Commission of the European Communities v Hellenic Republic (C-415/03)

Contents

Judgment of the Court (Second Chamber)12 May 2005^noteIn Case C-415/03,ACTION under Article 88(2) EC for failure to fulfil obligations, brought on 25 September 2003,Commission of the European Communities, represented by D. Triantafyllou and J. Buendia Sierra, acting as Agents, with an address for service in Luxembourg,vHellenic Republic, represented by A. Samoni-Rantou, and by P. Mylonopoulos, F. Spathopoulos and P. Anestis, acting as Agents, with an address for service in Luxembourg,THE COURT (Second Chamber),composed of C.W.A. Timmermans, President of the Chamber, R. Silva de Lapuerta (Rapporteur), R. Schintgen, G. Arestis and J. Klucka, Judges,Advocate General: L.A. Geelhoed,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 8 December 2004,after hearing the Opinion of the Advocate General at the sitting on 1 February 2005,gives the following

Judgment

1By its action, the Commission of the European Communities asks the Court to declare that, by failing to take within the prescribed period all the measures necessary for repayment of the aid found to be unlawful and incompatible with the common market — except that relating to the contributions to the national social security institution (‘the IKA’) —, in accordance with Article 3 of Commission Decision 2003/372/EC of 11 December 2002 on aid granted by Greece to Olympic Airways (OJ 2003 L 132, p. 1), or, in any event, by failing to inform it of the measures taken pursuant to Article 4 of that decision, the Hellenic Republic has failed to fulfil its obligations under Articles 3 and 4 of that decision and the EC Treaty.

Background to the dispute

2In 1996 the Commission initiated against the Hellenic Republic the procedure laid down in Article 93(2) of the EC Treaty (now Article 88(2) EC), which led to the adoption of Commission Decision 1999/332/EC of 14 August 1998 on aid granted by Greece to Olympic Airways (OJ 1999 L 128, p. 1; ‘the approval decision’) concerning guarantees, the reduction and conversion to equity of debts approved in 1994, and also other guarantees and capital injections totalling GRD 40.8 billion, to be paid in three instalments of GRD 19, 14 and 7.8 billion. The grant of that aid was coupled with a revised restructuring plan for the period from 1998 to 2002 and was subject to special conditions.

3Following further complaints about the grant of aid to Olympic Airways, the Commission, by decision of 6 March 2002, initiated the procedure laid down in Article 88(2) EC, on the ground that the company's restructuring plan had not been implemented and that some of the conditions laid down by the approval decision had not been fulfilled. That decision required the Hellenic Republic to provide the Commission with information pursuant to Article 10 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 88 of the EC Treaty (OJ 1999 L 83, p. 1).

4On 9 August 2002 the Commission addressed to the Hellenic Republic a further injunction to provide the information previously requested, requiring in particular the production by the latter of the accounts and figures relating to the payment of operating costs to the State. The replies given by the Greek authorities on this subject were deemed insufficient by the Commission.

5On 11 December 2002 the Commission approved Decision 2003/372, which is based in particular on the findings that most of the objectives of the Olympic Airways restructuring plan had not been attained, that the conditions imposed by the approval decision had not been fully met and that the approval decision was wrongly implemented. In addition, the Commission refers to the existence of new operating aid, which consists, in essence, in the toleration by the Greek State of the nonpayment, or deferment of the payment dates, of social security contributions for October to December 2001, value added tax (‘VAT’) on fuel and spare parts, rent payable to airports for the period 1998 to 2001, airport charges and a tax imposed on passengers on departure from Greek airports, called ‘spatosimo’.

