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Action brought on 5 August 2008 - Smurfit Kappa Group v Commission

(Case T-304/08)

Language of the case: English

Parties

Applicant: Smurfit Kappa Group plc (Dublin, Ireland) (represented by: T. R. Ottervanger, E. V. A. Henny, lawyers)

Defendant: Commission of the European Communities FORMTEXT

Form of order sought

To annul the decision of the Commission in accordance with Article 230 EC;

To order the Commission to pay the costs incurred by the applicants in the proceedings.

Pleas in law and main arguments

The applicant seeks pursuant to Article 230 EC annulment of Commission decision N 582/2007 of 2 April 2008 (Case "Aid to Propapier PM2 GmbH & Co. KG-LIP" C(2008)1107) in which the Commission approved the State aid notified by the German State to Propapier PM2 GmbH & Co. KG.

The applicant, an Irish based international packaging company, lodged an informal complaint to the Commission against the grant of a substantial subsidy for the construction (in the Region of Brandenburg-Nordost in Germany) of what would be, according to the applicant, the largest paper mill in the European Union. The applicant submits that although there were clear indications that the subsidised investment would have serious and disproportionate effects on it and on the sector as a whole, the Commission considered that no formal investigation was necessary as the regional aid did not meet the market share and capacity increase thresholds laid down in paragraph 68 under (a) and (b) of the Guidelines on national aid for 2007-2013¹ ('The Regional Aid Guidelines') and, consequently declared the aid compatible with the Treaty.

The applicant, being a direct competitor of the aid beneficiary, challenges the Commission's decision not to open the formal procedure provided for in Article 88(2) EC on the basis of the following grounds:

First, according to the applicant, the Commission should have initiated the formal procedure under Article 88(2) EC and Article 4(4) of Council Regulation No 659/1999² and examined the aid more thoroughly in light of the doubts arising in connection with the structural difficulties of the market and in accordance with a more appropriate assessment of the market. The applicant claims that the Commission mistakenly confined itself to applying the rigid thresholds of paragraph 68 of the Regional Aid Guidelines and made a manifest error of assessment when calculating the capacity increase.

Second, the applicant submits that the Commission infringed Article 87(3) EC and the Regional Aid Guidelines in as much as the contested decision (i) does not contain any analysis of the adverse effect of the aid on trading conditions and (ii) misinterprets the Regional Aid Guidelines. On that basis, it is submitted that, rather than balancing the benefits of the region against the repercussions of substantial aid for the sector as a whole, the Commission simply applied a per se 5% capacity increase test while refraining from an economic analysis. Also, it is submitted that the application of the test laid down in paragraph 68 of the Regional Aid Guidelines is contrary to the EC Treaty since the said provision does not require the Commission to automatically approve all aid measures that follow below the thresholds set therein.

Third, according to the applicant, the contested decision is vitiated by errors of fact and manifest errors of assessment in respect of market definition and capacity increase.

Fourth, it is submitted that the Commission infringed Article 87(3) EC and the Regional Aid Guidelines in so far as the contested decision contains a manifest error of assessment as to the qualification of the aid measure.

Fifth, the decision is also vitiated, allegedly, by serious errors of law in so far as it considers the Regional aid Map 2007-2013 of Germany to be compatible with the EC treaty, allowing the Region Brandenburg-Nordost to be eligible for regional aid pursuant to the derogation laid down in Article 87(3)(a) EC for the whole period of 2007-2013. In addition the contested decision is flawed since it ignores other aid concerning the same project.

Finally, the applicants argue that the Commission infringed its obligations in relation to the preliminary investigation to state adequate reasons on which it based its decision.

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¹ - OJ 2006 C 54, p. 13

² - Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83 p. 1)