Judgments nº T-359/04 of The General Court, September 09, 2010

• Resolution Date: September 09, 2010
• Issuing Organization: The General Court
• Decision Number: T-359/04

In Case T‑359/04,

British Aggregates Association, established in Lanark (United Kingdom),

Healy Bros. Ltd, established in Middleton (Ireland),

David K. Trotter & Sons Ltd, established in Manorhamilton (Ireland),

represented by C. Pouncey, Solicitor, and L. Van den Hende, lawyer,

applicants,

v

European Commission, represented by J. Flett and T. Scharf, acting as Agents,

defendant,

supported by

United Kingdom of Great Britain and Northern Ireland, represented initially by M. Bethell and subsequently by E. Jenkinson and I. Rao, and lastly by S. Ossowski, acting as Agents, assisted by M. Hall and G. Facenna, Barristers,

intervener,

APPLICATION for annulment of Commission Decision C(2004) 1614 final of 7 May 2004 not to raise objections to the modified exemption for Northern Ireland in the context of the scheme of levies on aggregates in the United Kingdom,

THE GENERAL COURT (Fifth Chamber),

composed of M. Vilaras, President, M. Prek and V.M. Ciucă (Rapporteur), Judges,

Registrar: C. Kantza, Administrator,

having regard to the written procedure and further to the hearing on 3 June 2009,

gives the following

Judgment

Facts

1 The first applicant, British Aggregates Association (‘BAA’), is an association comprising small independent quarrying companies in the United Kingdom. It has 55 members, which operate over 100 quarry sites. Most of its members operate quarries in Great Britain (and thus not in Northern Ireland). In the present case, BAA is acting on behalf of its members operating quarries in Great Britain.

2 The second applicant, Healy Bros. Ltd (‘Healy Bros’), and the third applicant, David K. Trotter & Sons Limited (‘DK Trotter’) are aggregates producers established in Ireland.

3 The present case concerns the exemption for Northern Ireland from an environmental tax, which the Commission of the European Communities declared, at the preliminary stage of the procedure for reviewing aid, to be aid compatible with the common market within the meaning of Article 87(3)(c) EC in Decision C(2004) 1614 final of 7 May 2004 (Aid No N2/04 – Aggregates Levy – Northern Ireland’) (‘the contested decision’), addressed to the United Kingdom of Great Britain and Northern Ireland. A summary notification of that decision was published in the Official Journal of the European Union of 2 April 2005 (OJ 2005 C 81, p. 4). According to the Commission, the conditions in the Community guidelines on State aid for environmental protection (OJ 2001 C 37, p. 3) (‘the Guidelines’) were fulfilled.

General scheme of the AGL

4 The general scheme of that environmental tax, entitled ‘phased introduction of the aggregates levy in Northern Ireland’ (‘AGL’) was introduced in the United Kingdom by sections 16 to 49 of Part II of the Finance Act 2001 (‘the Finance Act 2001’) and schedules 4 to 10 thereto.

5 The AGL was brought into force on 1 April 2002, by statutory implementing regulations under the Finance Act 2001.

6 The Finance Act 2001 was amended by sections 129 to 133 of and schedule 38 to the Finance Act 2002. The amended legislation provided, inter alia, for a phased introduction of the levy in Northern Ireland.

7 The AGL is charged at the rate of GBP 1.60 per tonne of aggregate subject to commercial exploitation (section 16(4) of the Finance Act 2001).

8 Section 16(2) of the Finance Act 2001, as amended, states that the charge to the AGL is to arise whenever a quantity of taxable aggregate is subjected, on or after the commencement date under that act, to commercial exploitation within the United Kingdom. It therefore applies to imported aggregates in the same way as to aggregates extracted in the United Kingdom.

9 By Decision C(2002) 1478 final of 24 April 2002 (Aid No N 863/2001 – Aggregates Levy) (‘the 2002 Decision’), the AGL was approved by the Commission. A summary notification of that decision was published in the Official Journal of the European Communities of 5 June 2002 (OJ 2002 C 133, p. 11).

10 In the 2002 Decision, the Commission had decided not to raise objections to the AGL, as it considered the scope of the AGL to be justified by the logic and nature of the tax system and that, consequently, the AGL did not qualify as State aid within the meaning of Article 87 EC.

11 The AGL is an ecotax imposed on aggregates in order to reduce and to rationalise the extraction of minerals commonly used as aggregates, by favouring their replacement by recycled products or other virgin materials not covered by the levy, thereby helping to protect the environment.

