DELIVERED ON 21 SEPTEMBER 1978 (1)

Mr President,

Members of the Court,

I — By way of introduction to my opinion I consider it necessary to recall the previous steps in the procedure since in the present case their chronological order is of decisive importance.

(1) On 27 May 1970 the Belgian Government, through its Permanent Representatives accredited to the European Communities, notified the Commission that the Société Nationale des Chemins de Fer Belges (the Belgian National Railway Company, hereinafter referred to as ‘the SNCB’) intended to lodge a claim with the Sute from which it holds the concession for financial compensation for the economic disadvantage which it allegedly suffered by reason of the application of through international railway tariffs for goods covered by the ECSC Treaty.

The SNCB assessed that disadvantage for 1971, on the basis of the principles defined in Article 11 (1) of Council Regulation No 1191/69 of 26 June 1969, adopted pursuant to Articles 75 and 94 of the Treaty of Rome, concerning the obligations inherent in the concept of a public service in transpon by rail, road and inland waterway, at Bfrs 500000000.

The international tariffs in question were established pursuant to an Agreement concluded on 21 March 1955 between the representatives of the Governments of the Member States of the European Coal and Steel Community, meeting within the Council; that Agreement was subsequently amended by three Supplementary Agreements of 1 May 1956, 1 May 1959 and 1 March 1974. It was based on Article 70 of the Treaty of Paris and on Article 10 of the Convention on the Transitional Provisions annexed to that Treaty.

The Belgian Government based its application somewhat succinctly on Regulation No 1191/69 of the Council. In fact it should be understood that it was relying upon the nature ‘of obligations inherent in the concept of a public service’ within the meaning of that regulation which, it considered, were entailed in the application of the ECSC international railway tariffs.

Since the Belgian Government foresaw that such applications would also be submitted in other Member States it requested the Commission to consult those States ‘in order that an identical view of this matter be taken in the su countries’.

A meeting of a group of experts appointed by the governments was held in Brussels on 10 September 1970. At that meeting particular consideration was given to whether the application of the ECSC through international tariffs constitutes a public service obligation and, more specifically, a tariff obligation within the meaning of Article 2 (5) of Regulation No 1191/69 and if so, whether such obligation entails economic disadvantages within the meaning of Article 5 (2) of the said regulation.

As the views taken by the various national delegations in the course of that meeting displayed considerable differences it was agreed that the problem should be discussed at another meeting before the end of 1970.

An impression of the subsequent course of events may be obtained from the correspondence between the Director General for Transport of the Commission and the Belgian Permanent Representation.

The Commission's departments went into the deuils of the question and the Director General notified the Permanent Representation on 2 July 1973 that ‘the Community and inter-governmental provisions do not entail … the obligation to apply fixed prices by prescribing particular tariff measures and they accordingly do not impose a tariff obligation within the meaning of Article 2 (5) of Regulation No 1191/69 which could give rise to compensation pursuant to that regulation’.

Having found that the Belgian Government had granted compensation to the SNCB amounting to Bfrs 410000000 in 1971 and Bfrs 520000000 in 1972 pursuant to that regulation, the Commission, through the Director General for Transport, requested the Belgian Government to ‘communicate to it all necessary deuils as to the reasons why that government considered it appropriate to grant the said compensation’.

There then occurs an interlude with the Council: on 11 October 1973 the Netherlands delegation to the Council requested that the Agreement of 21 March 1955 be amended to bring it up to date and take account of the enlargement of the Community.

The Council took note of that request and, in the course of its session of 22 November 1973, required the Permanent Representatives Committee to consider the matter.

In reply to a request by the Commission of 2 July 1973 the Belgian Permanent Representation notified the Commission on 7 December 1973 that the table of sums granted to the SNCB in the framework of the normalization of the accounts, adopted definitively for the 1971 financial year and provisionally for the 1972 and 1973 financial years, referred to the amounts in compensation for the ECSC tariffs as aids granted pursuant to Regulation No 1107/70 of the Council of 4 June 1970, adopted pursuant to Articles 75, 77 and 94 of the Treaty and relating to the granting of aids for transport by rail, road and inland waterway.

