Case T-243/09, Fedecom v Commission

Court further defines concept op "state resources".

Measures financed by both State contributions and voluntary contributions from professionals in a sector can constitute State aid within the meaning of Article 107(1) TFEU.

>> Between 1992 and 2002, French organisations of fruit and vegetable producers received aid paid by an operational fund in an amount estimated by the Commission at over €330 million. The fund was managed by approved economic agricultural committees, which consisted, at the regional level, of farmers’ organisations. Between 30% and 50% of the financing of the fund came from farmers’ voluntary contributions. Farmers who did not pay the contribution could not receive aid. The remainder of the financing of the fund came from a public industrial and commercial institution under the supervision of the French State, called Oniflhor.

By its decision published in the Official Journal 22 September 2005, the Commission requested interested parties to submit their observations on the measures at issue carried out as part of the contingency plans. The Commission received the observations of the French authorities by letter of 4 October 2005. In addition, it received a letter of 20 October 2005 from the Fédération de l’organisation économique fruits et légumes (Fedecom), an interested third party, describing in particular the composition, financing methods and role of the approved agricultural economic committees in the award of the aid at issue, which was sent to the French authorities on 1 December 2005.

By decision of 28 January 2009, the Commission held that the aid in question constituted unlawful State aid – as it had not been notified to the Commission – that was incompatible with the common market. It therefore ordered that the aid be recovered by France, with interest, from its beneficiaries.

France, the Fédération de l'organisation économique fruits et légumes (Fedecom) and Producteurs de légumes de France had brought actions seeking the annulment of that decision before the General Court, alleging inter alia an error of law in that the Commission categorised measures financed by voluntary contributions from the sector concerned as State aid within the meaning of Art. 107(1) EC.

>> Admissibility

As a preliminary point, the Commission argued that the French Republic could not challenge before the General Court comments made by Fedecom in its observations of 20 October 2005 concerning the respective roles of the professionals and Oniflhor in defining the amount of the sectoral contribution and the disputed measures and in the implementation of those measures.

The Commission submitted that those arguments were inadmissible, since the French Republic raised no objections to the comments made by Fedecom in its observations of 20 October 2005 during the formal investigation procedure.

The Court however reiterated that a Member State which had granted or sought to be allowed to grant aid under one of the exceptions provided for in the Treaty rules had a duty to cooperate with the Commission in the proceeding in which it took part, pursuant to which it must in particular provided all the information necessary to enable the Commission to verify that the conditions for the derogation sought were fulfilled (Case C364/90 Italy v Commission [1993]; Joined Cases T132/96 and T143/96 Freistaat Sachsen and Others v Commission [1999]; and Case T25/07 Iride and Iride Energia v Commission [2009]).

The Court held that the legality of a decision concerning State aid fell to be assessed in the light of the information available to the Commission at the time when the decision was adopted (Case C197/99 Belgium v Commission [2003].

The Court thus concluded that since the concept of State aid must be applied to an objective situation appraised on the date on which the Commission took its decision, it was the appraisals carried out on that date which must be taken into account in the conduct of the review referred to above. Thus, where there was no information to the contrary from interested parties, the Commission was empowered to take as its basis the factual elements it had at the time it Adopted its final decision, even if they were incorrect, provided that the factual elements in question were the subject of an information injunction issued by the Commission to the Member State to provide it with the necessary information (Case T318/00 Freistaat Thuringen v Commission [2005]).

The Court held that in the present case, it was clear from the contested decision that Fedecom submitted its observations on 20 October 2005 as an interested third party, describing, inter alia, the composition, payment methods and the role of the approved economic agricultural committees in the allocation of the aid in question, and that those observations were sent to the French authorities on 1 December 2005 with the information that they had a period of one month in which to submit their own observations. The French authorities did not challenge those observations in their letter of 28 December 2005, by which they also gave permission for their letters of 26 December 2002 and 22 July 2003 to be sent to Fedecom and made a correction as regards the amount of aid paid in 2002.

