Case C-91/01

Italian Republic

v

Commission of the European Communities

(State aid – Recommendation concerning the definition of small and medium-sized enterprises – Guidelines on State aid to small and medium-sized enterprises – Independence criterion – Protection of legitimate expectations – Legal certainty)

Summary of the Judgment

1. State aid – Prohibition – Derogations – Information from the Commission concerning the guidelines on State aid to small and medium-sized enterprises – Definition of ‘small and medium-sized enterprises’ – Interpretation of the independence criterion

(Commission Recommendation 96/280 concerning the definition of small and medium-sized enterprises; Information from the Commission – Community guidelines on State aid to small and medium-sized enterprises)

2. State aid – Compatibility of aid with Community rules – Possibility of legitimate expectation on the part of recipients – Protection – Conditions and limits

(Art. 88 EC)

1. The Commission is bound by the guidelines and notices that it issues in the area of supervision of State aid where they do not depart from the rules in the Treaty and are accepted by the Member States.

In that connection, point 1.2 of Information from the Commission – Community guidelines on State aid to small and medium-sized enterprises (SMEs), published in 1996, states that the favourable consideration given by the Commission to such aid is justified by the imperfections in the market which lead to their having to suffer a number of handicaps and which thus limit the socially and economically desirable development of such enterprises. Point 3.2 of those Guidelines states that, in order to qualify as an SME under those guidelines, an enterprise must satisfy three tests: number of persons employed, the financial test and the independence test. Regarding the last test, Article 1(3) of the Annex to Commission Recommendation 96/280 concerning the definition of SMEs defines independent enterprises as those which are not owned as to 25% or more of the capital or the voting rights by one enterprise, or jointly by several enterprises, falling outside the definition of an SME or a small enterprise.

However, the operative part of an act is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption.

The 18th, 19th and 22nd recitals of that recommendation, as well as point 3.2 of the SME Guidelines, make it clear that the purpose of the independence criterion is to ensure that the measures intended for SMEs genuinely benefit the enterprises for which size represents a handicap and not enterprises belonging to a large group which have access to funds and assistance not available to competitors of equal size. It also follows that, in order to ensure that only genuinely independent SMEs are included, there has to be a way of eliminating legal arrangements in which SMEs form an economic group much stronger than such an SME. It must also be ensured that the definition is not circumvented on formal grounds.

Accordingly, the independence criterion must be interpreted in the light of that purpose, so that an enterprise which is owned as to less than 25% by a large enterprise and thus formally meets the criterion, but in reality belongs to a large group of enterprises, may not nevertheless be regarded as meeting the criterion.

(see paras 45-51)

2. In view of the mandatory nature of the supervision of State aid by the Commission under Article 88 EC, undertakings to which aid has been granted cannot, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure laid down in that article.

It follows that, so long as the Commission has not taken a decision approving aid and also so long as the period for bringing an action against such a decision has not expired, the recipient cannot be certain as to the lawfulness of the proposed aid which alone is capable of giving rise to a legitimate expectation on his part.

(see paras 65-66)

JUDGMENT OF THE COURT (Fifth Chamber) 29 April 2004 (1)

(State aid – Recommendation concerning the definition of small and medium-sized enterprises – Guidelines for State aid to small and medium-sized enterprises – Independence criterion – Protection of legitimate expectations – Legal certainty)

In Case C-91/01,

applicant,

v

defendant,

APPLICATION for annulment of Commission Decision 2001/779/EC of 15 November 2000 on the State aid which Italy is planning to grant to Solar Tech Srl (OJ 2001 L 292, p. 45), in so far as it did not allow the application to that aid of the bonus of 15% gross grant equivalent provided for for small and medium-sized enterprises,

THE COURT (Fifth Chamber),,

composed of: C.W.A. Timmermans, acting for the President of the Fifth Chamber, A. Rosas and S. von Bahr (Rapporteur), Judges,