12 The AGL is levied on the commercial exploitation of rock, sand and gravel when used as aggregates, but not when they are used for other purposes. However, the AGL is levied only on virgin aggregate. It is not levied on aggregates extracted as a by-product or waste from other processes, or on recycled aggregates.

13 With regard to Northern Ireland, the Finance Act 2001 provided for a degressive scheme of relief from the AGL phased over five years. For the first year a 0% rate of the tax payable (the AGL) was laid down. The rate of tax payable was to increase by 20% each year until ultimately reaching the 100% rate after five years. The cost of the measure, and thus the loss of revenue to the United Kingdom, was calculated at GBP 45 million over those five years.

14 The United Kingdom’s justification for that special treatment for Northern Ireland was that it would prevent a temporary loss of international competitiveness of companies within Northern Ireland involved in the extraction and processing of virgin aggregates, resulting from the unique position of Northern Ireland within the United Kingdom, in that Northern Ireland shares a land boundary with another Member State. Importation of aggregate and processed products into, and exportation of aggregate and processed products out of, Northern Ireland is therefore much easier than is the case for other parts of the United Kingdom.

15 Consequently, the Commission, in its 2002 Decision, declared that the exemption for Northern Ireland was compatible with the common market and did not open the formal procedure provided for by Article 88(2) EC.

16 The 2002 Decision was then challenged by BAA through an action for partial annulment before the Court of First Instance (now ‘the General Court’) (Case T‑210/02 British Aggregates Association v Commission [2006] ECR II-2789). In that case, BAA challenged not the Commission’s finding that the gradual introduction of the AGL in Northern Ireland was compatible with the common market, but the Commission’s assessment that the AGL does not constitute State aid within the meaning of Article 87(1) EC.

17 By judgment of 13 September 2006, the General Court dismissed BAA’s action in Case T‑210/02 British Aggregates Association v Commission, paragraph 16 above. In its judgment, the General Court considered that the Commission did not commit a manifest error in the assessment of the scope of the AGL and that, therefore, the AGL did not constitute State aid within the meaning of Article 87(1) EC. On 27 November 2006, BAA brought an appeal against that judgment.

18 By judgment of 22 December 2008 in Case C‑487/06 P British Aggregates Association v Commission [2008] ECR I‑10505, the Court of Justice set aside the judgment of the General Court in Case T-210/02 British Aggregates v Commission, and referred the case back to the General Court.

Amendments to the AGL concerning the exemption granted for Northern Ireland

19 After observing that, with the gradual introduction of the AGL in Northern Ireland, the objectives pursued were not materialising as expected, the United Kingdom decided to replace the gradual exemption on aggregates in Northern Ireland by a new relief scheme.

20 Even after the gradual introduction of the AGL, there was an increase in undeclared imports of aggregate into Northern Ireland from Ireland, on which the AGL was not paid, giving rise to a risk of a loss of competitiveness of the aggregates industry in Northern Ireland. In addition, the expected environmental benefits were not materialising as intended in Northern Ireland. That situation was attributed to the limited availability of levy-free recycled and alternative materials in Northern Ireland and the virtual absence of infrastructure for collecting and processing such materials. Hence the gradual introduction of the AGL was found by the United Kingdom authorities not to give the processed products industry in Northern Ireland sufficient time to adapt to that change by switching to recycled or alternative materials.

21 It is for those reasons that the United Kingdom replaced the degressive relief scheme in Northern Ireland with a new relief scheme. Under that new scheme, in order effectively to achieve the intended environmental objectives, operators established in Northern Ireland who have concluded an environmental agreement with the United Kingdom authorities pay only 20% of the AGL from 1 April 2004 to 31 March 2011, thus achieving an 80% exemption from the AGL. That relief is subject, however, to the requirement that claimant undertakings formally enter into and comply with negotiated agreements with the United Kingdom Government, committing them to a programme of environmental performance improvements over the duration of the relief.

Procedure before the Commission

22 On 5 January 2004 the United Kingdom notified the Commission of that new relief scheme.

23 By letter of 9 February 2004, BAA lodged a complaint with the Commission against that relief scheme. BAA requested in particular that the formal investigation procedure be opened.

24 On 12 February 2004, the Commission sent a request for additional information to the intervener.

25 The United Kingdom responded to that request by letters of 11 March 2004 and 2 April 2004.

The contested decision

26 On 7 May 2004, the Commission adopted the contested decision, in which the new relief scheme was found to be State aid within the meaning of Article 87(1) EC...