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

16 March 2000 (1)

(State aid - Shipbuilding - Article 4(3) of Council Directive 90/684/EEC -Determination of the ceiling for production aid)

In Case T-72/98,

Astilleros Zamacona SA, established in Santurce, Spain, represented by A. CreusCarreras, of the Barcelona Bar, and B. Uriarte, of the Madrid Bar, CabinetCuatrecasas, 60 Avenue de Cortenberg, Brussels, Belgium,

applicant,

v

Commission of the European Communities, represented by P. Nemitz, of its LegalService, and M. Desantes, a national civil servant on secondment to theCommission, acting as Agents, assisted by M. Muñoz, of the Saragossa Bar, withan address for service in Luxembourg at the Chambers of C. Gómez de la Cruz,of its Legal Service, Wagner Centre, Kirchberg,

defendant,

APPLICATION for the annulment of Commission Decision 98/157/EC of 5November 1997 concerning aid Spain proposes to grant to Astilleros Zamacona SAin respect of five tugboats (OJ 1998 L 50, p. 38),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Second Chamber, ExtendedComposition),

composed of: A. Potocki, President, K. Lenaerts, J. Azizi, J. Pirrung andA.W.H. Meij, Judges,

Registrar: J. Palacio González, Administrator,

having regard to the written procedure and further to the hearing on 6 October1999,

gives the following

Judgment

Legal background

1.

    According to Article 92(1) of the EC Treaty (now, after amendment, Article 87EC), 'any aid granted by a Member State or through State resources in any formwhatsoever which distorts or threatens to distort competition by favouring certainundertakings or the production of certain goods shall, in so far as it affects tradebetween Member States, be incompatible with the common market‘.

2.

    Under Article 92(3)(e) of the Treaty, 'categories of aid ... specified by decision ofthe Council acting by a qualified majority on a proposal from the Commission‘ maybe considered to be compatible with the common market.

3.

    On the basis of that provision and of Article 113 of the EC Treaty (now Article 133EC), Council Directive 90/684/EEC of 21 December 1990 on aid to shipbuilding(OJ 1990 L 380, p. 27; 'the directive‘) was adopted. The directive has beenamended a number of times, but without affecting the provisions at issue in thiscase.

4.

    Article 4(1) of the directive provides that 'production aid in favour of shipbuildingand ship conversion may be considered compatible with the common marketprovided that the total amount of aid granted in support of any individual contractdoes not exceed, in grant equivalent, a common maximum ceiling expressed as apercentage of the contract value before aid, hereinafter referred to as the ceiling‘.

5.

    According to Article 4(2) of the directive, the ceiling is to be fixed by theCommission.

6.

    According to the first subparagraph of Article 4(3) of the directive, 'the aid ceilingapplicable to a contract shall be that in force at the date of signature of the finalcontract. However, this rule shall not apply in respect of any ship delivered morethan three years from the date of signing of the final contract. In such cases, theceiling applicable to that contract shall be that in force three years before the dateof delivery of the ship‘.

7.

    However, in accordance with the second paragraph of Article 4(3) of the directive,'the Commission may grant an extension of the three-year delivery limit laid downin the first subparagraph when this is found justified by the technical complexity ofthe individual shipbuilding project concerned or by delays resulting fromunexpected disruptions of a substantial and defensible nature in the workingprogramme of a yard‘.

Facts underlying the dispute

8.

    In December 1991, Astilleros Zamacona SA, a small shipyard in Bilbao, signed 16shipbuilding contracts with a number of shipowners. Ten of those contracts nevercame into force, and one is not in dispute. The five contracts at issue in this case,concerning the building of tugboats, were numbered 300, 301, 318, 319 and 320.

9.

    At the date of signature of those contracts, the maximum authorised ceiling for theaid was 9%. As from 1 January 1992, that ceiling was reduced to 4.5% (OJ 1992C 10, p. 3).

10.

    Under Article 18 of each of those five contracts, the contracts were not to 'enterinto force‘ until a later date (30 April 1992 in one case, 30 November 1992 inanother and 30 December 1992 in the last three cases), subject to a first paymentby the shipowner and, in four of the five contracts, to written confirmation by theshipowner. The same provision stated, in contracts nos 301, 318, 319 and 320, thatthe contract would become void if it did not enter into force on the anticipateddate.

