«(ECSC Treaty – Aid granted by the Member States – Annulment of Commission Decision 2001/198/ECSC of 15 November 2000 concerning State aid granted by Belgium to Cockerill Sambre SA)»

1.. ECSC – Aid to the steel industry – Meaning – Financing by public funds of supplementary pay to compensate for a reduction in wages ensuing from a reduction in working time – Included (Art. 4(c) CS)

2.. ECSC – Aid to the steel industry – Time-limit fixed by Article 6(5) of the Sixth Steel Aid Code for the Commission to take a decision on the compatibility of aid – Time-limit not a prescription period linked to loss of competence (General Decision No 2496/96, Art. 6(5))

3.. Acts of the institutions – Statement of reasons – Obligation – Scope – ECSC decision (Arts 4(c) and 15 CS)

4.. ECSC – Aid to the steel industry – Commission authorisation – Authorisation by way of individual decision – Condition – Prior application by the Member State concerned (Art. 95 CS)

JUDGMENT OF THE COURT (Fifth Chamber)

12 décembre 2002 ( * )

(ECSC Treaty - Aid granted by the Member States - Annulment of Commission Decision 2001/198/ECSC of 15 November 2000 concerning State aid granted by Belgium to Cockerill Sambre SA)

Dans l'affaire C-5/01,

In Case C-5/01,

Kingdom of Belgium, represented by A. Snoecx, acting as Agent , and by L. Levi, G. Vandersanden and J.-M. de Backer, avocats, with an address for service in Luxembourg,

applicant,

v

Commission of the European Communities, represented by G. Rozet, acting as Agent, with an address for service in Luxembourg,

defendant,

APPLICATION for the annulment of Commission Decision 2001/198/ECSC of 15 November 2000 concerning State aid granted by Belgium to Cockerill Sambre SA (OJ 2001 L 71, p. 23),

THE COURT (Fifth Chamber),

composed of: M. Wathelet, President of the Chamber, C.W.A. Timmermans, D.A.O. Edward (Rapporteur), P. Jann and S. von Bahr, Judges,

Advocate General: C. Stix-Hackl,

Registrar: H.A. Rühl, Principal Administrator,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 2 May 2002,

after hearing the Opinion of the Advocate General at the sitting on 12 September 2002,

gives the following

Judgment

1 By application lodged at the Court Registry on 8 January 2001, the Kingdom of Belgium brought an action under the first paragraph of Article 33 of the ECSC Treaty for the annulment of Commission Decision 2001/198/ECSC of 15 November 2000 concerning State aid granted by Belgium to Cockerill Sambre SA (OJ 2001 L 71, p. 23, hereinafter the contested decision).

Legal framework

The ECSC Treaty

2 Under Article 4 CS,

The following are recognised as incompatible with the common market for coal and steel and shall accordingly be abolished and prohibited within the Community, as provided in this Treaty:

...

(c) subsidies or aids granted by States, or special charges imposed by States, in any form whatsoever;

...

Decisions, recommendations and opinions of the Commission shall state the reasons on which they are based and shall refer to any opinions which were required to be obtained.

4 The first paragraph of Article 95 CS states:

In all cases not provided for in this Treaty where it becomes apparent that a decision or recommendation of the Commission is necessary to attain, within the common market in coal and steel and in accordance with Article 5, one of the objectives of the Community set out in Articles 2, 3 and 4, the decision may be taken or the recommendation made with the unanimous assent of the Council and after the Consultative Committee has been consulted.

Decision No 2496/96/ECSC

5 Commission Decision No 2496/96/ECSC of 18 December 1996 establishing Community rules for State aid to the steel industry (OJ 1996 L 338, p. 42, hereinafter the sixth steel aid code), adopted on the basis of Article 95 CS and applicable from 1 January 1997 until 22 July 2002, defines the conditions in which aid to the steel industry financed by Member States or their regional or local authorities or through State resources may be deemed compatible with the orderly functioning of the common market.

6 In accordance with Article 1 of the sixth steel aid code, entitled Principles:

1. Aid to the steel industry, whether specific or non-specific, financed by Member States or their regional or local authorities or through State resources in any form whatsoever may be deemed Community aid and therefore compatible with the orderly functioning of the common market only if it satisfies the provisions of Articles 2 to 5.

