Case C-199/06

Centre d’exportation du livre français (CELF)

and

Ministre de la Culture et de la Communication

v

Société internationale de diffusion et d’édition (SIDE)

(Reference for a preliminary ruling from the Conseil d’État (France))

(State aid – Article 88(3) EC – National courts – Recovery of unlawfully implemented aid – Aid declared compatible with the common market)

Summary of the Judgment

1. State aid – Planned aid – Granting of aid contrary to the prohibition laid down by Article 88(3) EC – Subsequent Commission decision declaring the aid compatible with the common market – Obligations of national courts before which claims for repayment are brought

(Art. 88(3) EC)

2. State aid – Planned aid – Granting of aid contrary to the prohibition laid down by Article 88(3) EC – Subsequent Commission decision declaring the aid compatible with the common market – Annulment of that decision by the Community court – Retroactivity – Recipients’ legitimate expectations – None save for exceptional circumstances

(Arts 88(3) EC, 231, first para., EC and 249 EC)

1. In a situation where a claim based on the last sentence of Article 88(3) EC is examined after the Commission has adopted a positive decision, the national court, notwithstanding the declaration of the compatibility of the aid in question with the common market, must adjudicate on the validity of the implementing measures and on the recovery of the financial support granted. In such a case, Community law requires that court to order the measures appropriate effectively to remedy the consequences of the unlawfulness. However, even in the absence of exceptional circumstances, Community law does not impose an obligation of full recovery of the unlawful aid.

The last sentence of Article 88(3) EC is based on the preservative purpose of ensuring that compatible aid alone is implemented. In order to achieve that purpose, the implementation of planned aid is to be deferred until the doubt as to its compatibility is resolved by the Commission’s final decision. When the Commission adopts a positive decision, it is then apparent that such purpose has not been frustrated by the premature payment of the aid. In that case, from the point of view of operators other than the recipient of such aid, its unlawfulness will, first, expose them to the risk, in the result unrealised, of the implementation of incompatible aid, and, second, make them suffer, depending on the circumstances earlier than they would have had to, in competition terms, the effects of compatible aid. From the aid recipient’s point of view, the undue advantage will have consisted, first, in the non-payment of the interest which it would have paid on the amount in question of the compatible aid, had it had to borrow that amount on the market pending the Commission’s decision, and, second, in the improvement of its competitive position as against the other operators in the market while the unlawfulness lasts. The national court must therefore, applying Community law, order the aid recipient to pay interest in respect of the period of unlawfulness.

Within the framework of its domestic law, the national court may, if appropriate, also order the recovery of the unlawful aid, without prejudice to the Member State’s right to re‑implement it, subsequently. It may also be required to uphold claims for compensation for damage caused by reason of the unlawful nature of the aid.

(see paras 45-53, 55, operative part 1)

2. When the Community court annuls a Commission decision declaring compatible with the common market aid which, contrary to the prohibition laid down by the last sentence of Article 88(3) EC, had been implemented without awaiting the Commission’s final decision, the presumption of the lawfulness of the acts of the Community institutions and the rule that annulment is retroactive apply in turn. Aid implemented after the Commission’s positive decision is presumed lawful until the Community court decides to annul that decision and subsequently, on the latter decision, the aid is deemed, in accordance with the first paragraph of Article 231 EC, not to have been declared compatible by the annulled decision, with the result that its implementation must be regarded as unlawful. It is thus apparent that, in that case, the rule arising from the first paragraph of Article 231 EC puts a stop, retroactively, to the application of the presumption of lawfulness.

Whilst it is true that a recipient cannot be precluded from relying on exceptional circumstances on the basis of which it had legitimately assumed the aid to be lawful and thus from declining to refund that aid, on the other hand the mere existence of the subsequently annulled positive decision cannot be regarded as capable of having caused such an expectation. Where an action for annulment has been brought against a positive decision, the recipient is not entitled to harbour any assurance as to the lawfulness of the aid so long as the Community court has not delivered a definitive ruling.

