Judgments nº T-369/06 of Court of First Instance of the European Communities, September 09, 2009

• Resolution Date: September 09, 2009
• Issuing Organization: Court of First Instance of the European Communities
• Decision Number: T-369/06

In Case T-369/06,

Holland Malt BV, established in Lieshout (Netherlands), represented initially by O. Brouwer and D. Mes, and subsequently by O. Brouwer, A. Stoffer and P. Schepens, lawyers,

applicant,

supported by

Kingdom of the Netherlands, represented by C. Wissels, M. de Grave, C. ten Dam and Y. de Vries, acting as Agents,

intervener,

v

Commission of the European Communities, represented by T. Scharf and A. Stobiecka-Kuik, acting as Agents,

defendant,

APPLICATION for annulment of Commission Decision 2007/59/EC of 26 September 2006 concerning the State aid granted by the Netherlands to Holland Malt BV (OJ 2007 L 32, p. 76),

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

composed of O. Czúcz (Rapporteur), President, I. Labucka and S. Soldevila Fragoso, Judges,

Registrar: C. Kantza, Administrator,

having regard to the written procedure and further to the hearing on 12 November 2008,

gives the following

Judgment

Background to the dispute

1 The applicant, Holland Malt BV, is a joint venture between Bavaria NV, a brewery which produces beer and soft drinks, and Agrifirm, a cooperative of cereal producers in Germany and the northern Netherlands. The applicant obtained a patent enabling it to produce and sell HTST (High Temperature, Short Time) malt, a type of malt that increases the stability of taste, flavour and sparkle of beer, as well as its shelf life.

2 The Netherlands Government decided to grant investment aid of EUR 7 425 000 to the applicant under a regional investment scheme called -Regionale investeringsprojecten 2000-, which was subsequently extended to include the sectors processing and selling agricultural products listed in Annex I to the EC Treaty.

3 The subsidy granted to the applicant is for the construction of a malting plant in Eemshaven (Netherlands) and is designed to bring together various operations - such as the storage and processing of malting barley and the production of and trade in malt - on one site. The actual payment of the subsidy was suspended pending its approval by the Commission. Investment in this project was required to be effected before 1 July 2005 in order to secure payment of the subsidy.

4 The expected production capacity of the Eemshaven malting plant was to be 120 000 tonnes per year. Following the construction of that plant and the closure of the production plants in Lieshout (Netherlands) and Wageningen (Netherlands), the applicant-s annual production capacity was to be 205 000 tonnes of malt in 2005, as against 150 000 tonnes (in Lieshout and Wageningen) in 2001. Construction work commenced in February 2004 and, according to the Commission in the contested decision, the malting plant became operational in 2005.

5 By letter of 31 March 2004, the Netherlands notified the subsidy to the Commission in accordance with Article 88(3) EC and point 4.2.6 of the Community Guidelines for State aid in the agriculture sector (OJ 2000 C 28, p. 2; -the Guidelines-). On 5 May 2005, the Commission initiated a procedure under Article 88(2) EC. Since that procedure delayed payment of the subsidy beyond the initial deadline for implementation set by the Netherlands Government, the applicant requested an extension of time until the adoption by the Commission of a decision on the subsidy.

6 On 26 September 2006, the Commission adopted Decision 2007/59/EC concerning the State aid granted by the Netherlands to Holland Malt (OJ 2007 L 32, p. 76; -the contested decision-).

7 In the contested decision, the Commission found that the measure at issue, concerning an investment to improve the quality of the applicant-s products and increase its production capacity, constituted State aid within the meaning of Article 87(1) EC. It went on to consider whether that measure could nevertheless be declared compatible with the common market pursuant to Article 87(3)(c) EC.

8 In that context, the Commission found that there was no separate market for HTST malt or for premium malt. Next, it referred to point 4.2.5 of the Guidelines, according to which -no aid may be granted [for investments in connection with the processing of agricultural products] unless sufficient evidence can be produced that normal market outlets for the products concerned can be found-. It found in that regard that there was overcapacity in the world and Community malt markets, and that no evidence had been produced that normal market outlets existed.