The Permanent Representation stated that ‘in our opinion this decision is in accordance with the view of the Commission on this point’. Accordingly the Belgian Government had, for the year 1971, decided on, and for the financial years 1972 and 1973 was considering, the replacement of the compensation granted pursuant to Regulation No 1191/69 by an equivalent aid covered by Article 3 (2) of Regulation No 1107/70.

The latter provision provides that:

‘… Member States shall… [not] impose obligations inherent in the concept of a public service which involve the granting of aids pursuant to Article 77 of the Treaty except in the following cases or circumstances:

(2) As regards reimbursement for the discharge of obligations inherent in the concept of a public service: until the entry into force of relevant Community rules, when payments are made to rail… transport undertakings as compensation for public service obligations imposed on them by the State or public authorities and covering…:

— tariff obligations not falling within the definition given in Article 2 (5) of Regulation (EEC) No 1191/69’.

The Commission, having had this new measure considered in deuil by its departments, in collaboration both with the Belgian experts and the Advisory Committee on Aids to Transpon set up under the above-mentioned Regulation No 1107/70, notified the Permanent Representation, by way of a letter from the Director General of 24 June 1974, that ‘it is impossible to consider as compatible with the common market pursuant to Article 3 (2) of Regulation No 1107/70 an aid the object of which is to cover such charges’, that is to say the charges entailed by the alleged tariff obligation imposed within the meaning of Anide 2 (5) of Regulation No 1191/69.

The Commission observed, as an ancillary point, that ‘in any event, the Commission must, in accordance with Article 93 (3) of the EEC Treaty, be informed of an aid granted pursuant to Article 3 (2) of Regulation No 1107/70’.

That was the date on which mention was first made of that provision of the Treaty.

The Commission concluded by requesting the Belgian Government to notify it, if possible before the end of July 1974, of its views on this point and of the measures which it intended to take to rectify the situation.

On 29 November 1974, that is six months later, the Belgian Permanent Representation informed the Director General, in reply to his letter of 24 June 1974, that ‘it may in fact be concluded that all the conditions necessary for the application “to the letter” of Regulation No 1191/69 have not been fulfilled’ and that ‘Belgium concedes this point’; on the other hand, the Belgian Representation considered that ‘the matter in question is indeed a public service obligation of a tariff nature, not a tariff obligation as referred to in Regulation No 1191/69, which justifies the application of Article 3 (2) of Regulation No 1107/70’. In short, whilst the Belgian Government had ceased to grant the compensation pursuant to the former regulation it continued to grant it pursuant to provisions in the latter regulation.

In support of its argument the Permanent Representation referred to the judgment of the French Conseil d'Etat of 22 December 1961, Société Nationale de Chemins de Fer Français v Ministère des Travaux Publia, des Transports et du Tourisme, observed that the Agreement of 21 March 1955‘exceeded the requirements of Article 70 of the Treaty’ and added that the Member States were empowered to request the amendment of the said Agreement, pursuant to the wording of Article 17 thereof.

With regard to the Commission's reply to the effect that it required to be informed, pursuant to Article 93 (3) of the Treaty, of an aid granted pursuant to Article 3 (2) of Regulation No 1107/70, the Representative maintained that the formality in question had been completed by a letter No 28.103/G.12.123 of'21 January 1974 which ‘was addressed to you by my predecessor; that letter mentioned inter alia for 1974 an aid within the meaning of Regulation No 1107/70 of 4 June 1970 amounting to 530000000 francs in respect of the ECSC tariffs’. Finally, the Permanent Representative transmitted to the Commission the request of the Belgian Government for a review of its position.

I have been unable to find this lener on the file but it is clear from subsequent correspondence that the Commission conceded that it had been informed that the aid granted by the Belgian Government amounted to 410000000 francs for 1971, 441500000 for 1972, 489000000 for 1973 and that the budgetary estimates for 1974 and 1975 amounted to 530000000 and 525000000 francs respectively.

21 January 1974 is thus the date which must prima foot be adopted in establishing whether, in accordance with Article 93 (3), the Commission was ‘informed, in sufficient time to enable it to submit its comments’, of the plan to establish an aid which might be considered compatible with the common market pursuant to Article 92 or to Article 77 of the Treaty and whether the Commission, considering that that plan was not compatible with the common market having regard to Article 92, initiated without delay the procedure provided for in Article 92 (2).