6The operative part of Decision 2003/372 is worded as follows:‘Article 1The restructuring aid granted by Greece to Olympic Airways in the form of:(a) loan guarantees extended to the company until 7 October 1994 pursuant to Article 6 of Greek Law No 96/75 of 26 June 1975;(b) new loan guarantees totalling USD 378 million for loans to be contracted before 31 March 2001 for the purchase of new aircraft and for investment necessary for the relocation of Olympic Airways to the new airport in Spata;(c) easing of the undertakings debt burden by GRD 427 billion;(d) conversion of GRD 64 billion of the undertakings debt to equity;(e) a capital injection of GRD 54 billion reduced to GRD 40.8 billion in three instalments of GRD 19, 14 and 7.8 billion in 1995, 1998 and 1999 respectively,is considered to be incompatible with the common market within the meaning of Article 87(1) of the Treaty, as the following conditions, under which the initial authorisation of the aid has been granted, are no longer met:(a) the full implementation of the restructuring plan aimed at the achievement of the long-term viability of the company;(b) the observance of 24 specific undertakings attached to the authorisation of the aid, and(c) the regular monitoring of the implementation of the restructuring aid.Article 2The State aid which Greece has implemented in the form of tolerance of a persistent non-payment of social security obligations, of VAT on fuel and spare parts payable by Olympic Aviation, of rentals for different airports, of airport charges payable to Athens International Airport and other airports, of Spatosimo tax is incompatible with the common market.Article 31. Greece shall take the necessary measures to recover from the beneficiary the aid of GRD 14 billion (EUR 41 million) referred to in Article 1 which is not compatible with the Treaty and the aid referred to in Article 2 and unlawfully made available to the beneficiary.2. Recovery shall be effected without delay and in accordance with the procedures of national law provided they allow the immediate and effective execution of the decision. The aid to be recovered shall include interest from the date on which the aid was at the disposal of the beneficiary until the date of its recovery. Interest shall be calculated on the basis of the reference rate used for calculating the grant-equivalent of regional aid.Article 4Greece shall inform the Commission within a period of two months from the date of notification of the present Decision of the measures to be taken to comply with it....’

7On 11 February 2003 the Greek Government informed the Commission that it had instructed an independent expert to ascertain whether Olympic Airways had debts to the State outstanding, and whether it had received preferential treatment. On the basis of the information thus obtained, the Government stated that it would not implement Articles 3 and 4 of Decision 2003/372.

8On 6 March 2003 the Commission informed the Greek Government that it was required to comply with Decision 2003/372. On 12 May 2003 the Commission sent the Government a notice with additional explanations as to the quantification of the further aid and requesting detailed information on the arrangements for the repayment of EUR 41 million, representing the second instalment of the injection of capital, together with proof of payment by Olympic Airways of the debts referred to in Article 2 of the aforementioned decision.

9The Greek authorities replied by letter of 26 June 2003. With regard to the repayment of the sum of EUR 41 million, they stated first that they intended to take a decision to recover that aid before the end of August 2003 and, second, that the legal effects of Decision 2003/372 as well as the procedure which the Commission had followed in adopting it were being ‘examined’. They also noted that Olympic Airways was about to settle its debt of EUR 2.46 million relating to rents due to Greek airports.

10With regard to the debt totalling EUR 27.4 million owed to the IKA, the Greek authorities referred to an agreement reached between Olympic Airways and the IKA, as well as to a payment to the latter of EUR 5.28 million, so that there was no longer any question of ‘forbearance in relation to a debt’ for the benefit of Olympic Airways.

11As regards the debt of EUR 33.9 million in respect of airport charges owed to Spata airport, the Greek authorities claimed that they had no powers because of the mode of administration of that airport. However, they referred to a payment of EUR 4.83 million made on the basis of an agreement reached in that connection, and produced proof of payment of that sum by Olympic Airways. The agreement also provides for the debt to be settled in 12 quarterly payments. The authorities stated that the total amount of the debt will be repaid by April 2005.

12As for the debt of EUR 61 million, which corresponds to the ‘spatosimo’ tax, the Greek authorities argued that a payment of EUR 22.8 million had been made on the basis of agreements reached in that connection. They produced supporting documents for that amount and for other payments. Regarding the debt of EUR 28.9 million owed to ministries and public institutions, the Greek authorities pleaded that they had no details of the repayment liabilities, as they had no specific particulars of the air tickets issued to employees of those ministries.

13Since it was not satisfied with the explanations provided by the Hellenic Republic, the Commission brought the present action.

The action

Arguments of the parties

14With regard to the second instalment of the capital injection of EUR 41 million, which had been approved in 1998, the Commission notes that the Greek authorities have not recovered this amount from Olympic Airways.