9 On those grounds, essentially, the Commission found in Article 1 of the contested decision that the aid at issue was incompatible with the common market. Under Article 2 of the contested decision, the Kingdom of the Netherlands is required to withdraw the State aid. Article 3 of the contested decision requires the Kingdom of the Netherlands to recover from the recipient the aid unlawfully made available to it. Article 4 of the contested decision provides that the Kingdom of the Netherlands must inform the Commission of the measures taken to comply with the contested decision.

Procedure and forms of order sought by the parties

10 By application lodged at the Registry of the Court of First Instance on 7 December 2006, the applicant brought the present action.

11 By a document lodged at the Registry of the Court of First Instance on 6 April 2007, the Kingdom of the Netherlands applied for leave to intervene in the present proceedings in support of the applicant. By order of 12 June 2007, the President of the Third Chamber of the Court of First Instance granted leave to intervene.

12 The Kingdom of the Netherlands lodged its statement in intervention, and the other parties lodged their observations on that statement, within the prescribed periods.

13 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance decided to open the oral procedure. The parties presented oral argument and their answers to the questions put by the Court at the hearing on 12 November 2008.

14 The applicant claims that the Court of First Instance should:

- annul, in whole or in part, Articles 1, 2, 3 and 4 of the contested decision;

- order the Commission to pay the costs.

15 The Commission contends that the Court of First Instance should:

- dismiss the action;

- order the applicant to pay the costs.

16 The Kingdom of the Netherlands claims that the Court of First Instance should:

- annul the contested decision;

- order the Commission to pay the costs.

Law

17 The applicant puts forward four pleas in law in support of its application. The first plea in law alleges infringement of Article 87(1) EC. The second alleges infringement of Article 87(3)(c) EC. The third and fourth pleas in law allege, respectively, breach of the principle of sound administration and breach of the duty to state reasons, provided for in Article 253 EC.

18 The Court considers it appropriate to examine the first plea in law, alleging infringement of Article 87(1) EC, in conjunction with the first part of the fourth plea in law, concerning the inadequacy of the reasons as to why the measure at issue should be classified as State aid.

1. First plea in law, alleging infringement of Article 87(1) EC, and first part of the fourth plea in law, alleging breach of the duty to state reasons as to why the measure in question should be classified as State aid

   Arguments of the parties

   19 In the first place, the applicant takes the view that, by failing to establish that the measure at issue constitutes aid within the meaning of Article 87(1) EC, the Commission infringed that provision as well as its duty to state reasons.

   20 It submits that, in order to establish that a State measure constitutes an aid that can have an impact on competition and that can affect trade between Member States, the Commission must carry out a proper analysis of the situation of the relevant market, the position of the recipient and its competitors in that market and the patterns of trade between Member States, and indicate the advantage conferred by the measure in intra-Community trade. It refers, in that regard, to the judgments of the Court of Justice in Joined Cases 296/82 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission [1985] ECR 809; Joined Cases C-329/93, C-62/95 and C-63/95 Germany and Others v Commission [1996] ECR I-5151; and Joined Cases C-15/98 and C-105/99 Italy and Sardegna Lines v Commission [2000] ECR I-8855.

   21 The Commission must establish that the measure has a real, rather than wholly theoretical, effect on trading conditions between Member States. In addition, according to the judgment of the Court of Justice in Case 248/84 Germany v Commission [1987] ECR 4013, paragraph 18, it must ascertain whether the measure concerned grants -an appreciable advantage to recipients in relation to their competitors and is likely to benefit in particular undertakings engaged in trade between Member States-.

   22 Referring to the judgment in Germany and Others v Commission, cited in paragraph 20 above, the applicant submits that, by not presenting information concerning its exports outside the Community and its turnover in respect of destinations within the Community, the reasons for the contested decision are even less detailed than those of the decision at issue in that case which was annulled by that judgment on the grounds of an inadequate statement of reasons.

   23 In the second place, the applicant complains that the Commission made an error of assessment by failing to take into account the existence of a separate market for premium malt. Owing to the innovative characteristics of its malt product, the applicant operates in a separate market segment, namely the premium malt market, on which it is not in competition with traditional Community malt producers. Consequently, the measure at issue is not liable to distort competition between standard malt producers engaged in the malt trade between Member States.

   24 In the third place, according to the applicant, the Commission erred in...