11.

    The date of 'entry into force‘ of contracts nos 318 and 319 was postponed until31 July 1994, 19 months after the date initially envisaged. That of the other threecontracts was not changed.

12.

    All the contracts were subject to amendments between 20 December 1993 and 10May 1994. They finally 'entered into force‘ between 5 May and 10 May 1994. Some days later, they were assigned to other shipowners, save for contract no 318.

13.

    On 10 February 1995, the Spanish authorities asked the Commission to extend thethree-year delivery limit for the tugboats laid down in the first subparagraph ofArticle 4(3) of the directive.

14.

    Two of the five tugboats built by the applicant were delivered in July 1995, twoothers in October 1995, and the last in May 1996.

15.

    On 20 November 1996, the Commission decided to open the procedure underArticle 93(2) of the EC Treaty (now Article 88 EC) with a view to examining theSpanish authorities' request of 10 February 1995 (OJ 1997 C 58, p. 8).

16.

    The Spanish authorities submitted their written observations on 24 January 1997and at two meetings with Commission staff and the applicant's representatives on1 April and 28 May 1997. By letter of 12 May 1997, they added to theirobservations in reply to doubts expressed by the United Kingdom and DanishGovernments as to the compatibility of the aid.

17.

    By Commission Decision 98/157/EC of 5 November 1997 concerning aid Spainproposes to grant to Astilleros Zamacona SA in respect of five tugboats (OJ 1998L 50, p. 38; 'the decision‘), the Commission rejected the Spanish authorities'request on the ground that the aid did not comply with the provisions of Article4(3) of the directive. It therefore decided that the level of aid envisaged for thefive contracts in question should be reduced so as to ensure that, in relation to eachship, the amount of the aid did not exceed 4.5% of the contractual value beforeaid, in accordance with the ceiling applicable for 1992 and 1993.

18.

    It was in those circumstances that, by application lodged at the Registry of theCourt of First Instance on 30 April 1998, the applicant brought the present action.

19.

    Upon hearing the report of the Judge-Rapporteur, the Court of First Instance(Second Chamber, Extended Composition) decided to open the oral procedure. The parties were asked to reply in writing to a number of questions and to producecertain documents. They complied with those requests within the time-limits.

20.

    They presented oral argument and replied to the questions of the Court of FirstInstance at the hearing on 6 October 1999.

Forms of order sought

21.

    The applicant claims that the Court should:

-    annul the decision;

-    order the production of internal Commission documents relating to theadoption of that decision and the opening of the procedure which led to itbeing adopted;

-    order the Commission to pay the costs.

22.

    The Commission contends that the Court should:

-    dismiss the action;

-    order the applicant to pay the costs.

The scope of the review of legality by the Court of First Instance

23.

    During the procedure before the Court of First Instance, the question was raisedwhether, at the date on which they were signed, the five contracts in question couldbe described as final contracts within the meaning of the first subparagraph ofArticle 4(3) of the directive.

24.

    However, the Court notes that, in the decision, the Commission did no more thanexpress 'serious doubts‘ as to whether they could be described as final contracts(Point V, penultimate paragraph, and Point VII, first paragraph). It thus emergesfrom the wording of the decision and the Commission's replies to the written andoral questions of the Court that the decision is based not upon the absence of afinal contract but upon the fact that the conditions for applying the secondsubparagraph of Article 4(3) of the directive are not met.

25.

    Therefore, in the context of the review of legality which it has to exercise underArticle 173 of the EC Treaty (now Article 230 EC), it is not for the Court of FirstInstance itself to carry out an examination of the description of the five contractsin dispute as 'final contracts‘ within the meaning of the directive.

26.

    For the purposes of the present judgment, therefore, it should be assumed that thecontracts are 'final contracts‘ and that the authorised aid ceiling initially applicableto them was that in force at the date of their signature in December 1991.

27.

    Bearing those preliminary remarks in mind, it is necessary to examine the pleas inlaw in support of this action, claiming, first, infringement of the duty to statereasons; second, infringement of Article 4(3) of the directive and manifest error inassessing the facts; and, third, infringement of the principle of proportionality.