In this connexion, whilst it may be admitted that the notification was indeed made in good time so far as the amounts for the financial years 1974 and 1975 are concerned, I also consider that, having regard to the complexity of the problem and to the prior exchange of correspondence, the letter addressed on 24 June 1974 to the Belgian Permanent Representation by the Director General of the Commission constitutes the initiation ‘without delay’ of the procedure provided for in Article 93 (2), at least for the sums to be granted for the financial year 1975.

At this point it is necessary again to make a ‘legislative’ detour in order to recall that on 20 May 1975 the Commission adopted a decision ‘on the improvement of the situation of railway undertakings and the harmonization of rules governing financial relations between such undertakings and States’, Article 13 of which states:

‘In conjunction with the railway undertaking the State shall draw up a financial programme aimed at achieving the financial balance of the undertaking.

Under this programme the Sute may grant to the railway undertaking deficit subsidies which must be distinct:

— from compensation granted in respect of categories of public service obligations provided for by Article 2 of Regulation (EEC) No 1191/69, or of categories of normalization of accounts provided for by Article 4 (1) and (4) of Regulation (EEC) No 1192/69;

— from aid granted in respect of categories of aid provided for by Article 3 of Regulation (EEC) No 1107/70 and Article 9 (2) of this decision;

— from the financial assistance provided for by Article 5 (1) of this decision’.

The said Article 9 (2) of the decision provides:

‘Pursuant to Article 3 (2) of Regulation (EEC) No 1107/70, compensation may be made in respect of tariff obligations imposed upon railway undertakings and not covered by Regulation (EEC) No 1191/69. Acting on a proposal from the Commission to be submitted not later than 1 January 1978, the Council shall harmonize the procedures for granting such compensation’.

As a result of the adoption of that decision, Article 4 of Regulation No 1107/70 no longer applied to national railway undertakings; henceforth Member States might, on the one hand, give financial assistance to such undertakings within the framework of the business plans of the latter in accordance with Article 5 (1) of the decision and, on the other, grant them deficit subsidies in accordance with Article 13 of that decision.

It was thus necessary to modify Article 4 of Regulation No 1107/70; this was effected by Regulation No 1473/75 of the Council of 20 May 1975, published in the Official Journal of 12 June 1975, the same day as the decision of 20 May which I have just mentioned, but an earlier page, although the decision gave rise to the regulation. Article 4 as amended reads as follows:

‘1. Until the expiry of the period laid down for attaining financial balance in accordance with Anide 15 (1) of Council Decision No 75/327/EEC of 20 May 1975 … and without prejudice to Regulations (EEC) No 1191/69 and (EEC) No 1192/69 Anide 3 shall apply neither to financial assistance given to railway undertakings within the framework of their business plans in accordance with Anide 5 (1) of that decision nor to the deficit subsidies granted to them in accordance with Anide 13 of that decision.

Nevertheless, it was indeed stated in the recitals of the preamble to the regulation that ‘in view of the special nature of these financial measures, it is advisable to retain, pursuant to Article 94 of the Treaty, the special procedure for informing the Commission provided for in Article 5 (2) of Regulation (EEC) No 1107/70’.

Regulation No 1473/75 thus constitutes one of the ‘appropriate regulations for the application of Articles 92 and 93’, adopted by the Council on the basis of Article 94 and in particular determines ‘the conditions in which Article 93 (3) shall apply and the categories of aid exempted from this procedure’.

Article 5 (2) of Regulation No 1107/70 contains the following provisions establishing the special procedure for informing the Commission:

‘The aids referred to in Article 4 [that is to say, the deficit subsidies and payments provided by States and public authorities for railway undertakings by reason of any failure to achieve harmonization of the rules governing the financial relations between railway undertakings and States, the purpose of such harmonization being to make those undertakings financially autonomous, unlike aids in the form of reimbursement for the discharge of obligations inherent in the concept of a public service, as referred to in Article 3] shall be exempt from the procedure provided for in Article 93 (3) of the Treaty. Deuils of such aids shall be communicated to the Commission in the form of estimates at the beginning of each year and subsequently, in the form of a repon, after the end of the financial year’.

It must further be noted that Regulation No 1473/75 did not amend Article 7 of Regulation No 1107/70 whereby:

‘The provisions of Article 3 [of Regulation No 1107/70] shall not apply to measures adopted by any Member Sute in implementation of a system of aid upon which the Commission has, pursuant to Articles 77, 92 and 93 of the Treaty, already pronounced’.