It follows that, where a Commission decision declaring compatible with the common market aid implemented in breach of the last sentence of Article 88(3) EC is annulled by the Community court, the obligation arising from that provision to remedy the consequences of the aid’s unlawfulness extends also, for the purposes of calculating the sums to be paid by the recipient, and save for exceptional circumstances, to the period between that adoption of the Commission’s positive decision and its annulment by the Community court.

(see paras 62-69, operative part 2)

JUDGMENT OF THE COURT (Grand Chamber)

12 February 2008 ( * )

(State aid – Article 88(3) EC – National courts – Recovery of unlawfully implemented aid – Aid declared compatible with the common market)

In Case C‑199/06,

REFERENCE for a preliminary ruling under Article 234 EC by the Conseil d’État (France), made by decision of 29 March 2006, received at the Court on 2 May 2006, in the proceedings

Centre d’exportation du livre français (CELF),

Ministre de la Culture et de la Communication

v

Société internationale de diffusion et d’édition (SIDE),

THE COURT (Grand Chamber),

composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, K. Lenaerts, G. Arestis, U. Lõhmus and L. Bay Larsen (Rapporteur), Presidents of Chambers, A. Borg Barthet, M. Ilešič, J. Malenovský, J. Klučka and E. Levits, Judges,

Advocate General: J. Mazák,

Registrar: J. Swedenborg, Administrator,

having regard to the written procedure and further to the hearing on 27 February 2007,

after considering the observations submitted on behalf of:

– the Centre d’exportation du livre français (CELF), by J. Molinié, O. Schmitt, P. Guibert and A. Tabouis, avocats,

– the Société internationale de diffusion et d’édition (SIDE), by N. Coutrelis and V. Giacobbo, avocats,

– the French Government, by G. de Bergues and S. Ramet, acting as Agents,

– the Danish Government, by C. Thorning, acting as Agent, assisted by P. Biering and K. Lundgaard Hansen, advokater,

– the German Government, by C. Schulze-Bahr and M. Lumma, acting as Agents,

– the Hungarian Government, by J. Fazekas, acting as Agent,

– the Netherlands Government, by H.G. Sevenster and P.P.J. van Ginneken, acting as Agents,

– the Commission of the European Communities, by V. Di Bucci and J.‑P. Keppenne, acting as Agents,

– the EFTA Surveillance Authority, by M. Sánchez Rydelski and B. Alterskjær, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 24 May 2007,

gives the following

Judgment

1 This reference for a preliminary ruling concerns the interpretation of Article 88(3) EC.

2 The reference was made in the course of proceedings between the Centre d’exportation du livre français (CELF) (French Book Export Centre; hereinafter ‘CELF’) and the Ministre de la Culture et de la Communication (Minister for Culture and Communication), on the one hand, and the Société internationale de diffusion et d’édition (SIDE) (International Distribution and Publishing Company; hereinafter ‘SIDE’), on the other, concerning aid paid to CELF by the French State.

The dispute in the main proceedings and the questions referred for a preliminary ruling

Facts which gave rise to the dispute in the main proceedings, and Community proceedings

3 CELF, a cooperative society in public limited company form, carries on the activity of export agent.

4 Under its articles of association, its object is to process directly orders for abroad and the French overseas territories and departments for books, brochures and any communication media and, more generally, to perform any operations aimed, in particular, at increasing the promotion of French culture throughout the world, using the above media.

5 It combines small orders for books, thus enabling foreign clients to deal with a single intermediary rather than a host of suppliers, whilst benefiting from the widest possible supply base. It satisfies all the orders of operators, without regard to the size of the orders, even if they are unprofitable.

6 CELF’s obligations were a reaffirmed in agreements concluded with the French Ministry of Culture and Communication.

7 From 1980 to 2002, CELF received operating subsidies from the French State to offset the extra costs of handling small orders placed by booksellers established abroad.

8 In the course of 1992, SIDE, a competitor of CELF, asked the Commission of the European Communities whether or not it had been informed, under Article 93(3) of the EC Treaty (now Article 88(3) EC), of the aid granted to CELF.

9 The Commission requested of, and obtained from, the French Government information about the measures in favour of CELF.

