British Aerospace Public Ltd Company and Rover Group Holdings plc v Commission of the European Communities. (Aid granted by States) [1992] EUECJ C-294/90 (4 February 1992)

Judgment 1 By application lodged at the Court Registry on 24 September 1990, British Aerospace Public Limited Company (hereinafter referred to as "British Aerospace") and Rover Group Holdings plc ("Rover") brought an action under the second paragraph of Article 173 of the EEC Treaty for the partial annulment of a Commission Decision of 17 July 1990 (Official Journal 1991 C 21, p. 2), in so far as it requires the United Kingdom to recover 44.4 million of alleged State aid. 2 In the preamble to the contested decision the Commission refers to a previous decision, Decision 89/58/EEC of 13 July 1988, concerning aid provided by the United Kingdom Government to the Rover Group, an undertaking producing motor vehicles (Official Journal 1989 L 25, p. 92). By that decision the Commission authorized aid consisting of a capital contribution intended to absorb certain debts of the Rover Group in connection with its acquisition by British Aerospace. The aid was authorized on inter alia the following conditions: that the United Kingdom Government would not alter the proposed terms of sale and in particular those specifying that the acquisition price paid by British Aerospace would be 150 million and that British Aerospace would bear all future restructuring costs; that the United Kingdom Government would refrain from granting any further aid to Rover in the form of capital contributions or any other form of discretionary aid except for limited regional aid. 3 Following the publication in November 1989 of a report and a secret memorandum by the Comptroller and Auditor General of the United Kingdom National Audit Office, the Commission discovered that the United Kingdom Government had granted British Aerospace a number of financial concessions which were not covered by Decision 89/58. 4 The Commission took the view that the additional concessions constituted aid for the purposes of Article 92(1) of the Treaty and that they were incompatible with the common market since they had been granted in breach of Article 1 of Decision 89/58. The Commission therefore adopted the contested measure in which it decided: "that the additional 44.4 million aid granted in the context of the sale of [Rover] to [British Aerospace] constitutes illegal aid which was paid in breach of Decision 89/58/EEC and that [the United Kingdom authorities] are required to recover it from the beneficiaries (i.e. the 9.5 million payment to cover the purchase cost of minority shares and the 33.4 million benefit to [British Aerospace] which resulted from the deferment of the payment of the sales price) and 1.5 million from [Rover] (which it obtained to cover external advice costs linked to the sale)". 5 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the procedure and the pleas and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court. 6 The applicants plead a breach of Articles 92 and 93 of the Treaty, the existence of an error in the calculation of the amount to be recovered, failure to respect the principle of proportionality and failure to provide an adequate statement of reasons. 7 The applicants contend first that, if the Commission considered that the concessions granted to British Aerospace and to Rover constituted State aid incompatible with the common market, it should have instituted the procedure laid down in Article 93(2) of the Treaty and thereby given the parties concerned the opportunity to submit their comments. The Commission cannot, in the applicants' view, deny that the contested decision is independent of Decision 89/58, inasmuch as it characterizes the concessions as State aid, finds them incompatible with the common market, quantifies them and orders their recovery. 8 The Commission replies that the contested decision is not independent of Decision 89/58/EEC, which laid down a series of conditions for the approval of the aid which had been notified at that time by the United Kingdom and was directly enforceable. 9 In considering the merits of this plea it is necessary to bear in mind the system established by Article 93(2) of the Treaty and the powers conferred upon the Commission by that provision. 10 The first subparagraph of Article 93(2) makes the Commission responsible for implementing, subject to review by the Court, a special procedure involving the constant review and monitoring of aid which Member States intend to introduce (see the judgment in Case C-301/87 France v Commission [1990] ECR I-307 ). Any finding that aid is incompatible with the common market may be made only on completion of that procedure, during which the Commission is required inter alia to give notice to the parties concerned to submit their comments. 11 If a State does not comply with a Commission decision finding proposed aid to be incompatible with the common market or does not observe the conditions on which the Commission approved the aid, the Commission is entitled, under the second subparagraph of Article 93(2), to refer the matter directly to the Court of Justice by way of derogation from the provisions of Articles 169 and 170 of the Treaty. 12 It follows from the foregoing that, if the Commission considered that the United Kingdom had not complied with certain conditions laid down by Decision 89/58, it should have instituted proceedings against the United Kingdom directly before the Court by virtue of the second subparagraph of Article 93(2). 13 If the Commission considered that the United Kingdom had paid new aid which had not been examined under the procedure leading to the adoption of Decision 89/58, it was obliged to institute the special procedure provided for by the first subparagraph of Article 93(2) and to give notice to the parties concerned to submit their comments. 14 It is true that in its judgment in Case C-261/89 Italy v Commission [1991] ECR I-4437 (at paragraph 20) the Court held that, where in such circumstances the Commission examines the compatibility of State aid with the common market, it must take into account all relevant matters, including in appropriate cases the circumstances already considered in any previous decision and any obligations which that previous decision may have imposed on the Member State. However, such an examination must be made in accordance with the procedures laid down by the Treaty. 15 Consequently, without there being any need to consider the other pleas, the Commission Decision of 17 July 1990 must be annulled in so far as it requires the United Kingdom to recover 44.4 million of alleged State aid. Costs 16 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Commission has failed in its submissions, it must be ordered to pay the costs. On those grounds, THE COURT hereby: 1. Annuls the Commission Decision of 17 July 1990 in so far as it requires the United Kingdom to recover 44.4 million of alleged State aid; 2. Orders the Commission to pay the costs. © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII