In two judgments of 3 February 201138, the General Court dismissed the actions brought by the Italian Republic and Cantiere Navale de Poli against the Commission decision declaring a state aid measure incompatible with the common market and thus prohibiting that measure.

Both cases deal with a state aid measure notified by the Italian Republic on 1 February 2008. The measure consisted of an allocation of an additional EUR 10 million to an aid scheme set up in 2004 to support shipbuilding companies. In fact the 2004 scheme already provided for a budget of EUR 10 million to support shipbuilding companies in Italy. This 2004 scheme was declared compatible with the common market by the Commission on the basis that it complied with Regulation 1177/2002 that made aid to shipbuilding companies possible (subject to some conditions) in order to protect these companies from fierce competition of Korean shipbuilding companies. The Regulation 1177/2002 expired on 31 March 2005 and was declared incompatible with the WTO rules by the Dispute Settlement Body (‘DSB’) of the WTO.

The Commission held in its decision that the plan to allocate an extra EUR 10 million to the 2004 scheme constituted a new state aid measure which was incompatible with the common market because Regulation 1177/2002 was no longer applicable and no other provision relating to state aid rule made the state aid compatible with the internal market. As an obiter dictum the Commission noted that the DSB also demanded the Commission to bring the national aid schemes on the basis of Regulation 1177/2002 in line with the obligations of the WTO rules. The Italian Republic and the Cantiere Navale de Poli lodged an application for annulment against this decision.

Both parties basically argued that the Commission was wrong in holding (i) that the additional grant of EUR 10 million constitute new aid, (ii) that Regulation 1177/2002 was no longer applicable to the state aid measure, (iii) that the principle of equality and legitimate expectations were violated, (iv) that the decision lacked motivation, and finally (iv) that the Commission could not take into account the decision of the DSB.  

The General Court found that the Commission was right in holding that the additional grant of EUR 10 million was new aid. Contrary to the Italian Republic’s claim, the Commission was right in considering that the 2004 scheme was limited to EUR 10 million and that the decision declaring the 2004 scheme compatible with the common market was also based on the fact that the scheme was limited to EUR 10 million. Taking these two factors into account, it is clear that the plan to grant an additional EUR 10 million to the 2004 scheme is a change to an existing aid which is not of a purely formal or administrative nature. Thus this plan constitutes a ‘new aid’.  

Furthermore, the Commission was right in holding that Regulation 1177/2002 is no longer applicable to the notified aid. The point in time in determining which legislation is applicable to notified aid not already paid (as in the case at hand) is the moment the Commission takes its decision on the compatibility of the aid, as the aid only produces its effects from that date. The moment the Commission took its decision in the present case was well after 31 March 2005 (expiry date of Regulation 1177/2002), and thus the Commission was right in holding that that Regulation was no longer applicable to the notified aid. The fact that this rule meant that the Commission can influence which legislation is applicable to notified aid (as it can determine to postpone the moment on which it will adopt its decision on the compatibility of the aid), does not justify a derogation from the principle that new substantive rules govern, with effect from their entry into force, the future effects of situations which came about under the old rules.

In addition, the General Court held that the Commission did not violate any principle of equal treatment by not applying the Regulation 1177/2002 to the new aid measure, as by doing so, the Commission only applied a rule of law. Furthermore, the decision did not violate the legitimate expectations of any party as the decision clearing the 2004 scheme was limited to this specific scheme and did not entail that modifications to the scheme would also be automatically compatible with the state aid rules. The General Court also deemed that the Commission committed no violation of the obligation to state reasons.  

Finally, as the reference to the decision of the DSB concerns, the General Court noted that the Commission made reference to this decision in order to answer an argument of the Italian Republic. Furthermore, the Court remarked that the reference to the DSB decision followed the finding of the Commission that the new aid measure was not compatible with the common market and was therefore not used as an argument to substantiate why the new aid measure was not compatible with the common market. Therefore, the arguments that the Commission was wrong in relying on the DSB decision were rejected by the General Court