2. The term aid also covers the aid elements contained in transfers of State resources by Member States, regional or local authorities or other bodies to steel undertakings in the form of acquisitions of shareholdings or provisions of capital or similar financing (such as bonds convertible into shares, or loans on non-commercial conditions or the interest on or repayment of which is at least partly dependent on the undertaking's financial performance, including loan guarantees and real-estate transfers) which cannot be regarded as a genuine provision of risk capital according to usual investment practice in a market economy.

3. Aid falling within the terms of this decision may be granted only after the procedures laid down in Article 6 have been followed and shall not be payable after 22 July 2002.

7 Under Article 6 of the sixth steel aid code, entitled Procedure, any aid plan and any plan for the transfer of State resources to steel undertakings must be notified to the Commission, which is to examine whether they are compatible with the common market. Under Article 6(4), the planned measures falling within paragraphs 1 or 2 may be put into effect only with the approval of and subject to any conditions laid down by the Commission.

8 According to Article 6(5) of the sixth steel aid code:

If the Commission considers that a certain financial measure may represent State aid within the meaning of Article 1 or doubts whether a certain aid is compatible with the provisions of this Decision, it shall inform the Member State concerned and give notice to the interested parties and other Member States to submit their comments. If, after having received the comments and after having given the Member State concerned the opportunity to respond, the Commission finds that the measure in question is an aid incompatible with the provisions of this decision, it shall take a decision not later than three months after receiving the information needed to assess the proposed measure. Article 88 of the Treaty shall apply in the event of a Member State's failing to comply with that decision.

9 Article 6(6) of the sixth steel aid code provides:

If the Commission fails to initiate the procedure provided for in paragraph 5 or otherwise to make its position known within two months of receiving full notification of a proposal, the planned measures may be put into effect provided that the Member State first informs the Commission of its intention to do so. Where the Commission seeks the views of Member States under paragraph 3, the abovementioned period shall be three months.

The factual context of the dispute

Social conditions in the undertaking Cockerill Sambre

10 Cockerill Sambre SA and the companies Carlam SA, Cockerill Sambre Finances Services SA and Recherche et Développement du Groupe Cockerill Sambre SC (hereinafter, as a whole, Cockerill Sambre) constitute an integrated steel company established in the Walloon Region of Belgium. Until early 1999, Cockerill Sambre was a publicly owned company, in which the Walloon Region held a majority stake. In that year, it was privatised and sold to the French steel group Usinor.

11 In response to the difficulties facing the Walloon steel industry, in particular during 1996, Cockerill Sambre drew up a restructuring plan which made provision, inter alia , for a reduction in the workforce of some 2000 persons.

12 In that context, the employees of Cockerill Sambre whose salaries were determined on the basis of salary scales (hereinafter salaried employees) demanded, during the negotiations which took place in 1997/1998, a reduction from 37 to 34 hours in the working week as a means of increasing, or at the very least maintaining, the number of jobs in that undertaking. That demand was rejected by Cockerill Sambre because of its high cost.

13 None the less, after a warning strike by the salaried employees, negotiations led to the conclusion, on 17 April 1998, of a collective agreement between Cockerill Sambre and the union representing the workers concerned which ratifies that reduction in working hours (hereinafter the collective agreement).

14 The collective agreement provides, inter alia :

− reduction in the working week from 37 to 34 hours from 1 January 1999;

− maintenance, despite that reduction in the working week, of the total working hours for the salaried employees as a whole, resulting in the creation of 150 new jobs;

− maintenance, at the level set in the collective agreement, of the total wages paid by Cockerill Sambre to the salaried employees as a whole;

− establishment of a mechanism intended to offset the loss of earnings by salaried employees as the result of a reduction in their pay proportional to the reduction in their working hours.

15 In that regard, the collective agreement provides, first, that the parties are to apply jointly for any aid made available to Cockerill Sambre in order to finance the reduction in working hours laid down in that agreement and, secondly, that the agreement is structurally dependent on the securing of public funds, failing which the parties to the agreement will re-examine the situation and the possibility of implementing the agreement.