The amounts which the Belgian Government communicated to the Commission in the form of estimates at the beginning of 1974 did not constitute ‘measures adopted in implementation’ of a system of aid upon which the Commission had already pronounced or, at all events, such ‘implementing measures’ were ‘provisionally incompatible’ with the common market since, as early as July 1973, the Commission had clearly stated that it was opposed to the granting of what the Belgian Government described after 7 December 1973 or 29 November 1974 as aids granted on the basis of Article 3 (2) of Regulation No 1107/70 but which it treated, from the point of view of informing the Commission, as aids referred to in Article 4.

It follows — and this appears to me to be a fundamental point — that the aids granted by the Belgian Government are covered by Article 3 (2) of Regulation No 1107/70 and that they were not exempted from the procedure prescribed in Article 93 (3) of the Treaty, which remains fully applicable to aids to be granted on the basis of that provision.

On 9 October 1975 the Commission wrote, in the name of one of its Members, to the Belgian Minister for Foreign Affairs, stating that it had taken note of the attitude of the Belgian Government (as set out in the letter of the Permanent Representation of 29 November 1974) which the Commission summarized as follows:

‘The Agreement … of 21 March 1955 must be treated as equivalent to the imposition of a tariff obligation by a Member Sute and has created a tariff obligation not falling within the definition given in Article 2 (5) of Regulation No 1191/69. Whilst the transpon charges in question are not fixed directly by the authorities, the method of arriving at such charges is nevertheless laid down in a binding tariff structure, the result of which is that the SNCB suffers an actual loss by reason of the fact that, in the absence of an increase in internal tariffs, which is ruled out by the need to remain competitive, or of any modification of the co-efficients of degressivity applicable in Belgium, the tariff provisions under the 1955 Agreement cause a reduction in the international transport charges for ECSC products compared with those normally applied to internal transport’.

The Commission, having set out in detail the reasons for its attitude, proceeded to find that the aid thus granted by the Belgian Government to the SNCB ‘is covered by Articles 92 and 93 of the EEC Treaty and cannot be justified either by the provisions of Article 92 (2) and (3) of the Treaty or by those of Article 3 of Regulation No 1107/70’.

Nevertheless, the Commission did not rule out the possibility that ‘if the abolition of the compensation in question were to entail an increase in the SNCB's deficit that additional deficit might … properly be covered by the Belgian Sute pursuant to Article 4 of Regulation No 1107/70’ in order to permit the SNCB to achieve a financial balance pursuant to Article 13 of the Council Decision of 20 May 1975.

The Commission, still on the basis of Article 93 (3), requested the Belgian Government, in accordance with the procedure laid down in Article 93 (2), to submit its observations to it before 15 November 1975.

The objection cannot be made that the Commission once again ‘initiated’ the procedure provided for in Article 93 (2), or that such initiation was belated, bearing in mind the amendment introduced by the Council Decision of 20 May 1975 and by Reguladon No 1473/75 of the same date, both published on 12 June 1975 in the Official Journal, whilst notification of the aid, assuming that it was in fact effected on 21 January 1974, was undertaken by the Belgian Government on the basis of the earlier version of Regulation No 1107/70. In fita in view of this ‘legislative’ amendment the Belgian Government itself should have undertaken a fresh notification.

On the same date, 9 October 1975, the Commission notified to the other Member States iu decision to inmate the procedure provided for in Article 93 (2) in relation to the Belgian system of aids for the SNCB in connexion with the ECSC international tariffs and invited them to submit any comments which they might have within a period of one month. The file contains the comments of the Netherlands Government (letter of 17 November 1975) and of the French Government (letter of 3 December 1975).

It is accordingly clear that the Commission specifically elected to proceed under Article 93 (3) in that, in accordance with Article 93 (2), it gave notice to ‘the parties concerned’ (Belgium and the other Member States) to submit their comments.

On 14 November 1975 the Belgian Minister submitted his comments to the President of the Commission: the Belgian Government confirmed that it was aware, as a result of the previous correspondence, that the Commission categorically ruled out the applicability of Regulation No 1191/69 and that it had accepted the Commission's ‘narrow’ interpretation of the concept of ‘tariff obligations’ within die meaning of that regulation; it nevertheless considered that the application of the ECSC tariff certainly constituted, if not a tariff obligation within the meaning of Regulation No 1191/69, at least a public service obligation of a tariff nature, which in its view justified the application of Article 3 (2) of Regulation No 1107/70.