Infringement of the duty to state reasons

Arguments of the applicant

28.

    Under Article 190 of the EC Treaty (now Article 253 EC), reasons for legalmeasures must be stated.

29.

    The applicant maintains that the duty to state reasons is particularly important inthis case since the Commission had a wide discretion (Case 41/69 ACFChemiefarma v Commission [1970] ECR 661, paragraphs 76 and 77; Case C-367/95P Commission v Sytraval and Brink's France [1998] ECR I-1719).

30.

    By limiting itself to the assertion that a simple statement of the facts was asufficient basis on which to conclude that the conditions justifying an extension ofthe delivery period were not met, the Commission infringed Article 190 of theTreaty.

31.

    Similarly, the wish to avoid setting a precedent could not justify the lack ofreasoning which vitiated the decision.

32.

    Finally, concerning the first case for applying Article 4(3) of the directive, theCommission should have indicated clearly and precisely, with the aid of examplesor general rules, the circumstances in which it considered that the conditions laiddown in that provision were or were not met.

Findings of the Court

33.

    It is settled case-law that the statement of reasons required by Article 190 of theTreaty, which is an essential procedural requirement within the meaning of Article173 of the Treaty, 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 competent Community court to exercise its power of review (see, interalia, Sytraval and Brink's France, cited above, at paragraph 63).

34.

    In this case, the reasons for the decision are divided into seven sections. The firstconstitutes a general introduction, recalling, inter alia, the purpose of the procedure. The second describes the progress of the procedure before the Commission. Thethird contains a summary of the comments submitted by the Spanish authorities. The fourth is a summary of the relevant provisions of the directive. The fifthexamines the facts of the case and is complemented by a summary in the form ofa table. In the sixth, the Commission examines whether, having regard to thecircumstances relied upon by the Spanish authorities, there were delays caused byunexpected disruptions in the working programme of the yard that were substantialand defensible within the meaning of the directive. The seventh section constitutesthe conclusion to which the matters referred to above led the Commission.

35.

    Those explanations allow an understanding both of the factual context of the caseand of the basis of the legal conclusions which the Commission drew therefrom forthe purposes of applying the second subparagraph of Article 4(3) of the directive. Moreover, the pleadings lodged in this case show that the applicant perfectlyunderstood the Commission's reasoning, each point of which it challenges.

36.

    The decision therefore includes a sufficient statement of reasons with regard toArticle 190 of the Treaty. By contrast, the review of any inaccuracies there maybe in the grounds for the decision forms part of the examination as to whether thelatter is well founded (see, for example, Case T-84/96 Cipeke v Commission [1997]II-2081, paragraph 47).

37.

    Moreover, the duty to state reasons, as recalled above, does not require theCommission to determine in the abstract the circumstances in which the conditionsof Article 4(3) of the directive are fulfilled.

38.

    The plea must therefore be rejected.

Infringement of Article 4(3) of the directive and manifest error in assessing thefacts

Arguments of the applicant

39.

    The applicant cites four circumstances with which it was confronted, and which theCommission should have described as 'delays resulting from unexpected disruptionsof a substantial and defensible nature in the working programme of a yard‘ withinthe meaning of the second subparagraph of Article 4(3) of the directive.

Adoption of a new port law

40.

    In December 1991, the announcement of the imminent amendment of Spain's veryold port legislation caused a great degree of uncertainty. The applicant maintainsthat the new law, finally adopted on 24 November 1992 and concerning both themerchant navy and the regulation of ports ('ley de puertos y de la marinamercante‘), contained several amendments to the previous situation, particularlyin relation to the system of port services, especially pilotage, and in relation to thepenalties imposed for breaches of maritime safety.

41.

    That led to postponement of the contracts' entry into force and an increase in thedemands of the contractors in safety matters. Certain clauses in the contracts werethus amended by riders in 1993, 1994 and 1995.

42.

    In the applicant's submission, those disruptions would appear to be substantial anddefensible, which the Commission does not appear to deny in its decision.

43.

