(Aid granted by the Portuguese Government to pig farmers – Aid intended to allow the repayment of aid declared incompatible with the common market – Council decision declaring such aid compatible with the common market – Illegality – Third subparagraph of Article 88(2) EC)

Summary of the Judgment

State aid – Power of the Council to authorise aid by way of derogation in view of exceptional circumstances – Conditions for exercise – Application to the Council by the Member State concerned before a decision by the Commission declaring the aid incompatible with the common market and taking of a decision within a period of three months – Limit – Thwarting of a previous decision by the Commission

(Arts 87 EC, 88 EC and 89 EC)

The intention of the EC Treaty, in providing through Article 88 EC for aid to be kept under constant review and supervised by the Commission, is that the finding that aid may be incompatible with the common market is to be arrived at, subject to review by the Community judicature, by means of an appropriate procedure which it is the Commission’s responsibility to set in motion. Articles 87 EC and 88 EC thus reserve a central role for the Commission in determining whether aid is incompatible.

As is clear from its very wording, the third subparagraph of Article 88(2) EC covers an exceptional case. In fact, the Council, acting unanimously, ‘on application by a Member State’, may decide that aid which that State is granting or intends to grant must be regarded as compatible with the common market ‘in derogation from the provisions of Article 87 or from the regulations provided for in Article 89’, if such a decision is justified by ‘exceptional circumstances’.

The power conferred upon the Council by the third subparagraph of Article 88(2) EC being therefore clearly exceptional in character, the further provisions in the third and fourth subparagraphs of Article 88(2), whereby, on the one hand, application to the Council by a Member State suspends examination in progress at the Commission for a period of three months, and, on the other, in the absence of a decision by the Council within that period, the Commission is to give a ruling, undeniably indicate that, where that period has expired, the Council is no longer competent to adopt a decision under that third subparagraph in relation to the aid concerned. The taking of decisions the operative parts of which might prove contradictory is thereby avoided.

Consequently, if the Member State concerned has made no application to the Council under the third subparagraph of Article 88(2) EC before the Commission declares the aid in question incompatible with the common market and thereby closes the procedure referred to in the first subparagraph of Article 88(2), the Council is no longer authorised to exercise the exceptional power conferred upon it by the third subparagraph in order to declare such aid compatible with the common market.

Nor can the Council thwart the effectiveness of such a decision by declaring compatible with the common market, in accordance with that provision, an aid designed to compensate the beneficiaries of the unlawful aid declared incompatible with the common market for the repayments they are required to make pursuant to that decision.

(see paras 29-33, 45)

JUDGMENT OF THE COURT (Full Court) 29 June 2004 (1)

(Aid granted by the Portuguese Government to pig farmers – Aid intended to allow the repayment of aid declared incompatible with the common market – Council decision declaring such aid compatible with the common market – Illegality – Third subparagraph of Article 88(2) EC)

In Case C-110/02,

Commission of the European Communities, represented by F. Santaolalla Gadea, D. Triantafyllou and V. Di Bucci, acting as Agents, with an address for service in Luxembourg,

applicant,

Council of the European Union, represented by J. Carbery and F. Florindo Gijón, acting as Agents,

defendant, supported by Portuguese Republic, represented by L. Fernandes and I. Palma, acting as Agents, with an address for service in Luxembourg,

and

French Republic, represented by G. de Bergues and F. Million, acting as Agents,

APPLICATION for the annulment of Council Decision 2002/114/EC of 21 January 2002 authorising the Government of Portugal to grant aid to Portuguese pig farmers who were beneficiaries of the measures granted in 1994 and 1998 (OJ 2002 L 43, p. 18),

THE COURT (Full Court),

composed of: V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, C. Gulmann, J.-P. Puissochet and J.N. Cunha Rodrigues, Presidents of Chambers, A. La Pergola, R. Schintgen, F. Macken, N. Colneric, S. von Bahr and K. Lenaerts (Rapporteur), Judges,

Advocate General: F.G. Jacobs, Registrar: R. Grass,

gives the following

1 This request for a preliminary ruling concerns the interpretation of Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment (OJ 2012 L 26, p. 1), as amended by Directive 2014/52/EU of the European Parliament and of the Council of 16 April 2014 (OJ 2014 L 124, p. 1) (‘Directive 2011/92’).

2 The request has been made in proceedings between, on the one hand, Waltham Abbey Residents Association and, on the other hand, An Bord Pleanála (Planning Board, Ireland; ‘the Board’), Ireland and the Attorney General (Ireland), concerning authorisation granted by the Board for a strategic residential housing development.