10 The Commission confirmed the aid’s existence to SIDE and informed it that the measures in question had not been notified.

11 By decision NN 127/92 of 18 May 1993, notice of which was published in the Official Journal of the European Communities of 25 June 1993 under the title ‘Aid to exporters of French books’ (OJ 1993 C 174, p. 6), the Commission concluded that, given the special nature of competition in the book trade and the cultural purpose of the aid schemes in question, the derogation provided for in Article 92(3)(d) of the EC Treaty (now Article 87(3)(d) EC) applied to them.

12 SIDE brought an action for annulment of that decision before the Court of First Instance of the European Communities.

13 By judgment of 18 September 1995 in Case T‑49/93 SIDE v Commission [1995] ECR II‑2501, the Court of First Instance annulled the decision in so far as it concerned the subsidy granted exclusively to CELF to offset the extra cost involved in handling small orders for French-language books placed by booksellers established abroad.

14 It decided that the Commission should have undertaken a detailed investigation of the conditions of competition in the sector concerned prior to ruling on the measures’ compatibility with the common market. The Commission should therefore have initiated the adversarial procedure under Article 93(2) of the EC Treaty (now Article 88(2) EC).

15 On 30 July 1996, the Commission decided to open a formal investigation procedure in respect of the aid in question.

16 Following its investigation, it adopted Decision 1999/133/EC of 10 June 1998 concerning State aid in favour of Centre d’exportation du livre français CELF (OJ 1999 L 44, p. 37), in which, first, it found that the aid was unlawful, on the ground that it had not been notified, and, second, declared the aid compatible with the common market on the ground that it satisfied the conditions for derogation under Article 92(3)(d) of the Treaty.

17 Two actions were brought for annulment of that decision.

18 The first, brought before the Court of Justice by the French Republic on the ground that the Commission had failed to apply Article 90(2) of the EC Treaty (now Article 86(2) EC), was dismissed by judgment of 22 June 2000 in Case C‑332/98 France v Commission [2000] ECR I‑4833.

19 The second, brought before the Court of First Instance by SIDE, was upheld by judgment of 28 February 2002 in Case T‑155/98 SIDE v Commission [2002] ECR II‑1179), which, finding a manifest error of assessment in the definition of the relevant market, annulled the Commission’s decision in so far as it declared the aid compatible with the common market.

20 Following that annulment, the Commission again declared the aid compatible with the common market by Decision 2005/262/EC of 20 April 2004 on the aid implemented by France in favour of the Coopérative d’exportation du livre français (CELF) (OJ 2005 L 85, p. 27).

21 SIDE brought an action for annulment of that decision before the Court of First of Instance. Those proceedings are currently pending before that Court (Case T‑348/04).

The national proceedings and the questions referred

22 At the same time as the Community proceedings, proceedings were brought before the national authorities and courts.

24 That request was rejected by decision of 9 October 1996.

26 By judgment of 26 April 2001, that court annulled the contested decision.

27 The Minister for Culture and Communication and CELF appealed against that judgment to the Cour administrative d’appel de Paris (Paris Administrative Court of Appeal).

28 By judgment of 5 October 2004, the Cour administrative d’appel de Paris upheld the judgment appealed against and ordered the French State to recover, within three months of the date of notification of the judgment, the sums paid to CELF for handling small orders for books placed by booksellers established abroad and, in default, to pay a penalty of EUR 1 000 per day for delay.

29 CELF and the Minister for Culture and Communication appealed to the Conseil d’État (Council of State) to set aside that judgment and the judgment of the Tribunal administratif de Paris.

30 In those appeals, the appellants argued, among other things, that the Cour administrative d’appel had made an error of law and an error of legal characterisation by not holding, in the present case, that the fact that the Commission had recognised the aid’s compatibility with the common market precluded the obligation to repay the aid which follows, as a rule, from unlawfulness in the implementation of measures of State aid, contrary to Article 88(3) EC, by the Member State.

