted by the Council. Moreover, British Steel was closely involved in theprocedure leading to the adoption of the contested decisions, and could nottherefore claim that it was not fully aware of the reasons which prompted theiradoption.

158.

    According to the Kingdom of Spain, a Community institution is not required to givedetails of all relevant factual and legal aspects. The statement of the reasons fora decision must take account of its context and all the legal rules governing thematter in question (see Case C-213/87 Gemeente Amsterdam and VIA v Commission[1990] ECR I-221). In this case, the statements of the reasons for the contesteddecisions are more than adequate, since the Commission deals point by point witheach of the conditions justifying the adoption of the measures concerned, and alsowith the legal basis and the monitoring measures required.

Findings of the Court

159.

    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.

160.

    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 other

persons concerned by the measure for the purposes of the second paragraph ofArticle 33 of the ECSC Treaty may have in obtaining an explanation‘ (JoinedCases 172/83 and 226/83 Hoogovens Groep v Commission [1985] ECR 2831,paragraph 24).

161.

    In this case, it is necessary to consider the applicant's complaints concerning thealleged inadequacy of the statements of the reasons for the contested decisions withregard, first, as to whether the aid in question was apt to restore the viability of theundertakings concerned and, second, as to whether that aim was in conformity withthe objectives of the Treaty.

162.

    As regards, first, the viability of the undertakings to which the aid was granted, theCourt finds that the contested decisions clearly indicate the means by which suchviability must, in the Commission's view, be restored, where they list, in particularin point II of their grounds, the various aspects of the restructuring programmesupported by the aid in question. In the case of CSI, the decision relating to itexpressly indicates that the plan comprises essentially a series of industrial, socialand financial restructuring measures which it describes concisely. It also refers, forexample, to the principal measures intended to restabilize the financial organizationof the undertaking, the closure of the least competitive plants and a reduction of42% in the workforce. In the case of Ilva, it is expressly indicated in the statementof reasons for the decision concerning the aid granted to it that the means used torestore the viability of the undertaking will be privatization of the group, that beingthe essential aim of the aid in question, and a new reorganization programme,involving in particular the splitting of its core business into two new companies inthe manner outlined in the decision.

163.

    Moreover, the Commission states in the contested decisions (point III of thegrounds) that, in assessing the viability of the respective restructuring plans, itapplied the same criteria as those imposed by it during the previous restructuringof the Community steel industry. Those criteria could not therefore be unknownto those active in the market, the applicant in particular. Moreover, the applicanthad itself benefited from the grant of State aid to facilitate its privatization,according to the assertions of the intervener Ilva, which have not been disputed. In those circumstances, by specifying the main elements of the abovementionedrestructuring plans, the contested decisions sufficiently indicated the reasons forwhich the aid in question would, in the Commission's view, enable CSI and Ilva tobe provided with a sound and viable structure.

164.

    Against that background, the applicant's argument that the Commission failed todisclose, in the contested decisions, the criteria used by the independent expertswhich assisted it in appraising the potential viability of the beneficiary undertakingscannot be upheld. It need merely be pointed out that, according to settled case-law, the Commission is not required to specify the numerous and complex facts onthe basis of which a decision was adopted provided that it refers to the general

situation which led to its adoption and the general objectives which it pursues. Inthis case, the contested decisions contain, as has been established in the foregoingparagraph, an adequate statement of reasons as regards restoration of the viabilityof the undertakings concerned.

165.

    Moreover, the statements of the reasons for the contested decisions, as far as theviability of the beneficiary undertakings is concerned, are substantiallysupplemented and developed by the documents in the file. As regards CSI'ssituation, the Commission produced the full text of its communication to theCouncil of 5 November 1992 (doc. SEC(92)1916 final) concerning the restructuringof CSI following notification of a plan for the reorganization of that undertakingby the Spanish Government. That document contains a detailed analysis of theconditions for the viability of the new company resulting from the takeover by CSIof AHV (Altos Hornos de Vizcaya) and Ensidesa (see paragraph 119 above). Moreover, a version of the Atkins report concerning CSI, with confidentialinformation removed, was supplied by the Commission with its supplementaryanswer, dated 30 June 1995, to the questions put to it by the Court. That versionillustrates in great detail the expert's working method and the options taken intoconsideration in working out a reliable basis for CSI to become viable again.

166.

    As regards Ilva's situation (Decision 94/259), the Commission also produced the fulltext of its communication of 15 December 1993 to the Council (doc. SEC(93)2089final) in which it requested the Council's assent under the first paragraph of Article95 of the Treaty. That communication reproduces in part the content of an earliercommunication of 10 November 1993 (doc. SEC(93)1745 final). It contains adetailed analysis of the conditions for the viability of the undertakings (ILP andAST) resulting from the privatization of Ilva (points 2.5 and 2.6), as accepted bythe Council (see paragraph 120 above).