Legal context

European Union law

Directive 2011/92

Recitals 7 to 9 of Directive 2011/92 state:

‘(7) Development consent for public and private projects which are likely to have significant effects on the environment should be granted only after an assessment of the likely significant environmental effects of those projects has been carried out. …

(8) Projects belonging to certain types have significant effects on the environment and those projects should, as a rule, be subject to a systematic assessment.

(9) Projects of other types may not have significant effects on the environment in every case and those projects should be assessed where the Member States consider that they are likely to have significant effects on the environment.’

Article 2(1) of that directive provides:

‘Member States shall adopt all measures necessary to ensure that, before development consent is given, projects likely to have significant effects on the environment by virtue, inter alia, of their nature, size or location are made subject to a requirement for development consent and an assessment with regard to their effects on the environment. Those projects are defined in Article 4.’

Under Article 3(1) of that directive:

‘The environmental impact assessment shall identify, describe and assess in an appropriate manner, in the light of each individual case, the direct and indirect significant effects of a project on the following factors:

…

(b) biodiversity, with particular attention to species and habitats protected under [Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (OJ 1992 L 206, p. 7), as amended by Council Directive 2013/17/EU of 13 May 2013 (OJ 2013 L 158, p. 193) (“Directive 92/43”)] and Directive 2009/147/EC [of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (OJ 2010 L 20, p. 7)];

…’

Article 4 of Directive 2011/92 provides:

‘1. Subject to Article 2(4), projects listed in Annex I shall be made subject to an assessment in accordance with Articles 5 to 10.

(a) a case-by-case examination;

(b) thresholds or criteria set by the Member State.

Member States may decide to apply both procedures referred to in points (a) and (b).

Where a case-by-case examination is carried out or thresholds or criteria are set for the purpose of paragraph 2, the relevant selection criteria set out in Annex III shall be taken into account. Member States may set thresholds or criteria to determine when projects need not undergo either the determination under paragraphs 4 and 5 or an environmental impact assessment, and/or thresholds or criteria to determine when projects shall in any case be made subject to an environmental impact assessment without undergoing a determination set out under paragraphs 4 and 5.

Where Member States decide to require a determination for projects listed in Annex II, the developer shall provide information on the characteristics of the project and its likely significant effects on the environment. The detailed list of information to be provided is specified in Annex IIA. The developer shall take into account, where relevant, the available results of other relevant assessments of the effects on the environment carried out pursuant to Union legislation other than this Directive. The developer may also provide a description of any features of the project and/or measures envisaged to avoid or prevent what might otherwise have been significant adverse effects on the environment.

The competent authority shall make its determination, on the basis of the information provided by the developer in accordance with paragraph 4 taking into account, where relevant, the results of preliminary verifications or assessments of the effects on the environment carried out pursuant to Union legislation other than this Directive. The determination shall made available to the public and:

(a) where it is decided that an environmental impact assessment is required, state the main reasons for requiring such assessment with reference to the relevant criteria listed in Annex III; or

(b) where it is decided that an environmental impact assessment is not required, state the main reasons for not requiring such assessment with reference to the relevant criteria listed in Annex III, and, where proposed by the developer, state any features of the project and/or measures envisaged to avoid or prevent what might otherwise have been significant adverse effects on the environment.

Member States shall ensure that the competent authority makes its determination as soon as possible and within a period of time not exceeding 90 days from the date on which the developer has submitted all the information required pursuant to paragraph 4. In exceptional cases, for instance relating to the nature, complexity, location or size of the project, the competent authority may extend that deadline to make its determination; in that event, the competent authority shall inform the developer in writing of the reasons justifying the extension and of the date when its determination is expected.’

Annex II.A of that directive contains the list of ‘information to be provided by the developer on the projects listed in Annex II’. That list reads as follows:

‘1. A description of the project, including in particular:

(a) a description of the physical characteristics of the whole project and, where relevant, of demolition works;

(b) a description of the location of the project, with particular regard to the environmental sensitivity of geographical areas likely to be affected.

3. A description of any likely significant effects, to the extent of the information available on such effects, of the project on the environment resulting from:

(a) the expected residues and emissions and the production of waste, where relevant;

(b) the use of natural resources, in particular soil, land, water and biodiversity.

