Judgments nº T-3/09 of The General Court, February 03, 2011

• Resolution Date: February 03, 2011
• Issuing Organization: The General Court
• Decision Number: T-3/09

In Case T‑3/09,

Italian Republic, represented by P. Gentili, avvocato dello Stato,

applicant,

v

European Commission, represented by E. Righini, C. Urraca Caviedes and V. Di Bucci, acting as Agents,

defendant,

APPLICATION for annulment of Commission Decision 2010/38/EC of 21 October 2008 on State aid C 20/08 (ex N 62/08) which Italy is planning to implement through a modification of scheme N 59/04 concerning a temporary defensive mechanism for shipbuilding (OJ 2010 L 17, p. 50),

THE GENERAL COURT (Eighth Chamber),

composed of M.E. Martins Ribeiro, President, S. Papasavvas and N. Wahl (Rapporteur), Judges,

Registrar: N. Rosner, Administrator,

having regard to the written procedure and further to the hearing on 16 June 2010,

gives the following

Judgment

Legal context

1 Article 1 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88 EC] (OJ 1999 L 83, p. 1) provides:

‘For the purpose of this Regulation:

…

(b) “existing aid” shall mean:

(i) … all aid which existed prior to the entry into force of the Treaty in the respective Member States, that is to say, aid schemes and individual aid which were put into effect before, and are still applicable after, the entry into force of the Treaty;

(ii) authorised aid, that is to say, aid schemes and individual aid which have been authorised by the Commission or by the Council;

…

(v) aid which is deemed to be an existing aid because it can be established that at the time it was put into effect it did not constitute an aid, and subsequently became an aid due to the evolution of the common market and without having been altered by the Member State. Where certain measures become aid following the liberalisation of an activity by Community law, such measures shall not be considered as existing aid after the date fixed for liberalisation;

(c) “new aid” shall mean all aid, that is to say, aid schemes and individual aid, which is not existing aid, including alterations to existing aid;

… .’

2 Article 4(1) of Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Regulation No 659/1999 (OJ 2004 L 140, p. 1) provides:

‘For the purposes of Article 1(c) of Regulation … No 659/1999, an alteration to existing aid shall mean any change, other than modifications of a purely formal or administrative nature which cannot affect the evaluation of the compatibility of the aid measure with the common market. However an increase in the original budget of an existing aid scheme by up to 20% shall not be considered an alteration to existing aid.’

3 On the basis of Article 87(3)(e) EC, the Council adopted Regulation (EC) No 1177/2002 of 27 June 2002 concerning a temporary defensive mechanism to shipbuilding (OJ 2002 L 172, p. 1). That regulation authorised such a mechanism in order to assist Community shipyards which had suffered serious harm caused by the unfair competition of shipyards in Korea (recital 3 in the preamble to the regulation). Article 2(2) and (3) of Regulation No 1177/2002 stated that direct aid in support of certain shipbuilding contracts could be considered to be compatible with the common market where that aid did not exceed 6% of contract value and where the market segment at issue had suffered serious prejudice caused by unfair Korean competition.

4 Article 3 of Regulation No 1177/2002 makes the grant of the aid conditional on its being notified, in accordance with Article 88 EC, to the Commission, which must examine it and adopt a decision on it in accordance with Regulation No 659/1999.

5 Articles 2(4), 4 and 5 of Regulation No 1177/2002 are worded as follows:

‘Article 2

…

4. This Regulation shall not apply in respect of any ship delivered more than three years from the date of signing of the final contract. The Commission may, however, grant an extension of the three-year delivery limit when this is found justified by the technical complexity of the individual shipbuilding project concerned or by delays resulting from unexpected disruptions of a substantial and defensible nature in the working programme of a yard due to exceptional circumstances, unforeseeable and external to the company.

   …

   Article 4

   The Regulation shall be applied to final contracts signed from the entry into force of this Regulation until its expiry, with the exception of final contracts signed before the Community gives notice in the Official Journal of the European Communities that it has initiated dispute settlement proceedings against Korea by requesting consultations in accordance with the World Trade Organisation’s Understanding on the Rules and Procedures for the Settlement of Disputes and final contracts signed one month or more after the Commission gives notice in the Official Journal of the European Communities that these dispute settlement proceedings are resolved, or suspended on the grounds that the Community considers that the Agreed Minutes have been effectively implemented.

   Article 5

   This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Communities and shall expire on 31 March 2004.

   … .’