167.

    As regards, secondly, the reasons for which the Commission considered that theaim of the aid in question, namely a return to viability for the beneficiaryundertakings, was in conformity with the objectives of the Treaty, it must beemphasized that those reasons are not only set out in point IV of the grounds ofthe decisions but are also developed throughout the preambles to the decisions. More specifically, it is apparent from point IV that, in the Commission's view, itwas because of serious difficulties being experienced by the steel industry in severalMember States since mid-1990 that reorganization of the undertakings in questionwas to be regarded as conforming with the objectives laid down in Articles 2 and3 of the Treaty. In points V and VI of the grounds, the Commission states that thecontested decisions are intended to make a contribution to the structuralreadjustment of the sector through capacity reductions. It also emphasizes that oneof the aims pursued by the various conditions imposed by it is to limit the impacton competition of the aid in question to the minimum. In those circumstances, theCourt considers that the statements of reasons for the contested decisions weresufficient to enable the applicant to identify the objectives of the Treaty which

those decisions purported to pursue and to assess whether the reorganization ofCSI and Ilva was consonant with those objectives.

168.

    Moreover, the lack of foundation for the complaints just examined is furtherconfirmed by the fact that it is not disputed that the applicant was closely involvedin the procedure preparatory to the adoption of the decisions, which detracts fromthe necessity of an extremely detailed statement of reasons concerning the facts onwhich the contested decisions were based (see Case 13/72 Netherlands vCommission [1973] ECR 27).

169.

    It follows from all the foregoing considerations that the contested decisions are notrendered unlawful by any inadequacy of their statements of reasons.

The alleged absence of a contentious procedure

Arguments of the parties

170.

    British Steel, supported by SSAB Svenskt Stål, maintains that, in failing to open thecontentious procedure provided for by Article 6 of the Aid Code, the Commissioninfringed an essential procedural requirement of Community law. The proceduralprovisions contained in Article 6 of the Aid Code are in most material respects thesame as those contained in Article 93(2) and (3) of the EC Treaty, as interpretedin the settled case-law of the Court of Justice (see in particular Case 120/73 Lorenzv Germany [1973] ECR 1471). In the applicant's opinion, the structure of thosetwo sets of provisions is so similar that, even if there is no express requirement inArticle 6 that the Commission open a contentious procedure when it has doubts asto the compatibility of a plan for aid, such an obligation is plainly to be inferred. It refers to the case-law of the Court of Justice according to which the Commissionmust make a finding of incompatibility of aid by means of an appropriateprocedure, which it is the Commission's responsibility to set in motion (see in thatconnection Case C-387/92 Banco Exterior de España [1994] ECR I-877). Accordingto the applicant, it would be an extraordinary result if the procedural guaranteesunder the ECSC Treaty were weaker than those under the EC Treaty, bearing inmind that the former contains a much stricter State aid regime than the latter.

171.

    The applicant rejects the Commission's argument that Article 95 of the Treaty laysdown a procedure offering greater protection than Article 6 of the Aid Code. Article 95 lays down no formal procedure for consultation of interested parties andthat runs counter to the importance attached by the Court of Justice to recourseto a formal procedure to ensure that all the parties concerned are able to submittheir observations. Moreover, Article 95 contains no specific provision regardingtime-limits, which may of course vary depending on the urgency and importance ofthe decision to be adopted by the Commission.

172.

    The Commission, supported by the Council and the Italian Republic, states that theobligation to open a contentious procedure of the kind provided for by Article 6(4)of the Aid Code is not provided for in the first paragraph of Article 95 of theTreaty. Recourse to Article 6 of the Aid Code would be simply inappropriate inthis case; the Commission might open the procedure to establish whether thepayments in question did actually constitute aid. However, in this case, it was clearfrom the outset that the proposed restructuring plans constituted aid incompatiblewith the Code. In any event, the Commission considers that Article 95 conferredon the applicant greater procedural rights than would have been afforded to itunder Article 6. The applicant in fact had a longer period to make representations,both directly and through the ECSC Consultative Committee. As regards Article6, it merely obliged the Commission to seek the views of the Member States beforetaking a decision on the compatibility of proposed State aids; by contrast, theadoption of the decisions in question under Article 95 required the unanimousassent of the Council, which provides much greater protection. Moreover, theexistence of one procedure for authorizing aid which confers a formal role oninterested parties, and another procedure which does not, is not so strange as theapplicant suggests. The first subparagraph of Article 93(2) of the EC Treatyprovides for a procedure involving interested parties, whereas the thirdsubparagraph of Article 93(2) provides for a procedure whereby the MemberStates, acting unanimously, may derogate from Article 92 in authorizing aid wherethis is justified by exceptional circumstances. The latter procedure expresslyexcludes the formal involvement of interested parties.