The Belgian Government then repeated in deuil the line of argument which had already been set out in the letter from its Permanent Representation of 29 November 1974 concerning the judgment of the French Conseil d'Etat, the Convention on the Transitional Provisions and the Agreement of 21 March 1955; in particular, it relied upon the fact that, contrary to the provisions of subparagraph (2) of the third paragraph of Article 10 of the Convention, the Agreement of 1955 did not undertake the ‘apportionment of the receipts among the carriers concerned’. The Belgian Government, in concluding its comments, which were specifically submitted within the framework of Article 93 (2), expressed the hope that ‘a fair decision will be taken in this matter on the basis of Article 93 of the Treaty’.

At this point we must return briefly to that Agreement of 1955. In accordance with the terms of reference laid down for it in January 1974 the Commission drew up and submitted on 2 February 1976 to the representatives of the Governments of the Member States of the ECSC meeting within the Council a draft for a new agreement on the establishment of through international railway tariffs for the carriage of coal and steel. The delegations of the Member Sutes, meeting within the ad hoc Working Party on Transport Questions of the Council, first discussed that draft on 23 March 1976 and at the conclusion of the discussion the representative of the Commission declared that he would endeavour to draw up within a period of four weeks a ‘document setting out the Commission's views on the substance of the problem’.

In the meantime, the procedure pursuant to Article 93 (2) followed its normal course and terminated in a decision adopted by the Commission on 4 May 1976‘on aid from the Belgian Government to the Société Nationale de Chemins de Fer Beiges (SNCB) for through international railway tariffs for coal and steel’.

In accordance with Article 191 of the Treaty that decision was notified on 6 May 1976 to its addressee, namely the Belgian Government, and published on 20 August 1976 in the Official Journal of the European Communities (No L 229, pp. 24 to 26).

The recitals in the preamble to that decision refer first to Article 93 of the Treaty and to the observations presented by the Member States concerned, recalling much more briefly than my immediately preceding exposition the background to the matter, and then set out the reasons why the Commission decided that the aid granted by the Belgian Sute to the SNCB for the said tariffs on the basis of Article 3 (2) of Council Regulation No 1107/70 (as amended by Regulation No 1473/75 of 20 May 1975) is compatible with the common market only if it was granted under Article 4 of the said regulation.

The Kingdom of Belgium had three months, that is until 6 August 1976 at the latest, in which to terminate the aid in question or to grant it pursuant to and under the conditions laid down in Article 4 of Regulation No 1107/70.

More precisely, this meant that the SNCB had to begin by requesting the Belgian Government to sanction an increase in tariffs for the transport of ECSC products; the Belgian Government could not request and obtain the Commission's authority to grant the SNCB a temporary deficit subsidy pursuant to Article 4 of Regulation No 1107/70, intended to compensate for the inadequacy of the undertaking's income deriving from the international rail transport of ECSC products, unless it were opposed to such an increase.

It appears to me that this undoubtedly constitutes the ‘final decision’ referred to in Article 93 (3) of the Treaty. However, the Belgian Government completely ignored that decision, which therefore became definitive on the expiry of the period of two months referred to in the third paragraph of Article 173 (two months from notification, that is on 6 July 1976) or in any case on the expiry of the period of three months which it was allowed by the decision, that is 6 August 1976.

The Commission, once again demonstrating patience, waited until 11 November 1976 before writing, in the name of the Director General for Transport, to notify the Belgian Permanent Representative that it noted that the period of three months had elapsed without any information having been received and to request the Permanent Representative to notify it without delay of the measures which the Belgian Government had taken to comply with that decision. In the meantime, the Government continued to pay the aid, notifying the amount to the Commission in accordance with the procedure laid down in Article 5 (1) of Regulation No 1107/70 as though it were an aid covered by Article 4.

The Commission, in an application of 19 December 1977 which was received at the Registry on 21 December, decided to eschew the more complex procedure under Article 169 and to refer the maner to the Court of Justice direct in accordance with the provisions of the second subparagraph of Article 93 (2), claiming that the Court should declare that the Kingdom of Belgium, by failing to comply with the decision of 4 May 1969 within the time-limit laid down therein, had failed to fulfil an obligation incumbent upon it under the Treaty and that the Court should order it to pay the costs.

