Judgments nº T-162/06 of Court of First Instance of the European Communities, January 14, 2009

• Resolution Date: January 14, 2009
• Issuing Organization: Court of First Instance of the European Communities
• Decision Number: T-162/06

In Case T-162/06,

Kronoply GmbH & Co. KG, established in Heiligengrabe (Germany), represented by R. Nierer and L. Gordalla, lawyers,

applicant,

v

Commission of the European Communities, represented initially by K. Gross and T. Scharf, and subsequently by V. Kreuschitz, K. Gross and T. Scharf, acting as Agents,

defendant,

APPLICATION for annulment of Commission Decision 2006/262/EC of 21 September 2005 on State aid No C 5/2004 (ex N 609/2003) which Germany is planning to implement for Kronoply (OJ 2006 L 94, p. 50),

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber),

composed of M. Vilaras (Rapporteur), President of the Chamber, M. Prek and V. Ciuc-, Judges,

Registrar: C. Kristensen, Administrator,

having regard to the written procedure and further to the hearing on 3 September 2008,

gives the following

Judgment

Facts

1 The applicant - Kronoply GmbH & Co. KG (-Kronoply-) - is a company governed by German law which manufactures timber products.

2 On 28 January 2000, Kronoply applied to the Investitionsbank des Landes Brandenburg (Investment Bank of the Land of Brandenburg) (-the ILB-) for a grant of DEM 77 million (EUR 39.36 million) for the construction of a production plant for oriented strand board (OSB), the total cost of which was DEM 220 million (EUR 112.5 million).

3 By letter of 22 December 2000, the Federal Republic of Germany notified the Commission, pursuant to Article 2(1) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88] of the EC Treaty (OJ 1999 L 83, p. 1), of a plan to award Kronoply an investment grant of DEM 77 million for the construction of an OSB production plant under the multisectoral framework on regional aid for large investment projects (OJ 1998 C 107, p.7) (-the 1998 multisectoral aid framework-), in the version in force at the material time. The notification was registered and processed by the Commission under number N 813/2000 (-the N 813/2000 proceedings-).

4 The maximum allowable intensity of aid under the 1998 multisectoral aid framework is determined on the basis of a calculation which involves the application of a number of assessment factors and, in particular, the factor indicating the state of competition in the sector concerned (-Factor T-), for which there are four levels: 0.25, 0.5, 0.75 and 1. In the present case, the plan was first notified by the Federal Republic of Germany with a T factor of 1, which denotes a project with no negative effects on competition.

5 On 19 June 2001, following an exchange of letters with the Commission, the Federal Republic of Germany amended its notification with respect to the intensity of the aid. It informed the Commission, inter alia, that it -[had] decided to reduce the notified -competition- factor of 1 to 0.75-. The T factor of 0.75 applies to projects which result in a capacity expansion in a sector facing structural overcapacity and/or a declining market. The application of the T factor of 0.75 reduced the intensity of the aid from 35% to 31.5%, that is to say, it reduced the total amount of the aid to DEM 69.3 million (EUR 35.43 million), instead of the DEM 77 million (EUR 39.36 million) originally notified.

6 On 3 July 2001, the Commission, pursuant to Article 4(3) of Regulation No 659/1999, adopted a decision not to raise objections to the grant of that aid. That decision was published in the Official Journal of the European Communities on 11 August 2001 (OJ 2001 C 226, p. 14).

7 By letter of 3 January 2002, the Federal Republic of Germany requested an amendment to the Commission-s decision of 3 July 2001 on the ground that the relevant market could not be regarded as declining and that, accordingly, a T factor of 1 fell to be applied, and the intensity of the aid authorised increased from 31.5% to 35% of the eligible investment.

8 By letter of 5 February 2002, the Commission refused to amend its decision of 3 July 2001 on the ground that the aid had been assessed on the basis of a correct calculation of all the applicable criteria.

9 On the view that that letter constituted a Commission decision, Kronoply brought an action for its annulment, which was dismissed as inadmissible by the Court of First Instance in its order of 5 November 2003 in Case T-130/02 Kronopoly v Commission [2003] ECR II-4857, on the ground that there was no challengeable act.

10 By letter of 22 December 2003, the Federal Republic of Germany notified the Commission of its intention to award an investment grant to Kronoply of EUR 3 936 947 under the 1998 multisectoral aid framework. That aid was registered under number N 609/2003.