15The Commission submits that the Greek authorities have not pleaded that it is absolutely impossible to implement Decision 2003/372. The authorities have merely issued a demand for payment and notification thereof, and made a declaration according to which those measures have become the subject of an objection together with an application for a stay of enforcement of the demand, which means that there has been no restitution.

16The Commission notes that, in spite of the adoption of Decision 2003/372, the measures taken have permitted the transfer, without any consideration, of not only the personnel of Olympic Airways, but also its most profitable assets, free of all the company's debts, to a new company called ‘Olympic Airlines’, and have made it impossible to recover the former company's debts from the new firm. The latter, to which the liabilities of Olympic Airways were not transferred, is therefore placed under a regime of special protection with regard to the creditors of the former.

17According to the Commission, by that transfer, the Greek authorities have prevented the recovery of the aid, since Olympic Airways mainly retains the liabilities without having assets capable of discharging the corresponding debts.

18With regard to the airport charges owed, the Commission argues that the schedule for payment of those charges constitutes a new financial facility and an unauthorised postponement of the implementation of Decision 2003/372. It adds that the schedule has furthermore not been complied with. Indeed, the first payment was made five months late and represented only part of the sum due. In addition, the amount paid in June 2003 did not correspond to the four quarterly payments which were due by April 2003.

19According to the Commission, it has been given no information about the payment of VAT on fuel and spare parts.

20With regard to the ‘spatosimo’ tax, the Commission claims that the grant of facilities extending over a further four years for the settlement of that tax gives Olympic Airways a further financial benefit and exceeds the parameters of the implementation of Decision 2003/372 within the time-limits laid down therein.

21The Commission emphasises that, apart from rare exceptions in relation to certain amounts, the majority of the aid due to be repaid remains in the possession of the beneficiary company. Furthermore, potential legal difficulties, such as those relating to the entry of debts in the corresponding budget or to the requirements of the State revenue code, cannot justify an absolute inability to implement Decision 2003/372.

22Lastly, the Commission rejects the argument concerning the forbearance which a private investor would have shown, faced with persistent non-payment of the sums in issue. Applying that test and taking account of the many aid payments made in the last 10 years, Decision 2003/372 rightly considered that a private creditor would not have tolerated such persistent non-payment of the debts in issue.

23As a preliminary point, the Greek Government considers that the matters raised by the Commission, in relation to the transfer of not only the personnel but also the most profitable assets of the former company Olympic Airways to the new company Olympic Airlines, constitute an inadmissible argument in the context of the present proceedings, because of the examination procedure initiated by a decision of the Commission of 16 March 2004, which relates to the same operation.

24As for Olympic Airways' debt to the State of EUR 41 million, the Greek Government considers that it has complied with Article 3 of Decision 2003/372. Pursuant to that decision, the competent tax authority issued a document confirming the debt, plus interest. That document constituted the writ of execution needed for the recovery of the sum due, so that the Greek authorities complied with the requirements of the decision by implementing all the means available under the national legal system for recovering that sum.

25So far as the other financial interventions are concerned, the Greek Government argues that Decision 2003/372 does not specify whether the sums referred to therein are definitive as to the amount of State aid to be recovered and that, as far as payments or facilities are concerned, that decision also does not identify expressly and clearly the amounts concerned.

26The Greek Government notes that the recovery of the sums which the Commission regards as State aid in favour of Olympic Airways must be carried out in accordance with the national provisions relating to the procedure for recovering public revenue. According to those provisions, the recovery from individuals and undertakings of debts owed to the State requires that the sums due have first been established precisely.

27The Government argues that Article 2 of Decision 2003/372 does not state the amount of the sums corresponding to the further State aid paid to Olympic Airways which has been described as incompatible with the common market. As regards the detail of those sums, it appears only in the grounds for the decision, in a fragmentary and unclear manner, yet without it being specified whether those sums constitute the definitive amount of State aid to be recovered.

28In any event, according to the Greek Government, the various sums which appear in the accounts of Olympic Airways as the company's debts and charges do not fall within the concept of aid. As a result, determining State aid in cases of outstanding and unrecovered debts requires an assessment of the actual amount of the benefit resulting from a possible toleration of non-payment.