31 Since it took the view that the resolution of the dispute depended on the interpretation of Community law, the Conseil d’État decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:

‘1. Is it permissible under Article 88 [EC] for a State which has granted to an undertaking aid which is unlawful, and which the courts of that State have found to be unlawful on the ground that it had not previously been notified to the … Commission as required under Article 88(3) EC, not to recover that aid from the economic operator which received it on the ground that, after receiving a complaint from a third party, the Commission declared that aid to be compatible with the rules of the common market, thus effectively exercising its exclusive right to determine such compatibility?

2. If that obligation to repay the aid is confirmed, must the periods during which the aid in question was declared by the … Commission to be compatible with the rules of the common market, before those decisions were annulled by the Court of First Instance of the European Communities, be taken into account for the purpose of calculating the sums to be repaid?’

The questions referred for a preliminary ruling

The first question

32 By its first question, the referring court is asking, in essence, whether the last sentence of Article 88(3) EC is to be interpreted as meaning that the national court is bound to order the recovery of aid implemented contrary to that provision, where the Commission has adopted a final decision declaring that aid to be compatible with the common market, within the meaning of Article 87 EC.

The second question

56 By its second question, the referring court is asking, in essence, whether, in a procedural situation such as that in the main proceedings, the obligation, arising from the last sentence of Article 88(3) EC, to remedy the consequences of the aid’s unlawfulness extends also, for the purposes of calculating the sums to be paid by the recipient, to the period between a Commission decision declaring the aid to be compatible with the common market and the annulment of that decision by the Community court.

57 That question concerns either any aid implemented between the two dates in question, as well as interest, if the consequence of the aid’s unlawfulness under national law, even in the event of it being declared compatible with the common market, is the recovery of that aid, or the interest alone on the aid received during the same period, if the recovery of compatible unlawful aid is not required by the national law.

58 As the main proceedings stand, two periods are involved, running between the decisions adopted by the Commission on 18 May 1993 and 10 June 1998 and, respectively, the judgments of the Court of First Instance which annulled them on 18 September 1995 and 28 February 2002 (see paragraphs 11 to 21 of the present judgment).

59 The question referred juxtaposes, on the one hand, the principle that acts of the Community institutions are presumed to be lawful and, on the other, the rule laid down by the first paragraph of Article 231 EC.

62 In circumstances such as those at issue in the main proceedings, the presumption of lawfulness and the rule that annulment is retroactive apply in turn.

65 After the annulment of a positive decision of the Commission, a recipient of unlawfully implemented aid is not precluded from relying on exceptional circumstances on the basis of which it had legitimately assumed the aid to be lawful and thus from declining to refund that aid (see, by analogy, Commission v Germany , cited above, paragraph 16, as regards a final negative decision of the Commission).

69 The reply to the second question referred must therefore be that in a procedural situation such as that in the main proceedings, the obligation, arising from the last sentence of Article 88(3) EC, to remedy the consequences of the aid’s unlawfulness extends also, for the purposes of calculating the sums to be paid by the recipient, and save for exceptional circumstances, to the period between a Commission decision declaring the aid to be compatible with the common market and the annulment of that decision by the Community court.

Costs

70 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Grand Chamber) hereby rules:

1. The last sentence of Article 88(3) EC is to be interpreted as meaning that the national court is not bound to order the recovery of aid implemented contrary to that provision, where the Commission has adopted a final decision declaring that aid to be compatible with the common market, within the meaning of Article 87 EC. Applying Community law, the national court must order the aid recipient to pay interest in respect of the period of unlawfulness. Within the framework of its domestic law, it may, if appropriate, also order the recovery of the unlawful aid, without prejudice to the Member State’s right to re‑implement it, subsequently. It may also be required to uphold claims for compensation for damage caused by reason of the unlawful nature of the aid.

2. In a procedural situation such as that in the main proceedings, the obligation, arising from the last sentence of Article 88(3) EC, to remedy the consequences of the aid’s unlawfulness extends also, for the purposes of calculating the sums to be paid by the recipient, and save for exceptional circumstances, to the period between a decision of the Commission of the European Communities declaring the aid to be compatible with the common market and the annulment of that decision by the Community court.

[Signatures]

* Language of the case: French.