European Commission v Kingdom of the Netherlands.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• ECLI: ECLI:EU:C:2010:799
• Docket Number: C-279/08
• Date: 22 December 2010
• Procedure Type: Recurso de anulación

OPINION OF ADVOCATE GENERAL

MENGOZZI

delivered on 22 December 2010 (1)

Case C‑279/08 P

European Commission

v

Kingdom of the Netherlands

(Appeal – Admissibility of the action at first instance – Action brought by a Member State against a Commission decision finding that a national measure notified pursuant to Article 88 EC constitutes State aid compatible with the Common market – State aid – Concept – Selectivity – Advantage financed through State resources – Emission trading scheme for nitrogen oxides)

1. In the present proceedings, the Commission is appealing against the judgment in the case of Netherlands v Commission (2) (‘the judgment under appeal’), by which the Court of First Instance of the European Communities annulled the Commission decision of 24 June 2003 (3) relating to State aid N 35/2003 concerning an emission trading scheme for nitrogen oxides notified by the Kingdom of the Netherlands (‘the decision’). That judgment forms the subject‑matter of two cross-appeals brought by the Kingdom of the Netherlands and the Federal Republic of Germany.

I – Facts of the case and the decision

2. The emission trading scheme for nitrogen oxides (NO_x) communicated to the Commission by the Netherlands (‘the measure in question’) and the content of the decision are set out as follows at paragraphs 8 to 13 and 16 to 20 of the judgment under appeal:

‘8 By letter of 23 January 2003 the Netherlands authorities notified the Commission pursuant to Article 88(3) EC of a NO_x emission trading scheme … . They requested the Commission to take a decision finding that the measure in question did not constitute aid, in accordance with Article 4(2) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83, p. 1).

9 On 24 June 2003, the Commission adopted [the] Decision … .

10 In paragraph 1 of the … decision, the Commission first describes the measure in question. In the framework of the NO_x national emission ceiling for the Netherlands established by Directive 2001/81, the Netherlands authorities set a target of 55 kilotonnes of NO_x emissions for its large industrial facilities, that is approximately 250 undertakings, to be attained by 2010.

11 Regarding the working of the scheme, the Commission explains in paragraph 1.2 of the … decision that Netherlands legislation will lay down a NO_x emission standard for each industrial facility. The undertaking can comply with the emission standard thus laid down by taking steps to reduce NO_x emissions in its own facility, by buying emission allowances from other undertakings, or by a combination of those options. Emission reductions, in the form of NO_x credits, will be offered in the emission market by facilities whose emissions fall below the emission standard.

12 A facility’s total annual NO_x emission, adjusted for any NO_x credits sold or bought, must comply with the authorised emission level for that facility. The authorised annual emission – as an absolute figure – is calculated on the basis of the emission standard concerned and the amount of energy used by that facility.

13 At the end of each year, the Netherlands authorities check whether the facilities have complied with the required emission standard. Each year, NO_x credits can be bought, saved or lent for future periods. If a facility exceeds its emission standard, it must compensate for that surplus the following year. Moreover, that surplus will be increased by 25% in order to deter any overstepping of the mark. If a facility fails to comply with its emission standard, the Netherlands authorities will impose on it a fine which is effective, proportionate and dissuasive.

…

16 In paragraphs 1.5 and 1.6 of the … decision, the Commission … points out that the measure in question will apply to all industrial facilities with installed total thermal capacity of more than 20 thermal megawatts (MWth), in parallel with Community legislation. The Netherlands authorities will continue to apply the emission limit values laid down by the various Community directives in force.

17 In its assessment of the measure in question (paragraph 3 of the … decision), the Commission first refers to its previous decisions on emission trading schemes and distinguishes between two types of scheme, as follows:

“(1) Systems where a tradable emission or pollution document is considered as [an] intangible asset representing a market value which the authorities could have sold or auctioned as well, leading to forgone revenues (or a loss of State resources), hence State aid within the meaning of Article 87(1) of the EC Treaty;

(2) Systems where a tradable emission or pollution document is considered as authorised proof of a certain production that cannot be sold or auctioned to the recipient, hence no forgone revenues, therefore no State resources, hence no State aid within the meaning of Article 87(1) of the EC Treaty”.