ECLI:EU:C:2025:140

JUDGMENT OF 6. 3. 2025 – CASE C-41/24 WALTHAM ABBEY RESIDENTS ASSOCIATION

The criteria of Annex III shall be taken into account, where relevant, when compiling the information in accordance with points 1 to 3.’

Annex III to that directive sets out the ‘criteria to determine whether the projects listed in Annex II should be subject to an environmental impact assessment’.

Directive 2014/52

Recitals 11 and 29 of Directive 2014/52 state:

‘(11) The measures taken to avoid, prevent, reduce and, if possible, offset significant adverse effects on the environment, in particular on species and habitats protected under [Directive 92/43] and Directive 2009/147 …, should contribute to avoiding any deterioration in the quality of the environment and any net loss of biodiversity, in accordance with the [European] Union’s commitments in the context of the [United Nations Convention on Biological Diversity, signed in Rio de Janeiro on 5 June 1992,] and the objectives and actions of the Union Biodiversity Strategy up to 2020 laid down in the [Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions] of 3 May 2011 entitled ‘Our life insurance, our natural capital: an EU biodiversity strategy to 2020’ [(COM(2011) 244 final)]

…

When determining whether significant effects on the environment are likely to be caused by a project, the competent authorities should identify the most relevant criteria to be considered and should take into account information that could be available following other assessments required by Union legislation in order to apply the screening procedure effectively and transparently. In this regard, it is appropriate to specify the content of the screening determination, in particular where no environmental impact assessment is required. Moreover, taking into account unsolicited comments that might have been received from other sources, such as members of the public or public authorities, even though no formal consultation is required at the screening stage, constitutes good administrative practice.’

Directive 92/43

Article 6(3) of Directive 92/43 provides:

‘Any plan or project not directly connected with or necessary to the management of the site but likely to have a significant effect thereon, either individually or in combination with other plans or projects, shall be subject to appropriate assessment of its implications for the site in view of the site’s conservation objectives. In the light of the conclusions of the assessment of the implications for the site and subject to the provisions of paragraph 4, the competent national authorities shall agree to the plan or project only after having ascertained that it will not adversely affect the integrity of the site concerned and, if appropriate, after having obtained the opinion of the general public.’

Article 12(1) of that directive provides:

‘Member States shall take the requisite measures to establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range, prohibiting:

(a) all forms of deliberate capture or killing of specimens of these species in the wild;

(b) deliberate disturbance of these species, particularly during the period of breeding, rearing, hibernation and migration;

(c) deliberate destruction or taking of eggs from the wild;

(d) deterioration or destruction of breeding sites or resting places.’

Point (a) of Annex IV to that directive mentions ‘all species’ of bats belonging to the suborder of ‘microchiroptera’.

Irish law

The Commission makes five pleas in law in support in its action, claiming that the Council did not have the power to adopt the contested decision, misuse of powers and procedure, infringement of the EC Treaty and various general principles, manifest error of assessment, and failure to state sufficient reasons for the contested decision.

The first plea

Arguments of the parties

13The Commission argues in its first plea that the Council did not have the power to adopt the contested decision, and its reasoning in that respect is in two stages.

14First, the Commission argues that the contested decision has effects identical to a revocation or annulment of Decisions 2000/200 and 2001/86, whereby the Commission declared the aid paid under the Decree-Laws of 1994 and 1999 incompatible with the common market and ordered it to be repaid.

15By authorising the payment to the Portuguese pig farmers concerned of aid equivalent in amount to that which they had to repay in accordance with those Commission decisions, the contested decision nullified the effects of the latter. It prevented the effective withdrawal of aid which the Commission had declared incompatible with the common market and the return to the status quo required by the first subparagraph of Article 88(2) EC in order to preserve the market from distortions of competition.

16According to the Commission, the contested decision effectively amounted to an authorisation of the initial aid, which the Commission had previously declared incompatible.

17Secondly, the Commission argues that it is clear from the wording of Article 88 EC that the Treaty intended to confer upon it, as a monopoly, the tasks of controlling and managing State aids. That, it maintains, is explained by the fact that only a body totally independent of Member States is capable of examining aid measures adopted by the latter with the required objectivity and impartiality, and of ensuring that competition is not distorted to an extent contrary to the common interest.

18As for the power conferred on the Council under Article 88(2) EC, the Commission argues that that is exceptional in character. That is clear from the wording both of the third subparagraph of that provision, which refers to ‘exceptional circumstances’, and of the fourth subparagraph, which lays down a period during which the Member State’s application is to suspend the procedure before the Commission, at the expiry of which period the Commission recovers its power to ‘give a decision’, that is to say decide definitively on the aids concerned. The granting to the Council of such a power of decision, taking precedence over that of the Commission for a limited period, would, moreover, be devoid of meaning if the Council’s decision could prevail over that of the Commission in all circumstances.