29According to the Greek Government the rents due to Greek airports are the subject of a procedure for a declaration by the tax authority so that the period for recovery may begin. The VAT relating to spare parts and fuel has to be paid, together with statutory penalties and increases, on the basis of the VAT return for 2003.

30As for the charges owed to Spata Airport, the Greek Government claims that it does not have the power to order that the sum concerned be recovered from Olympic Airways. Spata Airport is a company established under private law and, although the State controls 55% of its capital, it is subject to the legal framework laid down in the company's articles of association and in the development agreement for that airport. According to that legal framework, the management of that company is solely responsible for decisions relating to the settlement of charges due and to the conclusion of debt settlement agreements.

31So far as the so-called ‘spatosimo’ tax is concerned, the Greek Government refers to a certain number of payments as well as to a debt settlement agreement.

Findings of the Court

32With regard to the obligation set out in Article 3(1) of Decision 2003/372 concerning the recovery from the beneficiary company of EUR 41 million, and taking into account the reservations expressed by the Hellenic Republic concerning the admissibility of the Commissions argument that the transfer of not only the personnel, but also the most profitable assets of the company Olympic Airways to the new company Olympic Airlines made the recovery of the aid granted more difficult, it must be stressed that, as the Advocate General rightly states in points 27 and 28 of his Opinion, the fact that that operation is the subject of another examination as to its nature as State aid is irrelevant to the issue whether such an operation constitutes an obstacle to the recovery of aid that was granted earlier. In the context of the present proceedings, the only issue is that of determining whether this transfer creates obstacles to the implementation of the aforementioned decision.

33On that point, it must be noted that, as shown by the information given by the Commission which is not disputed by the Greek Government, the operation in issue transferred all the assets of the company Olympic Airways, free of all debts, to the new company Olympic Airlines. It must be added that that operation was structured in such a way as to make it impossible, under national law, to recover the debts of the former company Olympic Airways from the new company Olympic Airlines.

34That being the case, the operation created an obstacle to the effective implementation of Decision 2003/372 and to the recovery of the aid by means of which the Greek State had supported the commercial activities of that company. The purpose of that decision, which aims to restore undistorted competition in the civil aviation sector, was thus seriously compromised.

35It must be added that the action taken by the Greek authorities, that is to say, the adoption of a decision to proceed with recovery of Olympic Airways' debt of EUR 41 million, had no real effect with regard to the actual reimbursement of that sum by the company. Furthermore, the Greek Government did not provide any explanation as to why it might be absolutely impossible to proceed with the recovery of that debt. According to settled case-law, the only defence available to a Member State in opposing an application by the Commission under Article 88(2) EC for a declaration that it has failed to fulfil its Treaty obligations is to plead that it was absolutely impossible for it properly to implement the decision ordering recovery (see, in particular, Case C-280/95 Commission v Italy [1998] ECR I-259, paragraph 13, and Case C-378/98 Commission v Belgium [2001] ECR I-5107, paragraph 30).

36In those circumstances, it must be declared that the Hellenic Republic has failed to fulfil its obligation to recover the amount referred to in Article 3(1) of Decision 2003/372.

37So far as concerns the obligation to recover the other amounts of aid declared incompatible with the common market, referred to in Article 2 of Decision 2003/372, it must be emphasised at the outset that the various kinds of payments concerned as well as their technical features have been detailed in points 206 to 208 of the grounds of the decision. They are, in particular, airport charges, payment obligations in relation to VAT, contractual obligations to pay rent to the airports, as well as taxes, the non-payment or deferred payment of which was tolerated by the Greek authorities.

38As for the argument of the Hellenic Republic in relation to the absence of a financial benefit as a result of the forbearance which a private investor would have shown towards the persistent non-payment of certain sums, it must be noted that that argument calls into question the lawfulness of Decision 2003/372. In the context of the present action, which concerns the failure to implement a decision on State aid which has not been referred to the Court by the Member State to which it is addressed, the latter is not justified in challenging the lawfulness of such a decision (see, in particular, Case C-404/97 Commission v Portugal [2000] ECR I-4897, paragraph 34, and Case C-261/99 Commission v France [2001] ECR I-2537, paragraph 18). Consequently, the classification in Decision 2003/372 of the persistent non-payment of the various debts of Olympic Airways as State aid cannot be called into question in the context of the present proceedings.

