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• Jurisdiction: European Union
• Date: 15 July 2021
• Court: Court of Justice (European Union)

Provisional text

OPINION OF ADVOCATE GENERAL

TANCHEV

delivered on 15 July 2021(1)

Joined Cases C‑167/19 P and C‑171/19 P

European Commission

v

Freistaat Bayern (C‑167/19 P)

Interessengemeinschaft privater Milchverarbeiter Bayerns eV,

Genossenschaftsverband Bayern eV,

Verband der Bayerischen Privaten Milchwirtschaft eV (C‑171/19 P)

(Appeal – State Aid – Aid in favour of the Bavarian dairy sector – Funding of milk-quality tests – Decision declaring the aid to be incompatible with the internal market – Opening decision – the Commission’s obligations – Rights of the Member State concerned – Rights of the interested parties to be involved in the administrative procedure – Infringement of essential procedural requirements)

1. By these two appeals, the European Commission seeks to have the judgments of the General Court in Freistaat Bayern v Commission (2) and in Interessengemeinschaft privater Milchverarbeiter Bayerns and Others v Commission (3) set aside. In those judgments, the General Court allowed the actions of Freistaat Bayern (Free State of Bavaria; ‘the Land of Bavaria’) and of the Interessengemeinschaft privater Milchverarbeiter Bayerns and Others (‘the interest grouping’), seeking partial annulment of Commission Decision (EU) 2015/2432. (4)

I. Background to the disputes

2. The background to the disputes is described in paragraphs 1 to 21 of the first judgment under appeal and paragraphs 1 to 20 of the second judgment under appeal. I will limit myself to pointing out the following elements.

3. In Germany, the quality of milk has traditionally been guaranteed by independent quality tests. Those quality tests are funded, in Bavaria (Germany), first, by resources from the milk levy imposed on milk buyers and, secondly, from the general budget of the Land of Bavaria, one of the defendants in the present appeals.

4. By letter of 17 July 2013, the Commission informed the Federal Republic of Germany that it had decided to initiate the procedure laid down in Article 108(2) TFEU (‘the opening decision’). That decision concerns various measures implemented in several German Länder under the 1952 Gesetz über den Verkehr mit Milch, Milcherzeugnissen und Fetten (German Federal Law on Milk and Fats) (5) in order to support the dairy sector, including the aid referred to in the contested decision. With regard to that aid, the Commission, on the one hand, in paragraph 2.5 of the opening decision, regarding the financing of the measures being assessed, cited Paragraph 22 of the MFG, which concerns the milk levy. On the other hand, in recital 264 of that decision, the Commission stated that the measures being assessed were financed by means of a parafiscal levy, referring to the same provision of the MFG.

5. The Commission found that the aid at issue was compatible with the internal market during the period from 28 November 2001 to 31 December 2006, while expressing doubts as to its compatibility with the internal market as from 1 January 2007.

6. By letter dated 20 September 2013, the Federal Republic of Germany submitted comments concerning the opening decision. The Commission received seven comments from interested parties that referred to the measures concerning milk-quality tests covered by the contested decision. The comments received were sent to the Federal Republic of Germany, which then responded to additional observations submitted on 8 July 2014.

7. On 18 September 2015, the Commission adopted the contested decision. The decision concerns exclusively the funding of milk-quality tests carried out from 1 January 2007 in Baden-Württemberg (Germany) and Bavaria.

8. In the first place, the Commission examined whether the resources obtained from the milk levy constituted State aid within the meaning of Article 107(1) TFEU. In addition, points 1 to 6 of Paragraph 22(2) of the MFG stipulated the purposes for which milk-levy resources could be used. Consequently, the Commission considered that the resources from the milk levy should be regarded as being under State control and the measures funded by the resources from the milk levy were granted through State resources and were attributable to the State.