The contested measures

16 The measures adopted by the Kingdom of Belgium complained of by the Commission (hereinafter the contested measures) are intended to offset the reduction in the pay of salaried employees resulting from the reduction in their working hours.

17 Thus, in order to offset the effects of that reduction in pay, it was decided to pay salaried employees a transitional supplement intended to maintain their pay at the level reached in 1998 for 37 hours of work a week, until the end of 2005.

18 The transitional supplement is essentially funded by the Belgian public authorities and, for the remainder, by the salaried employees themselves, as a result of their forgoing the salary increases to which they were entitled in 1997 and 1998.

19 That public aid totals EUR 13.71 million and consists of two parts:

− a reduction in employers' social security contributions during the period from 1999 to 2005, granted by the Belgian Federal Government, amounting to EUR 10.36 million;

− a subsidy of EUR 3.35 million from the Walloon Government, paid to the association Cockerill Sambre employees' fund, during the same seven-year period.

20 The amounts saved by Cockerill Sambre as the result of the reduction in social security contributions, as well as the amounts paid to the association referred to in the preceding paragraph, are transferred to the salaried employees of that undertaking. Those payments constitute the transitional supplement.

Procedure prior to the adoption of the contested decision

21 By letter of 23 November 1998, the Commission requested information from the Belgian authorities regarding information which appeared in the Belgian press on 20 November 1998, according to which the Kingdom of Belgium had decided to grant aid to Cockerill Sambre, over a period of seven years, as part of a scheme to reduce total working time.

22 By letter of 11 December 1998, the Belgian authorities confirmed that they had taken the contested measures but stated that they did not consider these to constitute State aid and therefore had not notified them to the Commission in accordance with Article 6 of the sixth steel aid code.

23 Following several exchanges of letters and a meeting with the Belgian authorities during 1999, the Commission decided to initiate the procedure laid down in Article 6(5) of the sixth steel aid code and informed the Kingdom of Belgium of that decision by letter of 25 January 2000. That decision was published in the Official Journal of the European Communities of 25 March 2000 (OJ 2000 C 88, p. 8) and interested parties were invited to submit their comments to the Commission within one month of its publication.

24 In response to that decision, the Belgian authorities sent the Commission a note, dated 5 April 2000, reiterating the position already expressed before the procedure was initiated, namely, that the contested measures do not constitute State aid.

25 Under that procedure, the Commission received comments in April 2000 from an interested party and from a Member State, and it communicated those to the Belgian Government, giving it the opportunity to comment on them, which the Government did by letter of 9 June 2000.

26 As a result of that procedure, the Commission adopted the contested decision.

The contested decision

27 The contested decision was notified to the Kingdom of Belgium on 5 December 2000 under number C (2000) 3563.

28 Under Article 1 of that decision:

The State aid totalling BEF 553.3 million (EUR 13.7 million) granted by Belgium to the steel company Cockerill Sambre constitutes State aid under Article 1 of the steel aid code and is incompatible with the common market.

29 Article 2 of the contested decision requires the Kingdom of Belgium immediately to take all the necessary steps to recover from Cockerill Sambre the aid already unlawfully paid, together with interest accrued thereon, and to suspend payment of amounts not yet paid.

Pleas in law in the action for annulment, and the findings of the Court

30 In support of its action for annulment, the Kingdom of Belgium relies on five pleas. First, the contested decision infringes Article 4(c) CS and the sixth steel aid code by incorrectly considering that Cockerill Sambre derives an economic advantage from the contested measures. Second, the contested decision misconstrues those same provisions by considering that those measures benefit Cockerill Sambre, although the employees of that undertaking are the only true beneficiaries of those measures. Third, the decision is vitiated by lack of competence. Fourth, the statement of reasons is insufficient. Fifth, in the alternative, the contested decision infringes the first paragraph of Article 95 CS.

The first and second pleas

31 The first and second pleas, both of which seek to challenge the characterisation in the contested decision of the contested measures as State aid, should be considered together.