39As regards the argument of the Hellenic Republic that, as far as the various kinds of payments referred to in Article 2 of Decision 2003/372 are concerned, the decision cannot be implemented because of the absence of precise information about the sums to be recovered, it should be observed that, according to the case-law of the Court, no provision of Community law requires the Commission, when ordering the recovery of aid declared incompatible with the common market, to fix the exact amount of the aid to be recovered. It is sufficient for the Commission's decision to include information enabling the recipient to work out himself, without overmuch difficulty, that amount (see, in particular, Case C-480/98 Spain v Commission [2000] ECR I-8717, paragraph 25).

40The Commission was therefore able legitimately to confine itself to declaring that there is an obligation to repay the aid in question and leave it to the national authorities to calculate the exact amounts to be repaid.

41It must be added that, according to the settled case-law of the Court, whereby the operative part of a decision on State aid is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption (see, in particular, Case C-355/95 P TWD v Commission [1997] ECR I-2549, paragraph 21), the amounts to be repaid pursuant to Decision 2003/372 can be established by reading Article 2 in conjunction with points 206 to 208 of the grounds thereof.

42With regard to the argument of the Hellenic Republic that the implementation of Decision 2003/372 has encountered a certain number of national difficulties, it should be observed that, in such a situation, the Commission and the Member State concerned must respect the principle underlying Article 10 EC, which imposes a duty of genuine cooperation on the Member States and the Community institutions, and must work together in good faith with a view to overcoming difficulties whilst fully observing the Treaty provisions, and in particular the provisions on State aid (see Case C-348/93 Commission v Italy [1995] ECR I-673, paragraph 17, and Commission v France, cited above, paragraph 24). That has not happened in this case.

43It must be added that the Hellenic Republic has also not pleaded the absolute impossibility of proceeding with the diligent performance of its obligations under Articles 2 and 3 of Decision 2003/372. It is apparent from the settled case-law of the Court that the condition that it be absolutely impossible to implement a decision is not fulfilled where the defendant government merely informs the Commission of the legal, political or practical difficulties involved in implementing the decision, without taking any real step to recover the aid from the undertakings concerned, and without proposing to the Commission any alternative arrangements for implementing the decision which could have enabled those difficulties to be overcome (see, in particular, Case 94/87 Commission v Germany [1989] ECR 175, paragraph 10, and Case C-499/99 Commission v Spain [2002] ECR I-6031, paragraph 25).

44Furthermore, it is apparent from the statements of the Hellenic Republic concerning the efforts made by the national authorities to recover the aid referred to in Articles 2 and 3(1) of Decision 2003/372 that the authorities have restricted themselves to a certain number of procedural and administrative steps, partial arrangements for the settlement of debts and offset operations. Those initiatives which, moreover, were late or incomplete or without binding effect and which, in any event, did not result in the actual recovery of the sums owed by Olympic Airways, cannot be regarded as complying with the obligations of Member States in relation to the recovery of State aid.

45It follows from all the foregoing that the Commissions application must be held to be well founded.

46Consequently, it must be declared that, by failing to take within the prescribed period all the measures necessary for repayment of the aid found to be unlawful and incompatible with the common market — except that relating to the contributions to the IKA —, in accordance with Article 3 of Decision 2003/372, the Hellenic Republic has failed to fulfil its obligations under that article.

Costs

47Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission applied for costs and the Hellenic Republic has been unsuccessful, the latter must be ordered to pay the costs.

Operative part

On those grounds, the Court (Second Chamber) hereby:

1.Declares that, by failing to take within the prescribed period all the measures necessary for repayment of the aid found to be unlawful and incompatible with the common market — except that relating to the contributions to the national social security institution —, in accordance with Article 3 of Commission Decision 2003/372/EC of 11 December 2002 on aid granted by Greece to Olympic Airways, the Hellenic Republic has failed to fulfil its obligations under that article;

2.Orders the Hellenic Republic to pay the costs,