   6 By Council Regulation (EC) No 502/2004 of 11 March 2004 amending Regulation No 1177/2002 (OJ 2004 L 81, p. 6), the date of expiry of Regulation No 1177/2002 provided for in Article 5 of that regulation was postponed to 31 March 2005.

   Background to the dispute

   7 On 15 January 2004, the Italian Republic notified a State aid scheme by which it intended to apply Regulation No 1177/2002 by means of Article 4(153) of legge n. 350 su disposizioni per la formazione del bilancio annuale e pluriennale dello Stato (legge finanziaria 2004) (Law No 350 relating to the provisions for drawing up the annual and pluriannual budget of the State) of 24 December 2003 (‘the 2004 Finance Law’) (ordinary supplement to GURI No 299 of 27 December 2003) (‘Law 350/2003’), which provided:

   ‘In order to enable the application of [Regulation No 1177/2002], the sum of EUR 10 million is granted for 2004. The decree of the Ministry of Infrastructure and Transport lays down the detailed rules for the grant of the aid. The effectiveness of the provisions of the present paragraph is conditional, in accordance with Article 88(3) [EC], on the prior approval of the [Commission].’

   8 The procedure for the grant of aid was laid down in the decreto ministeriale (ministro delle infrastrutture e dei trasporti), Attuazione del regolamento (CE) n. 1177/2002 del 27 giugno 2002 del Consiglio, relativo ad un meccanismo difensivo temporaneo per la costruzione navale (Ministerial Decree of the Ministry of Infrastructure and Transport concerning provisions relating to the application of Regulation No 1177/2002, GURI No 93 of 21 April 2004 (‘the Ministerial Decree of 2 February 2004’).

   9 By decision of 19 May 2004 on aid scheme N 59/2004 relating to a defensive temporary mechanism for shipbuilding, notified under reference C (2004) 1807 (‘the 2004 approval decision’), the Commission approved the scheme notified, on the view that it complied with Regulation No 1177/2002 and was compatible with the common market (‘the 2004 scheme’).

   10 Since, in its estimation, the initial appropriation of EUR 10 million was not sufficient to cover all of the applications for aid submitted before the expiry of Regulation No 1177/2002, as amended by Regulation No 502/2004, the Italian Republic notified the Commission on 1 February 2008 of its plans to allocate, by means of Article 2(206) of legge n° 244 su disposizioni per la formazione del bilancio annuale e pluriennale dello Stato (legge finanziaria 2008) (Law No 244 relating to the provisions for drawing up the annual and pluriannual budget of the State; ‘the 2008 Finance Law’) of 24 December 2007 (ordinary supplement to GURI No 300 of 28 December 2007), another EUR 10 million to the budget for the 2004 scheme (‘the measure notified’).

   11 By letter dated 30 April 2008, the Commission informed the Italian Republic that it had decided to initiate the procedure laid down in Article 88(2) EC with regard to the measure notified. The decision to initiate the procedure was, furthermore, published in the Official Journal of the European Union (OJ 2008 C 140, p. 20). The Commission invited all the interested parties to submit their comments within one month of the date of publication.

   12 On 21 October 2008, the Commission adopted Decision 2010/38/EC on State aid C 20/08 (ex N 62/08) which Italy is planning to implement by altering scheme N 59/04 concerning a temporary defensive mechanism for shipbuilding (OJ 2010 L 17, p. 50) (‘the contested decision’), Article 1 of which provides:

   ‘The State aid which Italy is planning to implement by altering scheme N 59/04 concerning a temporary defensive mechanism for shipbuilding, which entails an increase [for 2004] of [EUR] 10 million, is incompatible with the common market.

   Therefore the aid may not be implemented.’

   13 In the contested decision, the Commission held that the measure notified constituted new aid within the meaning of Article 1(c) of Regulation No 659/1999 and Article 4 of Regulation No 794/2004 and that that aid could not be considered to be compatible with the common market, since Regulation No 1177/2002 was no longer in force and could not therefore serve as a legal basis for the assessment of the measure notified. The Commission also stated that that measure could not be considered to be compatible with the common market on the basis of the framework on State aid to shipbuilding (OJ 2003 C 317, p. 11); nor did it appear to be compatible with the common market on the basis of any other provision applicable to State aid.

   14 Furthermore, the Commission noted that, following the entry into force of Regulation No 1177/2002, the Republic of Korea had brought to the attention of the Dispute Settlement Body (‘the DSB’) of the World Trade Organisation (WTO) the question of the lawfulness of that regulation in the light...