33 Furthermore, the expression aid, for the purposes of Article 4(c) CS, necessarily implies advantages granted directly or indirectly through State funds or constituting an additional charge for the State or for bodies designated or established by the State for that purpose (see, inter alia , Case 82/77 Openbaar Ministerie of the Netherlands v Van Tiggele [1978] ECR 25, paragraphs 23 to 25; Joined Cases C-72/91 and C-73/91 Sloman Neptun v Bodo Ziesemer [1993] ECR I-887, paragraphs 19 and 21; Joined Cases C-52/97 to C-54/97 Viscido and Others v Ente Poste Italiane [1998] ECR I-2629, paragraph 13; and Ecotrade , cited above, paragraph 35).

34 In the present case it is common ground that the financing of the transitional supplement paid to Cockerill Sambre's salaried employees is essentially provided by means of public funding granted by the Belgian Federal Government and the Walloon Government.

35 None the less, the Belgian Government maintains that the involvement of those public authorities has not mitigated Cockerill Sambre's normal budgetary burdens.

36 In that regard, it should be pointed out that the transitional supplement financed by the abovementioned public funds was paid exclusively to the employees of Cockerill Sambre, either by the undertaking itself or by the association Cockerill Sambre employees' fund, for being employees of that undertaking and as compensation for their work for the firm.

37 That supplementary pay thus constitutes an incidental element of the salary received by Cockerill Sambre's employees and consequently comes under the labour costs which that undertaking must normally meet.

41 In addition, the Court has already held that public financing of a bonus paid to certain workers in the coal industry led to an increase in their pay which artifically reduced the production costs of the undertakings concerned and that that bonus had accordingly to be considered a prohibited aid under Article 4(c) CS (see De Gezamenlijke Steenkolenmijnen in Limburg v High Authority , cited above, paragraphs 51 and 52).

42 It must therefore be held that the effect of the contested measures is to mitigate Cockerill Sambre's normal budgetary burdens.

43 It follows that the first plea put forward by the Kingdom of Belgium, that public funding of the reduction in working hours of salaried employees of that undertaking has not brought it any financial advantage, with the result that the contested measures cannot be characterised as State aid, must be rejected.

44 The second plea on which the action relies, that those measures do not constitute State aid because Cockerill Sambre's employees are their true beneficiaries, must also be rejected.

46 The social character of State assistance is therefore not sufficient to exclude it from the outset from being categorised as aid (see, inter alia , Kimberly-Clark , cited above, paragraph 21, Case C-75/97 Belgium v Commission [1999] ECR I-3671, paragraph 25, and Case C-251/97 France v Commission [1999] ECR I-6639, paragraph 37).

47 It follows that the Belgian Government's argument that the contested measures are intended to create jobs and to attenuate, in the interest of the employees, the financial consequences of the reduction in working hours that they requested is irrelevant for the purposes of determining whether those measures constitute State aid prohibited under Article 4(c) CS.

48 As regards the effects of the contested measures, while the public funds granted by the Belgian Federal Government and the Walloon Government were paid to salaried employees of Cockerill Sambre, it is the latter which benefits from them since, as indicated in paragraph 42 of the present judgment, the effect of those measures is to mitigate the normal budgetary burdens imposed on that undertaking.

The third plea

49 By its third plea, the Kingdom of Belgium claims that the contested decision is vitiated by lack of competence.

50 It maintains that since the Belgian authorities communicated their observations on the comments by interested third parties on 9 June 2000 and no request for additional information was addressed to those authorities, the contested decision, dated 15 November 2000, was adopted after expiry of the three-month time-limit laid down in Article 6(5) of the sixth steel aid code.

51 It is common ground that that period had expired when the contested decision was adopted. In order to decide whether that fact deprived the Commission of the competence to adopt that decision, it is therefore necessary to determine whether its failure to do so within the period prescribed entails a consequent loss of competence.

52 However, the nature of a time-limit must be determined with reference to the general context in which it occurs and with regard to its objective (see, to that effect, inter alia , Case C-357/88 Hopermann [1990] ECR I-1669, paragraph 12 and Case C-289/97 Eridania [2000] ECR I-5409, paragraph 26).

53 As regards the context of the period prescribed in Article 6(5) of the sixth steel aid code, it should be recalled that under Article 4(c) CS, subsidies or aid granted by Member States in any form whatsoever are recognised as incompatible, without exception, with the common market for coal and steel and are accordingly to be abolished and prohibited within the Community.