    Those disruptions were also unexpected within the meaning of Article 4(3) of thedirective. The applicant submits that, by its nature, the adoption of a lawconstitutes an unforeseeable risk, being a general measure imposed by the publicauthorities which interferes in the area of private contracts. They maintain thatthat is particularly so in this case, since, at the date the contracts were signed, theaims and scope of the future law were not precisely known. Moreover, for as longas a law was not adopted, several amendments might intervene, especially where,as in this case, it was sharply contested. Finally, certain provisions were declaredunconstitutional by the Tribunal Constitucional (Spanish Constitutional Court,Judgment 40/1998 of 19 February 1998), which demonstrated the uncertainty thatmight prevail amongst shipowners at the time the law was adopted. In reality, theunexpected nature, within the meaning of Article 4(3) of the directive, related notto the adoption of a new law but to its scope, its final content and developmentssubsequent thereto, namely regulatory provisions made for the application of thatlaw.

Devaluation of the peseta in 1992

44.

    That devaluation considerably raised the price of parts bought on other nationalmarkets and thus the costs of building tugboats. Major amendments were madeto the technical specifications in the contracts in order to offset those effects. Therefore, the contracts' entry into force had to be postponed, theirimplementation was delayed, and the working programme of the yard wassubstantially affected (see, by way of analogy, Commission Decision 96/278/EC of31 January 1996 concerning the recapitalisation of the Iberia company (OJ 1996 L104, p. 25)).

45.

    A devaluation, being a sovereign decision of the State, constituted an unforeseeabledisruption, even for a diligent and well-informed operator. In that respect, theapplicant points out that, in the context of the European Monetary System,devaluations were a rare phenomenon, bearing in mind the rules governing thatmechanism; moreover, the normal margin of fluctuation was at that time only 6%. Whilst the applicant might foresee a fluctuation of that order, it could not expectgreater fluctuations.

Works in the port of Bilbao

46.

    Those works were decided upon by the port authorities, with a view to building anew fitting-out wharf. Although the applicant had received a verbal assurance thatthose works would be completed in April 1992, they were in fact carried out fromMay 1992 to May 1993; the new fitting-out wharf did not become operational untilJune 1994. Thus, whilst the existence of the works projects was known, their extentand duration, much greater than forecast, were unexpected. Similarly, the incorrectimplementation of the works, about which the applicant complained to the portauthorities, was unforeseeable.

47.

    Taking account of the proximity between those works and the applicant's shipyard,and, consequently, the unavailability of several installations in the yard, normalproduction activity was affected, as the Commission acknowledged in the decision. That necessarily had the effect of delaying the delivery of the tugboats. Inparticular, productivity diminished at that time and the undertaking recorded asignificant reduction in keels laid, deliveries, and the number of contracts whichentered into force. In fact, the construction of three of the tugboats at issue in thiscase had to be completed in dry dock, in the repair workshop.

The applicant's takeover of the business of the Ardeag shipyard

48.

    The applicant argues that, contrary to the Commission's assertions, the takeoverof that business did not constitute a simple commercial choice on its part. Theapplicant was aware of the orders which it had undertaken to honour and of thefact that a delay in their delivery would entail the loss of half the aid authorised. In reality, the takeover was imposed by the Spanish Ministry of Industry under theprogramme for restructuring the shipbuilding sector, as a condition for receiving thebenefit of redeployment aid programmes. On 18 March 1992, the Director-Generalof the Ministry of Industry approved the applicant's action programme for theperiod 1991/1993, which was amended after the takeover of Ardeag and approvedon 10 March 1993; in anticipation of that amendment, all investments andimplementation of the restructuring measures were suspended, entailing atemporary freeze on work.

49.

    That intervention by the administration in the area of industrial initiative wasundeniably unexpected.

50.

    Moreover, the taking over of another shipyard's workload constituted a substantialand defensible disruption within the meaning of Article 4(3) of the directive. Thefact that the takeover of the yard was accompanied by the granting of public aiddid not affect that conclusion. Finally, the Commission should have taken accountof the fact that four of the five tugboats were delivered within the three-year periodenvisaged by the directive, to which was to be added a period of ten months andthirteen days, corresponding to the 79 000 working hours that were necessary tofulfil Ardeag's obligations.

51.

