Opinion of the Advocate-General
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Mr President,
Members of the Court,
1 . The essential question raised in this case is to what extent the obligation to recover an aid which had been granted by the national authorities to an undertaking in breach of the Treaty may be frustrated by the application of a rule of domestic law . In the context of the procedural autonomy which the Member States enjoy in the implementation of their Community obligations, the Government of the Federal Republic of Germany is relying on the principle of the protection of legitimate expectations, as it is understood in German domestic law, to justify the failure to implement the Commission' s decision which ordered it to recover the aid granted to an undertaking producing primary aluminium .
2 . It should be recalled that the aid in question was granted by the national authorities without prior notification which ipso facto makes it unlawful . What is more, the Commission considers that the aid is incompatible with the common market . Neither the German Government, to which the Commission' s decision was addressed, nor Alcan, which, indisputably, is directly and individually concerned by the decision, sought to have the decision annulled within the period prescribed in paragraph 3 of Article 173 of the Treaty . The argument based on the principle of the protection of legitimate expectations may be regarded as a submission relating to the validity of the decision and in that case, the defendant government is out of time and may no longer call the validity of the decision into question during this action . ( 1 ) The Court has consistently held that the regularity or the merits of such a decision may not be challenged during legal proceedings instituted under Article 93(2 ). However, even in those circumstances, the Court has allowed a government defending an action for failure to fulfil obligations to plead as its only defence "that it was absolutely impossible for it to implement the decision properly ". ( 2 ) The Court recently stated in its judgment of 7 June 1988 Commission v Hellenic Republic, that any financial difficulties which might be encountered by the recipients of the aid do not constitute such an impossibility . ( 3 ) However, it should be noted that in that case the Commission required only the cessation of the aid and not its recovery . ( 4 )
3 . The legal position appears to me to be clear . The German Government should have implemented the Commission' s decision within the prescribed time period and required Alcan to repay the aid . Alcan could then have either brought an action against the national authorities for misuse of power, challenging the order for repayment on the grounds of its legitimate expectation that the aid had been properly granted, or an action seeking redress for any damage suffered because of the conduct of the authorities in improperly granting aid which had exposed it to the risk of an order for its repayment . It would then be for the national court to decide, in the light of the principles of Community law and the Court' s case-law and, if necessary, a preliminary ruling by the Court, to assess whether the application of such a principle of domestic law was compatible with the requirements of Community law in the circumstances of the case .
4 . It would be somewhat remarkable to free a government from its obligation to implement a decision which is "binding in its entirety upon those to whom it is addressed" ( 5 ) on the grounds of the need to protect the legitimate expectations of the person who must comply with the ensuing national decision .
5 . If the German argument were to be regarded as "a valid excuse", the only question to be dealt with would be whether the German Government' s obligation to recover the aid in question may run counter to the protection due to any legitimate expectation of the recipient undertaking .
6 . With the appropriate prudence and taking the necessary caution in its formulation, the Court recognizes that, as Community law stands and in the absence of Community rules on the matter, national law is applicable to legal actions involving Community law and to the implementation by the national authorities of obligations imposed by Community law . But this procedural autonomy is not absolute . It is limited by certain essential mandatory rules of the Community legal system .
7 . These mandatory rules, which are capable of modifying or even excluding the application of rules of domestic law, include the requirement that the exercise of a right or the implementation of an obligation flowing from Community law, in this case the obligation to recover sums improperly paid, should not be made virtually impossible .
8 . The principle of domestic law concerning the protection of legitimate expectations relied on by the defendant government also forms part of the Community legal order, but its meaning is not necessarily identical . In this case the reference to national procedural law is the reason for Germany' s reliance on the principle of protection of legitimate expectations . It must therefore be examined to what extent this principle, as formulated in German law, may frustrate the obligation to recover the aid in question .