54 The sixth steel aid code, adopted under Article 95 CS, nevertheless authorises the grant of aid to the steel industry in cases exhaustively enumerated, and in accordance with prescribed procedures. Article 6(4) of that code provides, in particular, that planned measures may be put into effect only with the approval of the Commission. Article 6(6) expressly derogates from that rule by providing that those measures may be put into effect if the Commission has failed to initiate the procedure provided for in Article 6(5) or otherwise to make its position known within two months of receiving notification of a proposal, provided that the Member State has first informed the Commission of that intention.

55 Cases in which aid to the steel industry may be granted therefore constitute an exception to the rule according to which such aid is prohibited and can in principle be granted only pursuant to a formal Commission decision.

57 It follows that, in the context of the implementation of Article 6(5) of the sixth steel aid code, a Member State may legally put into effect an aid measure only pursuant to a formal decision by the Commission in that regard. In the absence of such a decision, the expiry of the three-month time-limit set for the Commission's decision cannot therefore have the effect of implicitly authorising the Member State to implement the planned aid measure.

58 If that three-month time-limit were to be interpreted as a prescription period linked to loss of competence whose expiry prohibits the Commission from expressing a view on the compatibility with the ECSC Treaty of a planned aid measure where a decision in that regard has not been adopted by the Commission within that period, the Member State concerned would, on the one hand, be prevented from implementing that aid measure and, on the other, find it impossible to obtain an authorisation decision to that effect from the Commission under the procedure initiated by the latter. As the Advocate General pointed out in paragraph 101 of her Opinion, such a situation would be contrary to the orderly functioning of the rules on State aid.

59 In a situation such as the one described in the preceding paragraph, the Commission's authorisation may be obtained only as a result of a new procedure initiated in accordance with the sixth steel aid code, which would delay the Commission's decision without offering any additional safeguard to the Member State concerned, and be contrary to the objective of Article 6(5) of that code.

60 Therefore, given its general context and objective, the three-month period set out in Article 6(5) of the sixth steel aid code cannot be regarded as a prescription period linked to loss of competence.

61 It is true that, in its relations with the Member States, the Commission is bound to observe a condition which it has imposed on itself (see, to that effect, Case C-170/00 Finland v Commission [2002] ECR I-1007, paragraph 34 and Case C-158/00 Luxembourg v Commission [2002] ECR I-5373, paragraph 24).

62 Nevertheless, the failure to comply with such a condition is likely to constitute a breach only if it would render nugatory a procedural safeguard granted to the Member States (see, to that effect, Finland v Commission , cited above, paragraph 34 and Luxembourg v Commission , cited above, paragraph 24).

63 The period of three months laid down in Article 6(5) of the sixth steel aid code was established in the interest of protecting legal certainty, in order to ensure a rapid decision by the Commission.

64 Failure by the Commission to comply with its obligation to take a decision within that period therefore cannot lead to loss of competence, which, as is clear from paragraph 59 hereof, would merely serve to delay a decision by the Commission without offering any additional safeguard to the Member State concerned. That finding is without prejudice to the possibility of bringing an action for damages where the delay in the Commission's decision has caused real damage to one of the parties concerned.

65 Moreover, it cannot but be noted that, in contrast to Article 6(5) of the sixth steel aid code, Article 6(6), which concerns the situation where a Member State has notified the Commission of an aid project or a projected transfer of public resources, expressly provides that failure by the Commission to observe the time-limit set for making its position known is sanctioned by the opportunity afforded to the Member State, provided that it first informs the Commission of its intention, to implement the projected measures.

66 It follows from the foregoing considerations that the third plea must be rejected.

The fourth plea

67 The Kingdom of Belgium claims that the contested decision was adopted in breach of the obligation to state reasons set out in the first paragraph of Article 15 CS.

69 In this instance, the contested decision sets out the reasons why the Commission considers that the contested measures constitute State aid incompatible with the common market within the meaning of the ECSC Treaty and the sixth steel aid code. In particular, in paragraph 20 of the contested decision, the Commission develops in detail its argument that, in contrast to the claim by the Kingdom of Belgium, Cockerill Sambre derived financial and economic advantages from those measures.