Advocate General: F.G. Jacobs,

after hearing oral argument from the parties at the hearing on 5 June 2003,

after hearing the Opinion of the Advocate General at the sitting on 18 September 2003,

gives the following

‘… independence is also a basic criterion in that an SME belonging to a large group has access to funds and assistance not available to competitors of equal size; … there is also a need to rule out legal entities composed of SMEs which form a grouping whose actual economic power is greater than that of an SME;

… in respect of the independence criterion, the Member States, the EIB and the EIF should ensure that the definition is not circumvented by those enterprises which, whilst formally meeting this criterion, are in fact controlled by one large enterprise or jointly by several large enterprises;

… stakes held by public investment corporations or venture capital companies do not normally change the character of a firm from that of an SME, and may therefore be disregarded; the same applies to stakes held by institutional investors, who usually maintain an “arm’s-length” relationship with the company in which they have invested;

… a solution must be found to the problem of joint stock enterprises which, although they are SMEs, cannot state with any accuracy the composition of their share ownership due to the way in which their capital is dispersed and the anonymity of their shareholders and cannot therefore know whether they meet the condition of independence’.

‘… fairly strict criteria must be laid down for defining SMEs if the measures aimed at them are genuinely to benefit the enterprises for which size represents a handicap’.

‘Member States, the European Investment Bank and the European Investment Fund are invited:

‘1. Small and medium-sized enterprises, hereinafter referred to as “SMEs”, are defined as enterprises which:

–

3.‘At its meeting in Cannes in June 1995, the European Council emphasised in its conclusions that SMEs “play a decisive role in job creation and, more generally, act as a factor of social stability and economic drive”. But it is generally accepted that SMEs suffer from a number of handicaps that can slow down their development. One of the main such handicaps is the difficulty in obtaining capital and credit, the chief causes of which are imperfect information, the risk-shy nature of financial markets and the limited guarantees that SMEs are in a position to offer; SMEs limited resources also restrict their access to information, notably regarding new technology and potential markets. The introduction of new regulatory arrangements often entails higher costs for SMEs. The imperfections in the market which limit the socially desirable development of SMEs justify the favourable consideration which the Commission has traditionally been prepared to give to State aid to SMEs, provided that such aid does not affect trade to a disproportionate extent relative to the contribution it makes to the achievement of Community objectives allowed by Article 92(3)(c) of the EC Treaty …’.

‘For the purpose of applying the guidelines, an SME is defined in accordance with the [SME] recommendation’

…

…

The three tests – workforce, turnover or balance-sheet total, and independence – are cumulative: all three must be satisfied. The independence test, according to which a large enterprise must not hold 25% or more of the SME’s capital, is based on practice in a number of Member States where this percentage is the threshold at which supervision becomes possible. In order to ensure that only genuinely independent SMEs are included, there has to be a way of eliminating legal arrangements in which SMEs form an economic group much stronger than an individual SME. In calculating the thresholds referred to above, it is therefore necessary to cumulate the relevant figures for the beneficiary enterprise and for all the enterprises which it directly or indirectly controls through possession of 25% or more of the capital or of the voting rights.’

‘In assisted areas, the Commission may approve aid to SMEs which exceeds the level of regional investment aid it has authorised for large enterprises in the area:

…

–

‘Under this framework the Commission will decide on a case-by-case basis a maximum allowable aid intensity for projects which are subject to the notification requirement. This might lead to aid intensities below the applicable regional ceiling. …’

That principle is set out in the 22nd recital to the [SME Recommendation] … .

‘The State aid which Italy is planning to grant to Solar Tech Srl, amounting to EUR 42 788 290, is incompatible with the common market in so far as its intensity exceeds the maximum allowable in the case in point (40% nge [net grant equivalent]).

The aid may accordingly not be implemented by Italy to the extent that it exceeds an intensity of 40% nge.’

On those grounds,

THE COURT (Fifth Chamber)

hereby:

Timmermans

Rosas

von Bahr

Delivered in open court in Luxembourg on 29 April 2004.

R. Grass

V. Skouris

Registrar

President