19It follows, in the Commission’s view, that the Council does not have the power to adopt a decision on the basis of the third subparagraph of Article 88(2) EC where an aid has been declared incompatible with the common market by a Commission decision. Nor, to that extent, did the Council have the power to override the effects of such a decision, by authorising the grant of aids designed to compensate the beneficiaries of the aid declared incompatible for the repayment which that decision obliged them to make.

20The Council argues, first, that the Commission’s reasoning is based entirely on the premiss that the contested decision annulled or revoked Decisions 2000/200 and 2001/86. In reality, the Council argues, the contested decision did not call into question the repayment obligations under those decisions, since it was, on the contrary, in the context of the full implementation of those obligations, and taking account of the social and economic consequences which such implementation would have, that the Council decided to authorise the new aid which the Portuguese Government was proposing to grant.

21What counts as new aid, the Council argues, depends on formal and objective considerations. In this case the aid authorised by the contested decision consisted of an entirely new payment, arising from a national provision other than the Decree-Laws of 1994 and 1999, corresponding to different eligibility and payment conditions from those which applied to the aids granted under those Decree-Laws.

22According to the Council, the fact that the aid authorised by the contested decision constitutes new aid is also demonstrated by the definition of ‘new aid’ in Article 1 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83, p. 1) as ‘aid schemes and individual aid, which is not existing aid, including alterations to existing aid’. The term ‘existing’ implies that the aid in question has already been authorised, which is precisely not the case with the aid to which the contested decision relates.

23Moreover, the third subparagraph of Article 11(2) of Regulation No 659/1999, which allows the possibility of authorising the Member State to accompany repayment of the illegal aid with an aid to rescue the undertaking concerned, also confirms that it is possible to adopt divergent decisions concerning State aids granted successively to the same operators. The same applies to Community case-law, which, the Council argues, has implicitly acknowledged that the Commission may make the payment of new aid declared compatible with the common market subject to the recovery of earlier aid declared incompatible (Joined Cases T-244/93 and T-486/93 TWD v Commission [1995] ECR II-2265; Case C-355/95 P TWD v Commission [1997] ECR I-2549).

24Finally, the Council argues that neither decisions of the Commission declaring an aid incompatible with the common market nor any other text constitute a prohibition against the beneficiaries of such aid receiving other aid sooner or later. The principle that each successive aid is to be examined individually should be complied with in all circumstances (Case C-441/97 P Wirtschaftsvereinigung Stahl v Commission [2000] ECR I-10293, paragraph 55). If the contested decision had not been taken, the aid which it authorised, which had, moreover, been notified to the Commission by the Portuguese Republic, would have had to have been examined by the Commission and to have given rise to a decision by the latter.

25Concerning, secondly, the scope of Article 88(2) EC, the Council argues that the three-month period referred to in the fourth subparagraph of that provision is laid down for purely suspensive purposes. It follows, in the Council’s submission, that it remained at liberty to authorise the aid concerned notwithstanding the expiry of that period.

26As for the conflict capable of arising in that respect between a previous decision of the Commission, finding aid incompatible with the common market, and a subsequent decision of the Council, authorising that aid, the Council argues that the principle to be applied when dealing with incompatible rules, in the absence of a hierarchy between them, is that the later rule derogates from the previous one.

27The Portuguese Republic essentially shares the analysis of the Council. The aid authorised by the contested decision was a new aid, distinct from those established by the Decree-Laws of 1994 and 1999, having been notified as new aid to the Commission. Portugal adds that the fact that the third subparagraph of Article 88(2) EC empowers the Council to rule not only on aid which a Member State ‘intends to grant’ but also on aid which it ‘is granting’ confirms that the Council is empowered to authorise aid even where the Commission has already expressed its view on it. Article 88(3) shows that any granting of aid requires prior examination by the Commission, with the result that the aid cannot be granted unless there has been a favourable decision by the Commission in that regard.

28In order to rule on the Commission’s first plea in support of its action, it first needs to be determined whether, as the Commission has argued, Article 88(2) EC must be interpreted in such a way that, where the Commission has adopted a decision finding aid incompatible with the common market, the Council no longer has the power to decide, on the basis of the third subparagraph of that provision, that that aid must be regarded as compatible with the common market.

