Article 4
(c) of the ECSC Treaty provides that subsidies or aids granted by States, or special charges imposed by States, in any form whatsoever, are recognized as incompatible with the common market for coal and steel and are accordingly to be abolished and prohibited within the Community, as provided in the Treaty. This prohibition applies both to individual grants specifically provided for and to general, regional or sectoral schemes in the steel industry. The only exceptions to the above general prohibition which could or can be granted were or are spelt out in the various steel aid codes: Decision No 2320/81/ECSC followed by Decision No 1018/85/ECSC up to 31 December 1985, then Decision No 3484/85/ECSC from 1 January 1986 to 31 December 1988, and, lastly, Decision No 322/89/ECSC as from 1 January 1989. With regard to the first Decision, investment aid was authorized by the Commission in May 1983 for the Bolzano steelworks in connection with a restructuring plan notified in September 1982. However, pursuant to the last indent of Article 2 (1) of that Decision, the deadline for payment of the approved aid, i. e. the granting of the subsidized loan, was 31 December 1985. Since the payment deadline was not met, it is not Decision No 2320/81/ECSC nor its amendment No 1018/85/ECSC which is applicable in this case, but Decision No 3484/85/ECSC, namely the steel aid code which was in force at the time the subsidized loan was granted. The code which is now in force (322/89/ECSC) and which extends the original code on the same terms is mentioned here simply for the record. This distinction is very important inasmuch as, up to 31 December 1985, the Commission's steel policy consisted in authorizing certain aids to promote industrial restructuring and especially the financial viability of companies in this sector. By contrast, after that date, the only aids which could qualify for exemption from the prohibition in Article 4 (c) of the ECSC Treaty are spelt out: aid for research and development, environmental protection aid under certain conditions, certain forms of closure aid and, in cases where the recipient firm is located on the territory of a Member State not authorized to grant aid under Decision No 257/80/ECSC or No 2320/81/ECSC, certain regional investment aids. Since the last clause does not apply to Italy, it is not relevant here. The same is true of the other clauses referred to above: the aid in question is not for research and development or for closures, but for investments which are not therefore eligible for exemption under the rules in force. VI The Italian authorities invoked a number of arguments mentioned at IV above. By letter dated 5 July 1982, the Commission informed the Italian authorities of its approval of the regional aid scheme established by Provincial Law No 25 of the Province of Bolzano. Page 2 of that letter states that: 'the Bolzano authorities will also have to comply in full with the Community rules and codes on the award of aid to the steel industry'. This provision is unambiguous; it is therefore not possible in this connection to invoke any misunderstanding or error of interpretation due to the absence of a reply from the Commission. The second point made by the Italian authorities concerned the objectives to which research and development in the steel industry must be tailored in order to be eligible for aid. As the present case concerns investment in production and not in research, this argument is not relevant. Furthermore, energy conservation and improved product quality are not admissible as reasons for exemption under Decision No 3484/85/ECSC. Reference is then made to the improvement in working conditions and in the quality of air and water stemming from the investment. The Italian authorities would here have had to comply with the conditions for the application of Article 3 of Decision No 3484/85/ECSC by indicating that the investments were aimed at bringing the firm into line with new standards adopted at least two years after entry into service of the plant and were below the intensity ceiling specified in that Article. The letter initiating the procedure drew their attention to this point. They did not, however, supply any information that would have allowed the Commission to apply the exemption provided for in Article 3. It has already been stated that a favourable opinion on an investment under Article 54 of the ECSC Treaty cannot be a substitute for an authorization of aid. Similarly, a situation requiring urgent action does not justify the granting of aid without authorization, in breach of Community law and the Commission's long-established policy. Nor can it be claimed that it was necessary to await clarification from the Commission, at least as regards the steel industry, where the rules in force are both explicit and familiar to national administrations by dint of having been published. Ignorance of the law is no defence. The relatively small output of the Bolzano steelworks and its allegedly limited impact on Community trade cannot be invoked. Under ECSC rules, the fact that trade is affected is not a necessary condition for the incompatibility of aid. In the case in point, the general interest of the Province of Bolzano cannot be adduced as a valid argument since it is the Community interest which has to be taken into account here, and this is for the Commission to assess, essentially on the basis of whether or not competition is maintained within the common market. VII The exceptions to the basic prohibition of aid to the steel industry laid down in Article 4 (c) of the ECSC Treaty are in no way designed to relax Community policy on such aid, which is justified by the serious distortions of competition which could be caused by aid that was incompatible with the common market in an industry which, despite recent restructuring, remains sensitive. Strict compliance with this Community policy must be ensured, and this means that aid to a steel firm may be authorized only after the Commission has been able to check that the conditions spelt out in exhaustive fashion in the aid code have effectively been met. It is clear from the foregoing that these conditions have not been met and that the arguments advanced by the Italian authorities have not caused the Commission to change its initial assessment. The aid in question must therefore be considered incompatible with the common market. It is, however, necessary to take account of the special circumstances surrounding the case. As the Italian authorities have pointed out, the aid objected to was originally compatible with the common market and, on 25 May 1983, the Commission approved aid of Lit 2 billion to the Bolzano steelworks under Decision No 2320/81/ECSC. The aid subsequently became incompatible only because of the delay in its being granted due to the rules on the division of responsibility between the Province of Bolzano and the Italian national authorities. The Commission has therefore decided not to require repayment of the aid paid up to the date of notification of this Decision. It considers that the illegal aid in question will effectively be abolished provided that the interest subsidy ceases to be granted after the date of notification and until the loan in question matures. It therefore requests the Italian authorities to align the terms of the loan on the reference rate for Italy in force at the time the loan was granted, i. e. 12,8 %, HAS ADOPTED THIS DECISION: Article 1 The interest subsidy on a loan granted in December 1987 by the Province of Bolzano in Italy to the Bolzano steelworks under Provincial Law No 25 of 8 September 1981 is illegal State aid because it was made available without prior authorization from the Commission and, furthermore, is incompatible with the common market pursuant to Commission Decision No 3484/85/ECSC. As from the date of notification of this Decision, the authorities of the Province of Bolzano shall refrain from granting an interest subsidy on the annual instalments of the abovementioned loan until the loan matures. Article 2 The Italian authorities shall apply to the loan in question a rate consistent with the market rate in force when the loan was granted, such rate being defined by the Commission as the average reference rate applicable to interest subsidies paid by central government to credit institutions. The new rate shall apply to each annual instalment of the loan from the date of notification of this Decision until the loan matures. Article 3 The Italian authorities shall inform the Commission, within two months of the date of notification of this Decision, of the measures it has taken to comply herewith. Article 4 This Decision is addressed to the Italian Republic. Done at Brussels, 25 July 1990. For the Commission Leon BRITTAN Vice-President (1) OJ No L 340, 18. 12. 1985, p. 1. (2) For the definition of this rate, see OJ No C 31, 3. 2. 1979. (3) OJ No L 228, 13. 8. 1981, p. 14. (4) OJ No L 110, 23. 4. 1985, p. 5. (5) OJ No L 38, 10. 2. 1989, p. 8. (6) OJ No L 29, 6. 2. 1980, p. 5. (7) These cases concern the textiles sector as opposed to the steel sector.