    Having made those observations, the applicant also makes a number of generalcomplaints against the Commission:

-    first, the Commission did not undertake a full examination of the facts. Inthat respect, it was not enough simply to deplore the absence of evidencerelied upon by the applicant in support of its claims. The Commissioncould have remedied that by seeking the assistance of an independentexpert who would have assessed the real impact of the disruptions referredto;

-    next, the Commission should have carried out an overall assessment of thefour circumstances described above. It would then have found that theconditions of Article 4(3) of the directive were sufficiently met in this case,since each of those conditions was fulfilled by at least one of the disruptionsreferred to by the applicant;

-    finally, the Commission should have taken account of the particular situationof Spain in the shipbuilding industry.

Findings of the Court

52.

    It should be recalled, first, that the directive establishes, inter alia, the conditionsin which operating aid in the shipbuilding industry may, exceptionally, be regardedas compatible with the common market (Joined Cases C-356/90 and C-180/91Belgium v Commission [1993] ECR I-2323, paragraphs 24 to 32). Moreover, thesecond subparagraph of Article 4(3) of the directive itself establishes a system thatis in derogation from the principles set out in the first subparagraph of thatprovision. It permits a departure from the principle of progressive reduction in thelevel of aid where ships are not built within the three-year period.

53.

    Therefore, the second subparagraph of Article 4(3) of the directive must be givena restrictive interpretation (Case T-155/97 Natural van Dam and Danser ContainerLine v Commission [1998] ECR II-3921, paragraph 31). Moreover, the verywording of that provision, with the cumulation of conditions, shows that thelegislature intended to reserve its application for very specific situations.

54.

    Secondly, a Member State which seeks to be allowed to grant aid by way ofderogation from the Treaty rules has a duty to collaborate with the Commission inthe context of the procedure in which it participates (see paragraphs 13 and 16above). In pursuance of that duty, it must in particular provide all the informationnecessary to enable the Commission to verify that the conditions for the derogationsought are fulfilled (Case C-364/90 Italy v Commission [1993] ECR I-2097,paragraph 20).

55.

    The complaint that the Commission failed to seek assistance from an independentexpert when drafting the contested decision is therefore without foundation. Moreover, no provision in the Treaty or in Community legislation imposes such anobligation (Joined Cases T-371/94 and T-394/94 British Airways and Others andBritish Midland Airways v Commission [1998] ECR II-2405, paragraph 72).

56.

    Thirdly, it should be remembered that acts of Community institutions enjoy apresumption of legality (see, to that effect, Case 15/85 Consorzio Cooperatived'Abruzzo v Commission [1987] ECR 1005, paragraph 10), which it is for theapplicant for annulment to rebut by adducing evidence capable of casting doubtupon the assessments made by the defendant institution.

57.

    It is necessary to examine, in the light of those principles, the complaints made bythe applicant against the Commission's assessments on each of the circumstancesrelied upon.

58.

    Concerning the adoption of a new port law in Spain, the Court considers that, asthe Commission stated in the decision, it has not been proven that thatcircumstance 'constituted a disruption to the working programme of [the applicant]that led to delivery of the vessels being delayed‘. The applicant has not succeededin establishing the causal link which it claims exists between the adoption of a newport law and the postponement of the entry into force of the contracts.

59.

    In that respect, it should be emphasised at the outset that none of the riders to thecontracts contains the slightest reference to that new law or its implications.

60.

    Next, having regard to the general nature of the arguments set out in theapplicant's pleadings, the Court of First Instance requested the applicant to 'stateprecisely in what way the amendments, particularly the technical ones, made to thecontracts were aimed at complying with provisions of the law‘ in question. Inparticular, it was asked to produce a table showing, first, the amendments made tothe contracts and, secondly, the provision or provisions of the law which justifiedthose amendments.

61.

    The applicant produced such a table, which shows that all the technicalamendments to the contracts were justified by Article 74 of the law alone. However, as the applicant itself has acknowledged, that article merely refers to theobjectives of the law in general terms. Such a provision cannot be accepted asbeing sufficient to establish a causal link with the precise technical amendmentsrelied on by the applicant, such as the building of double walls in the engine rooms,new layout for fuel tanks, and an increase of more than 100% in the power ofauxiliary engines.

62.