9. In the second place, the Commission found that the dairies in Bavaria obtained a selective advantage as a result of being refunded the costs of milk-quality tests from resources from the levy and the general budget of the Land of Bavaria. The Commission found that those milk-quality tests were, ultimately, of benefit to dairies because they were required by law to test the milk delivered to them. The dairies were undertakings within the meaning of Article 107(1) TFEU and the costs relating to the payment made to a testing body for the purposes of milk-quality tests had to be regarded as typical operating costs which the undertakings in question, namely the dairies, normally had to bear themselves. (6) Moreover, according to the Commission, any possible advantage was granted only to ‘certain undertakings’ because, other than the dairy sector, many other economic sectors in Germany did not benefit from the measures in question. The possible advantage being conferred was therefore selective. Furthermore, in Länder other than Baden-Württemberg and Bavaria, dairies were not refunded those costs from milk-levy resources. Finally, in recital 145 of the contested decision, the Commission took account of the fact that the measure was also funded from the general budget of the Land of Bavaria. Consequently, in its view, the benefit which the dairies derived from the costs of the milk-quality tests being borne did not necessarily correspond to the amount they had paid in respect of the milk levy. It transposed that finding to the funding received from the general budget of the Land of Bavaria.

10. In the third place, as regards the presence of existing aid, the Commission found that, with the exception of the MFG, which did not establish the aid scheme in question, the German authorities had not submitted any information demonstrating that a legal basis adopted before 1958 was still applicable in its original version during the period of investigation.

11. In the fourth and last place, the Commission found that the aid towards routine controls of milk did not meet the conditions of paragraph 109 of the Community guidelines for State aid in the agriculture and forestry sector 2007 to 2013 (OJ 2006 C 319, p. 1), read in conjunction with Article 16(1) of Commission Regulation (EC) No 1857/2006, (7) to which paragraph 109 refers.

12. In those circumstances, the Commission decided, in Article 1 of the contested decision, that the aid granted since 1 January 2007 in Bavaria was unlawful and incompatible with the internal market. In Articles 2 to 4 of that decision, the Commission ordered the recovery of the aid and set out the detailed rules for that recovery.

II. Proceedings before the General Court and the judgments under appeal

13. On 26 November 2015 and on 4 December 2015 respectively, the Land of Bavaria and the interest grouping brought actions seeking partial annulment of the contested decision.

14. In particular, the first plea of both the Land of Bavaria and of the interest grouping alleged an infringement of Article 108(2) TFEU and of Article 6(1) and Article 20(1) of Regulation No 659/1999. (8)

15. The second plea of the interest grouping alleged an infringement of Article 107(1) TFEU in so far as the resources from the milk levy were considered to constitute State resources.

16. In the judgments under appeal, in relation to the first plea of the applicants, first, the General Court noted that, in accordance with Article 6(1) of Regulation No 659/1999, the opening decision must summarise the relevant issues of fact and law, include a preliminary assessment of the Commission and set out the doubts entertained by the Commission as to the compatibility of the measure at issue with the internal market, without rendering meaningless the right of interested parties to submit their comments.

17. Secondly, the General Court examined the contested decision in the light of the opening decision in order to determine whether the funding using resources from the general budget of the Land of Bavaria was already included in the opening decision. It found that the funding of milk-quality tests using the Land of Bavaria’s budgetary resources was not mentioned in the opening decision. It pointed out, in the second judgment under appeal, that the Commission had not asserted that that funding was mentioned explicitly in the opening decision. Therefore, the General Court found that the interested parties could presume legitimately that the Commission’s examination contained in the opening decision concerned only the resources from the milk levy.

18. Thirdly, the General Court pointed out that the term ‘State resources’, used in Article 107(1) TFEU, had a very broad sense since it provides that any aid granted through such resources ‘in any form whatsoever’ is incompatible with the internal market. Consequently, those resources may take various forms and, therefore, the Commission must identify them and analyse them carefully. In addition, it noted that State resources are one of the constituent elements of the classification as aid. In that regard, even though the expression ‘financial support’, used by the Commission in the opening decision, might be interpreted as referring to both sources of funding, it must be considered to be insufficiently precise. The General Court added that, admittedly, the final decision may contain certain differences with respect to the opening decision. However, such a difference is not justified in the present case. As the Commission acknowledged, it was informed by the Member State of the funding using resources from the general budget of the Land of Bavaria long before the opening decision was adopted. Moreover, the General Court noted that, in the contested...