The Court held that it followed that the French Republic could not for the first time at the judicial stage challenge the contents of factual observations made by an interested third party during the administrative procedure, when in fact the observations had been sent to it. The mere fact that it did not react to those facts since it shared the conclusions reached by Fedecom was not sufficient for it to avoid the principle of effectiveness of the administrative procedure.

>> Concept of State resources

The Court subsequently reiterated that under Art. 87(1) EC (now Article 107(1) TFEU), any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, in so far as it affected trade between Member States, was incompatible with the common market. For advantages to be capable of being categorised as aid within the meaning of that Article , they must, first, be granted directly or indirectly through State resources, and, second, be imputable to the State (Case C303/88 Italy v Commission [1991]; Case C482/99 France v Commission [2002]; Case C-126/01 GEMO [2003]).

The Court furthermore held that it followed from the wording of Art. 87(1) EC that only advantages granted directly or indirectly through State resources were to be considered aid. The distinction made in that provision between “aid granted by a Member State” and aid granted “through State resources” did not signify that all advantages granted by a State, whether financed through State resources or not, constituted aid, but was intended merely to bring within that definition both advantages which were granted directly by the State and those granted by a public or private body designated or established by the State (Case C379/98 PreussenElektra [2001]).

The Court furthermore reiterated that Article 87(1) EC covered all the financial means by which the public authorities might actually supported undertakings, irrespective of whether or not those means were permanent asset of the public sector. Consequently, even though the sums involved in the measure at issue were not held permanently by the public authorities, the fact that they remained constantly under public control, and therefore available to the competent national authorities, was sufficient for them to be categorised as State resources (see, to that effect, Case C83/98 P France v Ladbroke Racing and Commission [2000] ). Similarly, the originally private nature of the resources did not prevent them being regarded as State resources within the meaning of Art. 87(1) EC (see, to that effect, Case T358/94 Air France v Commission [1996]).

In accordance with the case-law, the mere fact that a subsidy scheme benefiting certain economic operators in a given sector was wholly or partially financed by contributions imposed by the public authority and levied on the undertakings concerned was not sufficient to take away from that scheme its status of aid granted by the State within the meaning of Art. 87(1) EC ( Case 173/73 Italy v Commission [1974]).

Conversely, funds collected by a public body by way of contributions taken only from the economic operators who benefit from the measures in question but which had never been made available to the national authorities and which were used to finance specific actions by those operators alone, could not be categorise as State resources (Case C345/02 Pearle and Others [2004]).

Thus, the relevant criterion in order to assess whether the resources were public, whatever their initial origin, was that of the degree of intervention of the public authority in the definition of the measures in question and their methods of financing.

The Court held that the mere fact that the contributions of the economic operators concerned to the partial financing of the measures in question were only voluntary and not obligatory was not sufficient to call that principle into question. The degree of intervention of the public authority as regards those contributions might be great, even where those contributions were not obligatory.

The Court thus concluded that in order to ascertain whether the Commission erred in law by categorising the disputed measures as state aid within the meaning of Art. 87(1), the role of the public authority in defining those measures and their methods of financing must be examined.

The Court held that as regards the assessment of the role of the public authority in the definition of the disputed measures, it was for the General Court to make an overall assessment, without it being possible to draw a distinction according to their method of financing, since the public and private contributions had been put together and mixed in an operational fund.

The Court pointed out that it was Oniflhor which decided unilaterally on the measures to be financed by the contingency plans and how they should be implemented and that although the approved economic agricultural committees had the task of managing the operational funds intended to finance those measures, they did not, however, had any discretion in their application.

The Court argued that the definition of the disputed measures and how they were financed was carried out by Oniflhor, a public industrial and commercial institution under the supervision of the State. Conversely, the beneficiaries of the measures had the power only to participate or not in the system thus defined by Oniflhor, by agreeing or refusing to pay the sectoral contribution which Oniflhor fixed. Accordingly, according to the Court, the disputed measures constituted State aid within the meaning of Art. 87(1) EC.