9 . Two judgments of the Court appear to me particularly relevant in this respect . In the first place, the Court stated in the Ferwerda judgment that
"in proceedings concerning the recovery by the authorities of the Member States of sums paid in error as export refunds to traders",
Community law does not preclude
"the application ... of a principle of legal certainty based on national law whereby financial benefits granted in error by the public authorities may not be recovered if the error committed was not due to incorrect information supplied by the beneficiary or if such error, despite the fact that the information supplied was incorrect though provided in good faith, could easily have been avoided ". ( 6 )
Secondly, in the Deutsche Milchkontor judgment, ( 7 ) on which the German Government places particular reliance, the Court reiterated that
"the principles of the protection of legitimate expectation and assurance of legal certainty are part of the legal order of the Community",
and stated that
"the fact that national legislation provides for the same principles to be observed in a matter such as the recovery of unduly paid Community aids cannot, therefore, be considered contrary to that same legal order ". ( 8 )
The Court concluded that, in principle, if the same rules are applied in the recovery of unduly paid Community or national aids, they cannot be considered to be contrary to, or to undermine, Community law, adding that :
"This applies particularly to grounds for excluding recovery where these are related to the administration' s own conduct and it can therefore prevent them from occurring ". ( 9 )
10 . However, it should be noted that the San Giorgio judgment, ( 10 ) albeit delivered in a different context and with regard to a particular rule of evidence of national law, adds a major rider which, to my mind, is of general application . The mandatory rule that national law may not make virtually impossible the exercise of a right flowing from a Community rule takes precedence over the requirement that there should be no discrimination between action based on the failure to observe Community provisions and actions based exclusively on provisions of domestic law .
11 . As far as the Ferwerda and Milchkontor judgments are concerned, it should be noted at the outset that those two cases concerned Community funds paid in error and not, as in this case, a national aid subject to the obligation of prior notification . It should also be noted that those two judgments were handed down in the context of reference for a preliminary ruling concerning applications to recover the amounts unduly paid . Those circumstances may have a bearing on the approach which it is appropriate to adopt . It should also be noted that in the Milchkontor case the German Government had argued that domestic law was not applicable in a case involving repayment of Community funds where there was an unlimited duty to repay . ( 11 ) Finally, it should be pointed out that the Court declared in the Ferwerda judgment that
"no consideration whatever which under one of the legal systems of the Member States is or may be based on a principle of legal certainty can in all cases constitute a defence against a claim for the recovery of Community financial benefits wrongly granted . It must in each case be considered whether such application does not jeopardize the very basis of the rule providing for such recovery and whether it does not result in practice in frustrating such recovery ". ( 12 )
12 . That is, it seems to me, a statement of fundamental importance . Certainly one can consider the individual case of Alcan, the recipient of the disputed aid, to determine whether, for reasons particular to it, it should have made certain that the Community procedure concerning State aids had been followed before using the aid in question . It is significant to note, as the Commission stated without being contradicted, that Alcan is well aware of the Community provisions regarding aids since it has, on a number of occasions, lodged complaints concerning aids granted to its competitors .
13 . However, I suggest that the Court should not examine the individual situation of the recipient of the State aid granted in breach of the rules of the Treaty but rather should adopt an overall approach .
14 . To my mind, the essential point is that an aid granted without prior notification is in itself illegal and may ipso facto be subject to recovery proceedings . The Court has held that the obligation to notify any proposed aid is of particular importance . Did the Court not declare, when for the first time, in the context of an action based on Article 93(2 ), the Commission requested interim measures under Article 186 of the Treaty, that
"disregard of the provisions of the final sentence of Article 93, which is the means of safeguarding the machinery for review laid down by that article, interferes with the proper operation of that machinery to such an extent as to be capable by itself of giving rise to the application of Article 186"? ( 13 )
15 . Furthermore, in a series of judgments given on 11 December 1973 the Court recognised that the obligation of prior notification had direct effect . ( 14 ) Finally, it should be recalled that in the judgment in the case of Commission v Federal Republic of Germany concerning aid for the redevelopment of mining regions ( 15 ) the Court stated that
"the Commission is competent, when it has found that aid is incompatible with the common market, to decide that the State concerned must abolish or alter it" ( 16 )
and that