II — I apologize for taking the Court through the ins and outs of this procedure, but I think that the subsequent passage of my opinion will thereby be eased.

The Court is already acquainted with the situation where the Commission, having found that an aid granted by a Member State was incompatible with the Common Market, had decided that the Member State concerned must abolish or modify it within a period prescribed by the Commission while the Member State concerned instituted proceedings under Article 173 for the annulment of that decision.

In the situation brought before the Court in Case 47/69 the Commission had found in its decision of 18 July 1968 that a system of aids established by the French Government for the benefit of the textile industry was incompatible with the common market and required that government to discontinue its application from 1 April 1970. The French Government lodged an application on 26 September 1969 against that decision, which was dismissed by the Court on 26 July 1970 ([1970] ECR 487).

In the procedure which gave rise to Case 73/73 (family allowances in the textile industry) the Government of the Iulian Republic contested a decision of the Commission of 25 July 1973 whereby it was found that an aid granted within that industry was improper. The Court, in its judgment of 2 July 1974 ([1974] ECR 709), dismissed the Iulian Government's application against that decision.

The situation with which the Court is confronted today is that the Member Sute ‘played possum’, allowing the time-limit laid down in Article 173 and that specified in the decision (Article 93 (2)) to expire. It is of the consequence of the procedure which is governed by the second subparagraph of Article 93 (2) that the Court must take cognizance at this point. That is the measure, quite apart from the relevance which its decision will have for the transpon sector properly so-called, of tu importance in terms of principle.

Certain aspects of the procedure which gave rise to Case 70/72 resemble the present case: on 17 February 1971 the Commission, in accordance with the first subparagraph of Article 93 (2), had required the Federal Republic of Germany to put an end to a system of aids for the redevelopment of the mining regions set up by that Sute. Since the German Government failed to comply with that decision and refrained from requesting the Court to annul it, the Commission brought the matter before the Court of Justice. The Court dismissed the Commission's application in its judgment of 12 July 1973 ([1973] ECR 813), but on the grounds that the Commission ‘did not exercise the powers conferred upon it by the second and third sentences of Article 93 (3) but confined itself in a communication dated 1 August 1969 to protesting and to requesting further information’ (p. 827) and that the Commission had failed to indicate to the Member Sute concerned the aspects of the aid which were regarded as incompatible with the Treaty and therefore subject to abolition or alteration (p. 832).

Nothing of this nature obtains in the present case: as I think I have demonstrated, it is impossible to complain that the Commission was tardy, the aid in question had not become an ‘existing’ aid within the meaning of Article 93 (1), as defined in the judgment of the Court of 11 December 1973 in the Lorenz case ([1973] ECR at p. 1482), since the Commission did not remain ‘silent’. Furthermore, that aid has been held entirely incompatible with the common market; its abolition required a mere administrative measure, that is the omission of the subsidy or aid from the estimates or reports for the accounting year, unless the Belgian Government consented to an alteration in the basis on which it was granted. The decision of 4 May 1976 contained all the information necessary to establish with clarity the duty imposed upon the Kingdom of Belgium.

‘Aids shall be compatible with this Treaty if they meet the needs of co-ordination of transpon or if they represent reimbursement for the discharge of certain obligations inherent in the concept of a public service’.

According to the Belgian Government, the derogation ‘save as otherwise provided in this Treaty’ at the beginning of Article 92 means that its measure, which is based on Regulation No 1107/70, itself adopted pursuant in particular to Article 77 of the Treaty, is exempt from the application of Articles 92 to 94 of the Treaty.

I cannot share this point of view: in fact, whilst Regulation No 1107/70 indeed refers to Article 77 it also refers to Article 94; Article 1 of the regulation provides that: ‘This regulation shall apply to aids granted for transpon by rail, … in so far as such aids relate specifically to activities within that sector’.

Article 2 states that:

‘Articles 92 to 94 of the Treaty shall apply to aids granted for transport by rail …’.

It is consequently clear that the compensation granted by the Belgian Government falls within the scope of Articles 92 and 94 and, more particularly, having regard to the legal basis on which it was granted, of Articles 92 and 93.