    Apart from the provisions of the law itself, the applicant has also referred to theclimate of uncertainty engendered by that law, which it claims justified thepostponement of the contracts' entry into force and the bringing of the vessels intothe workshop.

63.

    In that respect, the applicant began by producing a large number of press cuttings,annexed to its application, designed to demonstrate the heated nature of thearguments concerning the draft law. It is apparent, however, that none of thosecuttings concerns provisions of the law which would be capable of justifyingtechnical amendments of the contracts. No causal link has therefore beenestablished with the postponement of the contracts' entry into force.

64.

    The applicant has also referred to a judgment of the Tribunal Constitucionalconcerning the law in question. It is, however, apparent that none of the provisionssubmitted to that court bore any relation to the technical specifications of thetugboats which the applicant had to build or to the working programme of the yard.

65.

    Finally, the applicant has sought to justify the postponement of the contracts' entryinto force by reference to the adoption of a framework of regulations for theimplementation of the law. As is shown by its written replies to the questions ofthe Court of First Instance, however, the applicant's arguments have remainedimprecise, citing merely an 'announced‘ extension of regulations 'involving specificrequirements on vessel safety‘. Moreover, despite the years which have passedsince the adoption of the law of 24 November 1992, the applicant has not cited anyparticular regulation to justify the contractual amendments which were made.

66.

    Having regard to the rules referred to above concerning the strict interpretation ofderogatory provisions and the burden of proof, both before the Commission andbefore the Court of First Instance, it must be concluded that it has not beenestablished that the adoption of the Spanish port law of 24 November 1992 justifiedthe postponement of the entry into force of the contracts and thus affected theworking programme of the yard.

67.

    Concerning next the devaluation of the peseta, it should be noted that this is theonly circumstance relied upon by the applicant which is referred to in the riders tothe contracts. The preamble to the riders produced before the Court of FirstInstance states that 'for the convenience of the shipowner and bearing in mindprimarily the considerable increase in the peseta price of Voith engines, it isnecessary to amend the specification and payment details of the constructioncontract‘.

68.

    Those preambles show, however, that it was not the devaluation as such thatentailed disruptions which affected the working programme of the yard, but the factthat the contracting parties chose to renegotiate their contracts in order tocompensate for the effects of that devaluation. That is confirmed by the referenceto the 'convenience of the shipowner‘ which appears in the preamble to the riders.

69.

    It should moreover be noted that, although the devaluation of the peseta occurredin October 1992, it was not until between 14 and 20 months later that the firstriders were concluded. Therefore, it has not been established that the devaluationwas the cause of the delay in the entry into force of the contracts and thus affectedthe working programme of the yard.

70.

    Furthermore, a devaluation cannot be described as an unexpected disruption withinthe meaning of the second subparagraph of Article 4(3) of the directive. The risksof both depreciation and devaluation of a currency are known in commerce. Thefact that, as the applicant has emphasised, major devaluations were rare havingregard to the European Monetary System which was then in force does not removethat risk, against which there are legal and financial means of making provision.

71.

    Concerning the works in the port of Bilbao, the Commission acknowledges in thedecision that they entailed disruption which affected the activities of the yard. Ithas, however, disputed the unexpectedness and extent of that disruption.

72.

    In that regard, the Court considers that proof of the substantial nature of thedisruption relied upon has not been adduced.

73.

    As the Commission pointed out in its decision, the level of the shipyard's activityduring the period of the works does not appear to differ from that of the previousperiod. Thus, during the years 1992 and 1993, which correspond more particularlyto the years of works in the port, the number of keels laid in the yard remainedsimilar to that found in the years 1988 to 1991. Similarly, the number of vessellaunches there in 1992 and 1993 was identical to, or higher than, that encounteredfrom 1988 to 1991. The same finding may be made as regards vessel deliveries.

74.

    Concerning, finally, the takeover of the Ardeag shipyard, the Commissionconsidered, inter alia, that the takeover of that shipyard constituted a commercialdecision taken by the applicant and could not therefore benefit from the derogationin the second subparagraph of Article 4(3) of the directive.

75.

    It should be noted that the applicant does not deny that that provision can referonly to disruptions that are external to the shipyard.

76.