18 The Commission then explains the reasons which led it to find that the measure in question constitutes State aid, that is, concretely, the grant by the State of NO_x credits free of charge to a specific group of undertakings engaged in trade between Member States. According to the … decision, the Netherlands authorities had the option of selling or auctioning the emission allowances. By offering NO_x credits free of charge as intangible assets, the Member State therefore suffers forgone revenue. The Commission therefore concludes that that scheme involves State resources within the meaning of Article 87(1) EC. The strengthening of the position of the undertakings concerned will affect trade between Member States.

19 Finally, in paragraph 3.3 of the … decision, the Commission examines the compatibility of the measure in question with the common market.

20 In conclusion, in paragraph 4 of the … decision, the Commission finds that the scheme in question constitutes State aid within the meaning of Article 87(1) EC, while adding that it is compatible with the common market in accordance with Article 87(3) of the EC Treaty … . The Commission requests the Netherlands authorities to provide it with an annual report concerning the implementation of the measure in question and to notify it in advance of any change in the conditions under which the aid is granted’.

3. In its defence the Netherlands states that the measure in question entered into force on 1 June 2005.

II – Forms of order sought before the Court of First Instance and the judgment under appeal

4. The Kingdom of the Netherlands, supported by the Federal Republic of Germany, claims that the Court should annul the decision, in so far as it finds that the measure in question constitutes State aid, and order the Commission to pay the costs. The Commission contends that the Court should declare the action inadmissible or, in the alternative, dismiss the action, and order the Kingdom of the Netherlands to pay the costs.

5. In the judgment under appeal, the Court of First Instance rejected the plea of inadmissibility raised by the Commission (paragraphs 37 to 49). As to the substance, it rejected the first submission in support of the first ground alleging infringement of Article 87 EC, by which the Netherlands claimed that there was no advantage financed through State resources (paragraphs 63 to 78), and accepted the second submission, by which the applicant State disputed the claim that the condition of selectivity had been fulfilled (paragraphs 84 to 101). Therefore, the Court of First Instance annulled the decision and ordered the Commission to pay the costs.

III – Procedure before the Court of Justice and forms of order sought

6. By application lodged with the Registry of the Court of Justice on 23 June 2008, the Commission lodged the appeal forming the subject‑matter of the present proceedings. In their respective replies, the Kingdom of the Netherlands and the Federal Republic of Germany lodged cross-appeals. By order of the President of the Court of 23 December 2008, the United Kingdom of Great Britain and Northern Ireland and the Republic of Slovenia were given leave to intervene in the present proceedings. By order of 8 May 2009, the French Republic was given leave to intervene subject to the conditions laid down in Article 93(7) of the Rules of Procedure of the Court of Justice. At the hearing of 14 October 2010 the agents of the Commission and of the Governments of the Netherlands, the Federal Republic of Germany and the French Republic presented oral argument.

7. In the appeal, the Commission asks the Court to set aside the judgment under appeal and declare the action at first instance inadmissible or, in the alternative, to set aside the judgment under appeal and dismiss the action at first instance. In both cases the Commission asks that the Netherlands be ordered to pay the costs of the proceedings at first instance and the appeal. In its reply to the cross-appeals lodged by the Netherlands and the Federal Republic of Germany, the Commission asks the Court to set aside the judgment under appeal and to declare the action at first instance inadmissible or, in the alternative, to dismiss the cross-appeals, set aside the judgment under appeal, and dismiss the action at first instance as unfounded.

8. The Kingdom of the Netherlands claims that the Court should dismiss the appeal or, in the alternative, should the Court grant the appeal, set aside the judgment under appeal, in so far as it rejects the plea alleging a lack of an advantage financed through State resources. In both cases, it asks that the Commission be ordered to pay the costs of the proceedings at first instance and the appeal.

9. The Federal Republic of Germany claims that the Court should dismiss the appeal and set aside the judgment under appeal or, in the alternative, should the Court consider the latter claim inadmissible, dismiss the appeal and, if it...