173.

    According to the Kingdom of Spain, the contentious procedure provided for inArticle 6 of the Aid Code is not applicable in this case since that provision isconcerned with aid covered by the Aid Code. However, the contested decisions arenot based on the Aid Code but on Article 95 of the Treaty, which does not providefor any contentious procedure.

Findings of the Court

174.

    The contested decisions were adopted on the basis of the first and secondparagraphs of Article 95 of the Treaty. Those provisions provide for the assent ofthe Council and compulsory consultation of the ECSC Consultative Committee. They do not confer on the addressees of decisions and interested parties any rightto be heard. For its part, Article 6(4) of the Fifth Aid Code does confer such aright, stating '[i]f, after giving notice to the interested parties concerned to submittheir comments, the Commission finds that aid in a given case is incompatible withthe provisions of this decision, it shall inform the Member State concerned of itsdecision‘. That provision was included in all the aid codes prior to the one inforce, starting with the first (see Commission Decision 257/80/ECSC of 1 February1980 establishing Community rules for specific aid to the steel industry, OJ 1980L 29, p. 5).

175.

    The applicant considers that the Commission infringed the rights of the defence,in that, even in the absence of an express provision in Article 95 of the ECSCTreaty, it should have initiated a contentious procedure against it, on the patternof Article 6 of the Fifth Aid Code. It also seeks to draw a parallel between Article95 of the ECSC Treaty and Article 93(2) of the EC Treaty, to infer a generalprinciple that the Commission must systematically involve interested parties in theprocedure whenever it assesses the compatibility of a State aid with the Treaty.

176.

    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, in the procedurefor the adoption of the contested decisions under the first paragraph of Article 95of the ECSC Treaty, providing for consultation of the ECSC ConsultativeCommittee, the applicant in any event had an opportunity to make its positionknown within that committee. Pursuant to Article 18 of the ECSC Treaty, theECSC Consultative Committee consists of members representing producers,workers, consumers and dealers. It is not disputed that British Steel, as a producer,was represented on the Committee, in that Mr Evans, a member of the Committee,was at the material time a Director (International Affairs) of British Steel, as hestated in his letter of 4 March 1997 in response to a question asked at the hearingby the President of the Court of First Instance. At the 310th meeting of thatCommittee on 12 November 1993 the matter of aid for Ilva and CSI was discussedat length (see the extracts from the minutes appended as Annex 3 to theCommission's observations), and the applicant's representative was present andgave his views on the measures proposed by the Commission. The revisedcommunication concerning Ilva was discussed, in the same circumstances, at theCommittee meeting of 16 and 17 December 1993.

177.

    Moreover, in Decision 94/259 concerning Ilva, the second paragraph of point VIIIof the grounds expressly states that a procedure had been initiated pursuant toArticle 6(4) of the Aid Code before Italy notified to the Commission the newprogramme for reorganization and privatization of the Ilva group (point II of thegrounds of that decision). In that connection, the Commission has stated, withoutbeing contradicted, that the applicant was consulted and had an opportunity to giveits views. As regards Decision 94/258 concerning CSI, Annex 4 to the applicationlists 15 meetings or exchanges of correspondence between September 1992 andMarch 1994 concerning the programme for authorization of aid for certainundertakings, including CSI; Annex 6 to the defence contains the correspondencebetween British Steel and the Commission concerning aid for CSI.

178.

    Furthermore, Eurofer is a non-profiting-making association of European steelcompanies. British Steel is a member. As the Commission has stated, withoutbeing contradicted by the applicant, Eurofer submitted its observations on theenvisaged measures on behalf of all its members. Reference may be made by wayof example to a memorandum of 9 October 1992 (Annex 7 to the defence).

179.

    It thus follows that, in practice, the applicant did have an opportunity to give itsviews within the framework of the procedure for the adoption of the contesteddecisions, and thus those decisions cannot in any circumstances be regarded asrendered unlawful by the alleged absence of a contentious procedure.

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

Arguments of the parties

180.

    British Steel states that, pursuant to the first paragraph of Article 95 of the Treaty,a decision may be taken by the Commission only with the unanimous assent of theCouncil. It is essential that the text of the decision adopted by the Commission beidentical in every material respect to that approved by the Council. TheCommission has no discretion to take a decision under Article 95 of the Treaty ina form differing from that of the text approved by the Council.

181.

    In the case of Decision 94/259, that principle was infringed. The Commissionrequested the Council to assent to a proposal to authorize aid to Ilva on theexpress condition that the capacity reduction of 1.2 million tonnes per year atTaranto should take place irreversibly no later than 30 June 1994 and the Councilassented to those proposals on that express condition. However, the operative partof the contested decision contains no condition requiring the reduction to be madebefore that date. The time-scale is mentioned only in the preamble to the decisionand is not therefore binding. The Commission's decision thus differs in a significantrespect from the text unanimously approved by the Council.