29In that respect, it should be noted that the intention of the Treaty, in providing through Article 88 EC for aid to be kept under constant review and supervised by the Commission, is that the finding that aid may be incompatible with the common market is to be arrived at, subject to review by the Community judicature, by means of an appropriate procedure which it is the Commission’s responsibility to set in motion. Articles 87 EC and 88 EC thus reserve a central role for the Commission in determining whether aid is incompatible (Case C-354/90 Fédération nationale du commerce extérieur des produits alimentaires and Syndicat national des négociants et transformateurs de saumon [1991] ECR I-5505, paragraphs 9 and 14).

30As is clear from its very wording, the third subparagraph of Article 88(2) EC covers an exceptional case (Case 156/77 Commission v Belgium [1978] ECR 1881, paragraph 16). According to that provision, the Council acting unanimously, ‘on application by a Member State’, may decide that aid which that State is granting or intends to grant must be regarded as compatible with the common market ‘in derogation from the provisions of Article 87 or from the regulations provided for in Article 89’, if such a decision is justified by ‘exceptional circumstances’.

31It follows that, as the Commission has rightly pointed out, the power conferred upon the Council by the third subparagraph of Article 88(2) EC is clearly exceptional in character.

32In such a context, the further provisions in the third and fourth subparagraphs of Article 88(2), whereby, on the one hand, application to the Council by a Member State suspends examination in progress at the Commission for a period of three months, and, on the other, in the absence of a decision by the Council within that period, the Commission is to give a ruling, undeniably indicate that, where that period has expired, the Council is no longer competent to adopt a decision under that third subparagraph in relation to the aid concerned. The taking of decisions the operative parts of which might prove contradictory is thereby avoided.

33The enactment of a temporal limitation of that kind on the Council’s competence where the Commission has already opened the procedure under the first subparagraph of Article 88(2) EC, without, however, yet having adopted a decision declaring the aid incompatible with the common market, and the fact that, at the end of the three-month period laid down by the fourth subparagraph of that provision, the Commission alone retains the competence to rule on the aid concerned, also demonstrate that, if the Member State concerned has made no application to the Council under the third subparagraph of Article 88(2) EC before the Commission declares the aid in question incompatible with the common market and thereby closes the procedure referred to in the first subparagraph of Article 88(2), the Council is no longer authorised to exercise the exceptional power conferred upon it by the third subparagraph in order to declare such aid compatible with the common market.

34It may be observed on that latter point that, in Case C-l22/94 Commission v Council [1996] ECR I-881, the contested decision of the Council did not follow a Commission decision declaring aid incompatible with the common market, the Commission in that case having merely taken the view on the basis of Article 88(3) EC that the aid project in question was not compatible with the common market and opened the procedure laid down by the first subparagraph of Article 88(2).

35As the Commission has rightly pointed out, the interpretation adopted in paragraphs 32 and 33 of this judgment, which makes it possible to avoid the same State aid being the subject of contrary decisions taken successively by the Commission and the Council, contributes to legal certainty. It should be noted in particular that the definitive nature of an administrative decision which is acquired on the expiry of reasonable time-limits for bringing an action or by the exhaustion of remedies contributes to such certainty (Case C-453/00 Kühne & Heitz [2004] ECR I-0000, paragraph 24).

36As for the argument of the Portuguese Government that the third subparagraph of Article 88(2) EC also authorises the Council to rule on aid which a Member State is ‘granting’, whereas in accordance with Article 88(3) any ‘grant’ of aid requires precisely that the Commission should have expressed a view on it first, so that the Council has the power to rule on aid which has already been the subject of a previous decision by the Commission, the Court finds that this argument arises from a contradiction in terms. It cannot concomitantly be argued that an aid which a Member State is ‘granting’ within the meaning of the third subparagraph of Article 88(2) EC is an aid which must necessarily have been previously declared compatible with the common market by the Commission, pursuant to the provisions of Article 87 EC, and that the Council has the power subsequently to declare such an aid compatible with the common market in derogation from those provisions.

37Secondly, the Court has to determine whether the fact that the Council does not have the power to rule on the compatibility with the common market of an aid in relation to which the Commission has already definitively ruled implies, as the latter argues, that the Council also lacks the power to rule on an aid measure whose aim is to allocate to beneficiaries of the illegal aid previously declared incompatible by a Commission decision an amount designed to compensate for the repayments which they are obliged to make pursuant to that decision.