    It merely argues that the takeover of the shipyard was 'imposed‘ upon it by theSpanish authorities and thus constitutes a circumstance outside its volition. In itsapplication, it gave no further detail on that assertion but proposed to support it'at the stage of giving evidence in court‘. The Court requested the applicant tofollow up that offer of proof.

77.

    In reply to the Court's question, the applicant modified its statement, merelyindicating that the Spanish authorities had 'favoured‘ that link. It based itsargument on a sentence taken from a letter from the Spanish authorities to theCommission of 24 January 1997, according to which 'the acquisition of Ardeag[took place] in the context of marked redeployment in the industry and [was]directly favoured by the Spanish administration itself; moreover, it could not havebeen otherwise, in the context of the Community policy leading to the reductionand concentration of production capacity‘.

78.

    That mere quotation is not sufficient to establish that the decision to take over theArdeag shipyard is not the result of a commercial decision freely adopted by theapplicant taking into account the whole of the circumstances, and in particular theinvestment aid of over PTA 500 million which it enjoyed on that occasion. It hastherefore not been demonstrated that the takeover of the shipyard was the resultof such pressure on the part of the Spanish authorities as to be external to theapplicant.

79.

    Therefore, the takeover of the Ardeag shipyard cannot be regarded as a disruptionwhich allows benefit to be taken of the derogation in the second subparagraph ofArticle 4(3) of the directive. That conclusion accords moreover with theobservations of the Spanish authorities in the administrative procedure. Theyacknowledged that the takeover of the Ardeag shipyard did not per se justify thedelay in the delivery of the five tugboats (Point III (c), second subparagraph, in therecitals of the decision).

80.

    The applicant has therefore not established that the Commission made a legal orfactual error in concluding that none of the circumstances relied upon fell withinthe second subparagraph of Article 4(3) of the directive.

81.

    The applicant has nevertheless maintained that the circumstances upon which it hasrelied should be assessed on an overall basis. Thus, one disruption might fulfil onlysome of the conditions laid down in the second subparagraph of Article 4(3) of thedirective, while a second disruption fulfilled other criteria.

82.

    That argument cannot be accepted. First, the wording of the provision in questionshows that the conditions listed there are cumulative. Moreover, the applicant'sargument would run directly counter to the principle that rules in derogation areto be interpreted narrowly, giving the provision in question a manifestly wider scopethan that sought by the legislature.

83.

    It follows that the plea in law must be dismissed in its entirety.

The alternative plea, alleging infringement of the principle of proportionality

Arguments of the applicant

84.

    The applicant recalls that the principle of proportionality is one of the generalprinciples of Community law. Compliance with that principle is all the morenecessary where important economic interests are at stake, as is the case here,given that the amount of the reduction in aid represents nearly PTA 135 million.

85.

    In this case, the applicant argues, it needs to be determined whether applicationby the Commission of the obligation imposed by the directive in order to be ableto benefit, in this case, from aid of 9%, namely delivery of the tugboats within athree-year time-limit that is not in principle capable of extension, is proportionateto the consequence which follows from disregard of that condition, that is to sayreduction of the aid level to half the percentage initially authorised (namely 4.5%).

86.

    Having regard to the serious consequences of the decision on the applicant'sposition, and to the fact that, in the shipbuilding industry, delays in construction arecommon, the applicant maintains that reduction of the aid ceiling would bedisproportionate in relation to a delay of seven to fourteen months. That appliesall the more since, in the decision, the Commission appears to acknowledge aperiod of ten months to be reasonable.

Findings of the Court

87.

    According to Article 4(3) of the directive, where a ship is delivered more thanthree years after the date of signature of the final contract, the ceiling applicableis that which was in force three years before the date on which the ship wasdelivered, and not that in force at the date on which the contract was signed. Inthis case, the ceiling applicable was therefore 4.5% and not 9%.

88.

    According to the applicant, exceeding the three-year time-limit laid down for thedelivery of ships from the signature of the final contracts should not lead to sucha major reduction in the aid ceiling.

89.