"it is a matter for the Community authorities whose task it is to ensure that the requirements of the Treaty are observed to determine the extent to which the obligation of the Member State concerned may be specified in the reasoned opinions or decisions delivered under Articles 169 and 93(2 ) respectively and in applications addressed to the Court ". ( 17 )
16 . In a further development of its case-law, the Court declared in the Deufil judgment, ( 18 ) with respect to this "specification ":
"According to Article 93(2 ), the Commission is to decide that the State concerned is to abolish or alter the aid if it finds that it is not compatible with the common market . Where, contrary to the provisions of Article 93(3 ), the proposed aid has already been granted, that decision may take the form of an order to the national authorities to recover the aid ". ( 19 )
17 . Apart from those decisions, the Commission is making efforts to ensure that Community law concerning State aids is observed . Furthermore, the Commission Communication of 1983 informs "potential recipients of State aid of the risk attaching to any aid granted them illegally, in that any recipient of an aid granted illegally, i.e . without the Commission having reached a final decision, may have to refund the aid ". ( 20 ) This warning is an integral part of the position announced by the Commission in its recent reports on competition policy . In its Fifteenth Report the Commission stated that "it has instructed its services automatically to open the Article 93(2 ) procedure in cases where the Member State does not reply to a request for notification within a limited time" and that "it is examining whether non-notified aids which have been paid out, or aids paid before the Commission has taken its final decision on them and which are therefore illegal on procedural grounds irrespective of whether or not on examination they are found to be compatible with the common market, should automatically be subject to a demand for reimbursement ". ( 21 ) In its Sixteenth Report the Commission explains that it has "continued its policy of systematically ordering the recovery of aid granted illegally by Member States and found to be incompatible with the common market and reaffirmed its intention of gradually applying the same principle also to aid that is illegal only for procedural reasons, i.e . disregard by Member States of the obligation to give prior notification of aid proposals ". ( 22 ) This policy has been regularly followed, as the Seventeenth Report of the Commission on Competition Policy demonstrates . ( 23 )
18 . In the light of the fundamental nature of the obligation to notify a new aid provided for in Article 93(3 ) of the Treaty and because of the direct effect of that provision, it may be argued that any undertaking benefiting from State aids must be aware that prior notification of such an aid must be given to the Commission and that in the absence of notification repayment of the aid may be required . Thus, an aid which has not been notified cannot give the recipient of that aid any legitimate expectations . Recipients are under a duty to be prudent, vigilant and circumspect . Failure by recipients to investigate whether the aid in question has been notified rules out any valid claim to any legitimate expectations .
19 . I would therefore propose that the Court should
( 1 ) declare that, by not implementing the Commission decision of 14 December 1985 ( 86/60/EEC ) on the aid which the Land of Rheinland-Pfalz has provided to an undertaking producing primary aluminium, the Federal Republic of Germany has failed to fulfil its obligations under the EEC Treaty;
( 2 ) order the Federal Republic of Germany to pay the costs of the case .
(*) Original language : French .
( 1 ) Judgment of 15 November 1983 in Case 52/83 Commission v France (( 1983 )) ECR 3707, paragraph 10 of the decision .
( 2 ) Judgment of 15 January 1986 in Case 52/84 Commission v Belgium (( 1986 )) ECR 89, paragraph 14 of the decision .
( 3 ) Case 63/87 (( 1988 )) ECR , paragraph 14 of the decision .
( 4 ) Commission Decision 86/187/EEC of 13 November 1985, Official Journal L 136, 23.5.1986, p . 61 .
( 5 ) Article 189 of the EEC Treaty .
( 6 ) Judgment of 5 March 1980 in Case 265/78 (( 1980 )) ECR 617, paragraph 21 of the decision .
( 7 ) Judgment of 21 September 1983 in Joined Cases 205 to 215/82 (( 1983 )) ECR 2633 .
( 8 ) Paragraph 30 of the decision .
( 9 ) Paragraph 31 of the decision .
( 10 ) Judgment of 9 November 1983 in Case 199/82 (( 1983 )) ECR 3595 .
( 11 ) At p . 2656 .
( 12 ) Paragraph 15 of the decision .
( 13 ) Cases 31/77 R and 53/77 R Commission v United Kingdom Order of the Court of 21 May 1977 (( 1977 )) ECR 921, paragraph 20 .
( 14 ) Case 120/73 Gebrueder Lorenz (( 1973 )) ECR 1471; Case 121/73 Markmann (( 1973 )) ECR 1485; Case 122/73 Nordsee Deutsche Hochseefischerei (( 1973 )) ECR 1511; Case 141/73 Fritz Lohrey (( 1973 )) ECR 1527 .
( 15 ) Judgment of 12 July 1973 in Case 70/72 (( 1973 )) ECR 813 .
( 16 ) Paragraph 13 of the decision .
( 17 ) Paragraph 16 of the decision .
( 18 ) Judgment of 24 February 1987 in Case 310/85 Deufil v Commission (( 1987 )) ECR 901 .
( 19 ) Paragraph 24 of the decision .
( 20 ) OJ C 318, 24.11.1983, p . 3 .
( 21 ) Commission of the European Communities, Fifteenth Report on Competition Policy, pp . 139 and 140, paragraph 171 .
( 22 ) Commission of the European Communities, Sixteenth Report on Competition Policy, p . 135, paragraph 203 .
( 23 ) Commission of the European Communities, COM(88 ) 232 final, Brussels, 26 May 1988, p . 169 et seq ., C I 1 .
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