11 By letter of 18 February 2004, the Commission informed the Federal Republic of Germany of its decision to initiate the procedure provided for in Article 88(2) EC on the ground that it had serious doubts as to the incentive effect and necessity of the additional aid notified.

12 On 21 September 2005, having received the comments of the Federal Republic of Germany and Kronoply, the Commission adopted Decision 2006/262/EC on State aid No C 5/2004 (ex N 609/2003) which Germany is planning to implement for Kronoply (OJ 2006 L 94, p. 50; -the Decision-).

13 Recital 42 of the Decision is worded as follows:

-The Commission concludes that the notified aid constitutes State aid within the meaning of Article 87(1) [EC]. As the aid neither provides any incentive effect nor is necessary, none of the derogations in Article 87(2) or (3) [EC] apply. The aid therefore constitutes incompatible operating aid and may not be implemented.-

14 Article 1 of the Decision provides as follows:

-The State aid which, according to notification N 609/2003, Germany is planning to implement for Kronoply, amounting to EUR 3 936 947, is incompatible with the common market.

The aid may accordingly not be implemented.-

Procedure and forms of order sought

15 By application lodged at the Registry of the Court of First Instance on 26 June 2006, Kronoply brought the present action.

16 On hearing the report of the Judge-Rapporteur, the Court (Fifth Chamber) decided to open the oral procedure. The parties presented oral argument and answered the questions put to them by the Court at the hearing on 3 September 2008.

17 Kronoply claims that the Court should:

- annul the Decision;

- order the Commission to pay the costs.

18 The Commission contends that the Court should:

- dismiss the action;

- order Kronoply to pay the costs.

Law

19 Kronoply relies on five pleas in law in support of its action: (i) infringement of Article 253 EC; (ii) infringement of the provisions of Regulation No 659/1999; (iii) infringement of Article 87(3)(a) and (c) EC, Article 88 EC and the Guidelines on National Regional Aid (OJ 1998 C 74, p. 9; -the Guidelines-); (iv) manifest errors on the part of the Commission in the finding of the facts; and (v) manifest errors on the part of the Commission in the assessment of the facts, and misuse of powers.

Plea alleging infringement of Article 253 EC

Arguments of the parties

20 Kronoply claims, first, that it is unable to ascertain the reasons on which the Commission relied, because the reasoning of the Decision is flawed: in effect, the Commission denies the existence of an incentive effect without, however, determining whether such an effect exists on the basis of the criteria that it has itself established. As provided in the Guidelines, an incentive effect exists where the aid application is made before the project is completed, which is in fact the position in the present case. By omitting to mention that fact, not only has the Commission made an incorrect finding of the facts, it has failed to state adequate reasons.

21 Kronoply asserts, secondly, that the Commission did not examine the possibility - expressly mentioned by the Court of First Instance in its case-law - of altering aid already granted and authorised, because in the Decision the Commission requires there to be another investment project involved, giving rise to a further request for aid. It follows that the Decision failed to state adequate reasons.

22 The Commission contends that the present plea should be rejected.

Findings of the Court

23 It is clear from the wording and content of Kronoply-s arguments in support of the two complaints raised in connection with the plea alleging infringement of Article 253 EC that, strictly speaking, those complaints do not refer to a failure to state reasons, or to a failure to state adequate reasons, either of which is an infringement of an essential procedural requirement within the meaning of Article 230 EC. In fact, those complaints properly form part of the criticism of the merits of the Decision, hence of its legality in terms of the substance, their thrust being that the Decision is unlawful having regard, in particular, to the alleged infringement by the Commission of Article 87 EC and the Guidelines - on account, specifically, of an erroneous assessment of the incentive effect and necessity of the aid at issue - and to an alleged misuse of its powers.

24 In that connection, it is significant that the complaints relating to the failure by the Commission to take account of the date on which the original aid application was lodged or of the possibility, recognised by the Court, of altering aid already granted and authorised are expressly set out in the arguments by which Kronoply purports to show that the incentive effect and necessity of the aid at issue was incorrectly assessed and that the Commission misused its powers.

25 In any event, it must be held that the reasons given in the Decision satisfy the requirements of Article 253 EC, as interpreted by the case-law.

26 According to settled case-law, the statement of reasons required under Article 253 EC must be appropriate to the measure in question and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that measure, in such a...