    It is settled case-law that, in order to establish whether a provision of Communitylaw complies with the principle of proportionality, it is necessary to ascertainwhether the means which that provision applies to achieve its aim correspond tothe importance of that aim and whether they are necessary in order to achieve it(Case C-357/88 Hopermann v Bundesanstalt für landwirtschaftliche Marktordnung[1990] ECR I-1669, paragraph 14; Case C-118/89 Lingenfelser v Germany [1990]ECR I-2637, paragraph 12; Case C-155/89 Belgian State v Philipp Brothers [1990]ECR I-3265, paragraph 34; Case C-319/90 Pressler v Germany [1992] ECR I-203,paragraph 12). Those judgments show, moreover, that the establishment of animperative time-limit entailing the outright lapse of a right may be regarded ascompatible with the principle of proportionality, bearing in mind the purpose of theprovision in question.

90.

    As is apparent from the general tenor of the directive and the recitals in thepreamble thereto, the aim of the legislature was to make the shipbuilding industry'efficient and competitive‘. In that context, aid for restructuring the shipbuildingindustry, especially if designed to promote the closure of yards or research anddevelopment, was favoured, in order to 'encourage restructuring in many yards‘and to 'support the present trend in production towards more technologically-advanced ships‘, by comparison with operating aid, which was subject to ceilings. Bearing in mind that operating aid does not constitute the most efficient means ofencouraging the European shipbuilding industry to improve its competitiveness, thedirective provides that the ceiling is to be reviewed periodically, 'with the aim ofprogressively reducing the ceiling‘.

91.

    By providing that a different ceiling is to be applied according to whether or notthe ship is delivered within the three-year time limit from the signature of the finalcontract, the first subparagraph of Article 4(3) of the directive aims to preventshipyards from avoiding the effect of the progressive reduction of the aid ceilingapplicable. Otherwise, a yard might continue to enjoy a high aid ceiling for shipsdelivered several years after their order, without there being anything to justify thatlate delivery. Similarly, a yard would be able to take on orders benefiting from ahigh aid level at the end of the calendar year, just prior to the application of areduction in the ceiling, knowing that the ships could not be completed within areasonable time (Point IV, first paragraph, in the recitals of the decision).

92.

    In this case, first of all, it has been neither alleged nor established that the time-limit of three years laid down for the delivery of ships is abnormally short. Itshould be remembered in that respect that, under the terms of the contracts indispute, the building of the tugboats was to last 14 months.

93.

    Moreover, the applicant has not produced any particular evidence to suggest thatthe reduction of the ceiling from 9% to 4.5% was excessive, having regard to theaims of the directive in the matter of aid to shipbuilding. It should also be notedthat the three-year delivery period was substantially exceeded in this case. Delaysof from seven to more than fifteen months, as the case may be, cannot be regardedas minor delays in respect of which the halving of the aid ceiling would bedisproportionate. It should be emphasised in that regard that, contrary to theapplicant's argument, there is nothing in the final paragraph of Point VI of therecitals of the decision to support the conclusion that the Commission regarded anexcess time spent of ten months as 'reasonable‘.

94.

    In those circumstances, the applicant has failed to demonstrate that the applicationof a different ceiling, in this case less by half, according to whether or not the shipswere delivered within a three-year time-limit from the signature of the finalcontract, would infringe the principle of proportionality.

95.

    Therefore, this plea in law must also be dismissed.

96.

    The application for the annulment of the decision must therefore be dismissed inits entirety.

The application for the production of documents

97.

    The applicant requests the Court to order the production of internal Commissiondocuments relating to the adoption of the decision and the opening of theprocedure which led to that adoption.

98.

    The Court notes that the applicant does not explain in what way the documents theproduction of which it requests are necessary for the purposes of these proceedings.

99.

    It is therefore not appropriate to accede to that request.

Costs

100.

    Under Article 87(2) of the Rules of Procedure of the Court of First Instance, theunsuccessful party is to be ordered to pay the costs if they have been applied forin the successful party's pleadings. In this case, as the applicant has beenunsuccessful, it must be ordered to pay the costs in accordance with the forms oforder sought by the Commission.

On those grounds,

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

hereby:

1.    Dismisses the action;

2.    Orders the applicant to pay the costs.

PotockiLenaerts Azizi Pirrung Meij

Delivered in open court in Luxembourg on 16 March 2000.

H. Jung

A. Potocki

Registrar

President

1: Language of the case: Spanish.