State aid illegal to Hellenic Shipyards – Decision C-246/12 P of ECJ

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Ellinika Nafpigia AE (Hellenic Shipyards, ‘EN’) is a large shipyard in Greece which, in 1985, was purchased by the State-owned Hellenic Bank of Industrial Development (Elliniki Trapeza Viomikhanikis Anaptixeos AE; ‘ETVA’). In the context of EN’s privatisation, in 2001, its shares were sold to the consortium of German companies Howaldtswerke-Deutsche Werft GmbH (HDW) and Ferrostaal GmbH, which, with a view to managing their holdings in EN, set up Elliniki Nafpigokataskevastiki AE Khartofilakiou (Greek Naval Shipyard Holding; GNSH). In 2005, ThyssenKrupp AG acquired HDW and GNSH and has therefore 100% ownership and control of the shipyards. At present, the shipyards produce essentially military vessels.
As from 1992, the Greek Government granted the shipyards several amounts of aid, some of which, pursuant to a directive concerning operating aid to shipbuilding, were approved by the Commission. By contrast, in 2006, the Commission required Greece to recover from EN, within four months, sixteen amounts of aid, together with interest. In addition, Greece was required to notify, within two months, the amount to be recovered, a detailed description of the measures already taken, and also proof that the beneficiary had been ordered to repay the aid. The Greek Government was also required to keep the Commission informed of the progress of the national measures taken to implement the decision.

The shipyards challenged that decision before the General Court of the European Union, which, by a judgment delivered in 2012, rejected all of the arguments put forward.
In the present appeal, EN has challenged that judgment, submitting before the Court of Justice that the General Court erred in law in holding that the aid had benefited the production of civil material, without examining the aid on a case-by-case basis in order to ascertain what was necessary for operating a shipyard for military purposes. EN has submitted that shipyards are a complex undertaking and that civil activity is necessary for the viability of the main, military activity. Consequently, a total stoppage of the civil activity of the shipyards would endanger the continuation of military production. In its judgment, the Court of Justice notes that the Treaty allows Member States to take measures that are necessary for the protection of the essential interests of their security which are connected with the production of or trade in arms, munitions and war material. The recognition of that protection must not, however, adversely affect competition in relation to products which are not intended for specifically military purposes. The Treaty draws a strict distinction between the production of or trade in war material and all other economic activity, which also applies in the case where the same undertaking carries out activities in both military and civil spheres. The Court finds that the General Court was fully entitled, therefore, to reject EN’s argument that, when a civil activity is a ‘necessary corollary’ to the activity of military production, all aid measures should be excluded from the scope of the Treaty. Similarly, the General Court acted correctly in concluding that only aid measures covering military activity must be assessed under the special procedure laid down by the Treaty.

In addition, the division between military and civil activities (75% and 25% respectively), established by the Commission, was confirmed by the Greek authorities; in any event, the General Court’s assessments are factual in nature and therefore excluded from review by the Court in the context of the present appeal. Lastly, the Court goes on to say that the General Court was fully entitled to hold that, in the context of the administrative procedure conducted by the Commission, EN did not enjoy rights of defence (like a Member State), but merely the right to be involved (which is what actually occurred).
For all those reasons, the Court dismisses EN’s appeal in its entirety and thus confirms the validity of the Commission’s decision.