70 The Kingdom of Belgium claims, first of all, that the contested decision does not contain any reply to its arguments concerning the risk of creating inconsistencies in European employment policy.

71 In that regard, it is sufficient to state by way of reply that the Commission was not required to form a view on that matter, which is manifestly immaterial to the classification of the contested measures as State aid (see, to that effect, Commission v Sytraval and Brink's France , paragraph 64).

72 The Kingdom of Belgium also claims that the contested decision does not respond to its arguments concerning the concept of the beneficiary of those measures.

73 In that regard, paragraph 23 of the contested decision sets out the reasons why the Commission considers that the contested measures do not constitute aid to persons but aid to a firm, inasmuch as they finance costs related to the work performed by Cockerill Sambre's employees.

74 Finally, the Kingdom of Belgium claims that the contested decision contains no explanation conerning the consequences and the economic impact of the contested measures on the common market and unfettered competition.

75 In that regard, it must be held that, in order to be caught by the provisions of Article 4(c) CS, an aid measure does not necessarily need to have an effect on trade between Member States or on competition (see Joined Cases C-74/00 P and C-75/00 P Falck and Acciaierie di Bolzano v Commission [2002] ECR I-7869, paragraph 102), with the result that the Commission is not required to state reasons for the contested decision on that point.

76 It follows from the foregoing considerations that the fourth plea must be rejected.

The fifth plea

77 In the alternative, the Kingdom of Belgium claims that, were the Court to accept the classification of the contested measures as State aid, the contested decision was adopted in breach of the first paragraph of Article 95 CS.

78 In that regard, it states that the Commission committed a manifest error of assessment by failing to apply to the Council in order to obtain its opinion on the approval of those measures, by way of derogation under the first paragraph of Article 95 CS.

79 The Commission replies that the fact that the Belgian Government formally asked it to consider the possibility of applying the first paragraph of Article 95 CS after adoption of the contested decision renders inadmissible the plea put forward in the alternative.

80 However, that fact does not allow the consideration that the plea is not directed against the contested decision itself and in fact constitutes an action for failure to act, directed against the Commission's failure to consult the Council, brought outside the conditions laid down in Article 35 CS.

81 It follows that that plea is admissible.

82 As regards the substance of that plea, the first paragraph of Article 95 CS enables the Commission to adopt, in accordance with the procedure laid down in that provision, decisions to authorise, by way of exception, the grant of aid necessary for the orderly functioning of the common market in coal and steel.

83 Some of those decisions authorise the grant of specific aid to designated steel companies, others authorise the Commission to declare compatible with the common market certain types of aid with respect to any undertaking which satisfies the relevant conditions (order of the President of the Court in Case C-399/95 R Germany v Commission [1996] ECR I-2441, paragraph 20).

84 The Commission exercises that power when it considers that the aid in question is necessary for the purpose of attaining the objectives of the Treaty.

85 As noted in paragraph 138 of the Advocate General's Opinion, the logic inherent in that system of authorisation entails, in regard to an individual decision by the Commission, that the Member State concerned applies to the Commission for the procedure laid down in Article 95 CS to be initiated before the Commission considers whether aid is needed in order to attain the Treaty's objectives.

86 It follows that, in contrast to the claim by the Kingdom of Belgium, the Commission was in no way required in the present case, before adopting the contested decision, automatically to initiate the procedure laid down in the first paragraph of Article 95 CS, in order to authorise the contested measures on the basis of that provision.

87 Accordingly, the fifth plea must be rejected.

88 In light of all the foregoing considerations, the action must be dismissed.

Costs

89 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the Kingdom of Belgium has been unsuccessful, the latter must be ordered to pay the costs.

On those grounds,

THE COURT (Fifth Chamber)

hereby:

1) 1. Dismisses the application;

2) 2. Orders the Kingdom of Belgium to pay the costs.

Wathelet

Timmermans

Edward

Jann

von Bahr

Delivered in open court in Luxembourg on 12 December 2002.

R. Grass

M. Wathelet

Registrar

President of the Fifth Chamber

* Original language: English.