Case C-99/02

Commission of the European Communities

v

Italian Republic

(Failure of a Member State to fulfil obligations – State aid – Second subparagraph of Article 88(2) EC – Aid incompatible with the common market – Obligation to recover – Absolute impossibility of implementation)

Summary of the Judgment

1. Actions for failure to fulfil obligations – Non-compliance with a Commission decision finding State aid incompatible with the common market – Pleas in defence – Absolute impossibility of implementation

(Art. 88(2) EC)

2. State aid – Commission decision finding aid to be incompatible with the common market – Difficulties in implementation – Obligation on the Commission and the Member State to cooperate in seeking a solution consistent with the Treaty

(Arts 10 EC and 88(2) EC)

3. Actions for failure to fulfil obligations – Failure to comply with a Commission decision finding State aid incompatible with the common market – Obligation to recover the aid granted – Reference period – Period fixed by the decision failure to implement which is denied or, subsequently, by the Commission

(Art. 88(2), second subpara., EC)

1. The only defence available to a Member State in opposing an infringement action by the Commission under Article 88(2) EC is to plead that it was absolutely impossible for it to implement the decision properly.

(see para. 16)

2. A Member State which, in giving effect to a Commission decision on State aid, encounters unforeseen and unforeseeable difficulties or becomes aware of consequences overlooked by the Commission, may submit those problems to the Commission for consideration, together with proposals for suitable amendments to the decision in question. In such cases, the Commission and the Member State must, by virtue of the rule imposing on the Member States and the Community institutions a duty of genuine cooperation which underlies, in particular, Article 10 EC, work together in good faith with a view to overcoming the difficulties whilst fully observing the Treaty provisions and, in particular, the provisions on aid.

(see para. 17)

3. Because the second subparagraph of Article 88(2) EC does not provide for a pre-litigation phase, in contrast to Article 226 EC, and therefore the Commission does not issue a reasoned opinion allowing Member States a certain period within which to comply with its decision, when the second subparagraph of Article 88(2) EC is applied the reference period can only be that provided for in the decision failure to implement which is denied or, where appropriate, that subsequently fixed by the Commission.

(see para. 24)

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

(Failure of a Member State to fulfil obligations – State aid – Second paragraph of Article 88(2) EC – Aids incompatible with the common market – Obligation to recover – Absolute impossibility of implementation)

In Case C-99/02,

applicant,

v

defendant,

APPLICATION for a declaration that, by not adopting within the time-limit prescribed all measures necessary for the recovery from the recipients of the aid which was found, according to Commission Decision 2000/128/EC of 11 May 1999 concerning aid granted by Italy to promote employment (OJ 2000 L 42, p. 1), notified on 4 June 1999, to be unlawful and incompatible with the common market, and in any event by not notifying the Commission of such measures, the Italian Republic had failed to fulfil its obligations under Articles 3 and 4 of that decision and under the EC Treaty,

THE COURT (Fifth Chamber),,

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

Advocate General: D. Ruiz-Jarabo Colomer,

after hearing oral argument from the parties at the hearing on 18 September 2003, at which the Commission was represented by E. Montaguti, acting as Agent, and the Italian Republic by O. Fiumara, vice avvocato generale dello Stato, and A. Morrone,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

1. The aid granted unlawfully by Italy since November 1995 for employment under the training and work experience contracts provided for in Laws Nos 863/84, 407/90, 169/91 and 451/94 is compatible with the common market and the EEA Agreement provided that it concerns:

2. Aid for training and work experience contracts which does not satisfy the conditions set out in paragraph 1 is incompatible with the common market.

1.The workforce employed by a firm shall be calculated without taking account of jobs resulting from the conversion and jobs created through fixed-term contracts or not guaranteeing sufficiently stable employment.

2.Italy shall take all necessary measures to recover from the recipients the aid which does not satisfy the conditions of Articles 1 and 2 and has already been unlawfully paid.

Repayment shall be made in accordance with the procedures of Italian law. The amounts to be repaid shall bear interest from the date on which the aid was paid until the date on which it is effectively recovered. The interest shall be calculated on the basis of the reference rate used to calculate the net grant equivalent of regional aid.

Italy shall inform the Commission within two months of the date of notification of this Decision of the measures it has taken to comply herewith.’

On those grounds,

THE COURT (Fifth Chamber)

hereby

Jann

Timmermans

Rosas

La Pergola

von Bahr

Delivered in open court in Luxembourg on 1 April 2004.

R. Grass

V. Skouris

Registrar

President