182.

    The Commission's view that the Council merely has to assent to the substance ofthe Commission's proposal entails the risk of undermining the balance of powersbetween the institutions, in that the Commission could adopt a free interpretationof what was decided by the Council. Article 95 requires the assent of the Councilon the actual text of the decision, not on the substance of the proposal.

183.

    The Commission, supported by the Italian Republic, concedes that the time-limitof 30 June 1994 for closure of the Taranto plant does not appear in the operativepart of the decision but only in the preamble to it. The decisions in question wereadopted in their final form by the Commission after it obtained the Council's assenton the basis of the Commission's communication to the Council describing thesubstance of its proposed decision, without having concerned itself as to the preciseform the decision would take. Consequently, there was no alteration of an act ofthe Council by the Commission. Moreover, and in any event, the preambles to thecontested decisions did more than merely state reasons, since they refer to thearrangements by which the restructuring is to be carried out; in each case thegrounds and the operative part form a whole, which refers to the programmes tobe followed. The date of 30 June 1994 mentioned in the preamble to each

contested decision is thus a condition actually laid down by the decision itself, asrequired by the Council.

184.

    The Council considers that the text of the first paragraph of Article 95 of theTreaty does not impose an obligation on it to give its assent to the formal act whichthe Commission is proposing to adopt. In this case, it gave its unanimous assentwithin the limits and under the conditions set out in the communications from theCommission on the various cases concerning aid, also taking into account theamendments to be made to the enacting terms of the decisions as a result of thediscussions held by the Council. The Council states that the decisions adopted bythe Commission were consistent with what had been decided by it.

Findings of the Court

185.

    The Court finds that British Steel's complaint relates only to the formal legality ofDecision 94/259 concerning Ilva. The applicant considers that decision to havebeen adopted in breach of the Council's assent, prescribed in mandatory terms bythe first paragraph of Article 95 of the Treaty, because the time-limit of 30 June1994 for fulfilment by Ilva of its obligation to reduce its production capacity atTaranto appears in the Commission communication of 15 December 1993(paragraph 24), on which the Council's opinion of 22 December 1993 was based,but does not appear in the operative part of the contested decision, but only in thepreamble (point II, eighth paragraph).

186.

    It is not disputed that the date of 30 June 1994 appeared in the programme forreorganization and privatization of the Ilva group endorsed by IRI in September1993 and notified by the Italian Government to the Commission by letter of 13December 1993 (see point II of the grounds of the relevant decision). Nor is itdisputed that that date appeared in paragraph 24 of the communication from theCommission to the Council of 15 December 1993 on which the Council's assent wasbased, and does not appear in the operative part of Decision 94/259 but only in thepreamble (point II).

187.

    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.

188.

    The applicant does not criticize the Commission's practice of submitting acommunication to the Council rather than a draft decision. It merely claims thatan important element of the communication submitted to the Council was notincluded in the operative part of the contested decision.

189.

    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).

190.

    The Council itself has stated that 'the wording of Article 95(1) does not impose anobligation on the Council to give its assent to the formal act‘ which theCommission proposes to adopt and that 'the decisions adopted by the Commissionwere indeed consistent with what had been agreed by it‘.

191.

    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), 4(1) and 6) emphasizes the absolute needto comply with the restructuring programme described in point II of the groundsof 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.

192.

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

193.

    It follows from all the foregoing that the application for annulment must bedismissed.

Costs

194.

    Under Article 87(2) of the Rules of the Procedure the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. British Steel, the applicant, has been unsuccessful in its action forannulment of the contested decisions. Since the Commission and Ilva, theintervener supporting it, have applied for costs, British Steel must be ordered topay their costs.

195.

    Under the first subparagraph of Article 87(4) of the Rules of Procedure, theMember States and institutions which have intervened in the proceedings are to

bear their own costs. It follows that the Council, the Kingdom of Spain and theItalian Republic, as interveners, must bear their own costs.

196.

    Under the third subparagraph of Article 87(4) of the Rules of Procedure, the Courtmay order an intervener other than the Member States, the States parties to theEEA Agreement, the institutions and the supervisory authority of EFTA to beartheir own costs. In this case, SSAB Svenskt Stål and Det Danske Stålvalseværk,interveners in support of the applicant, 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 applicant to pay the costs of the defendant and of the intervenerIlva Laminati Piani SpA;

3.    Orders the Council, the Kingdom of Spain, the Italian Republic, SSABSvenskt Stål AB and Det Danske Stålvalseværk A/S to bear their own costs.

Saggio Kalogeropoulos 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: English.

ECR