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10.5.

2003 EN Official Journal of the European Union C 112/11

Action brought on 27 February 2003 by Portuguese selectiveness element with regard to State aid cannot
Republic against the Commission of the European Com- necessarily have as its frame of reference the whole
munities of the territory of the Member State.

(Case C-88/03)

(2003/C 112/20) — Erroneous description of the measures in question


as State aid inasmuch as it disregards the fact that
they are justifiable by the nature and the scheme of
the tax system in general:

An action against the Commission of the European Communi-


ties was brought before the Court of Justice of the European
Communities on 27 February 2003 by the Portuguese Repub- the scheme laid down in Decreto Legislativo
lic, represented by L. Fernandes, acting as Agent, and by J.L. da Regional (Regional Legislative Decree) No 2/99/A
Cruz Vilaça and L.M. Romão, lawyers, with an address for on tax reductions for natural and legal persons does
service in Luxembourg. not amount to an exception to the application of
the tax system but rather an adaptation which falls
within the founding and guiding principles of the
Portuguese tax system, which is applicable to all
The applicant claims that the Court should: economic operators having their tax residence in
the Autonomous Region of Azores. Moreover, it
1. find the present application admissible; constitutes the corollary to a tax system which
follows a redistributive approach based on the
special situation of the Autonomous Region of
2. declare the present application well-founded and, accord- Azores as an outermost region rendering it materi-
ingly, annul the decision of the Commission of the ally different from other parts of Portugal, as well
European Communities C(2002) 4487 final (State Aid C as on the constitutional principles of autonomy,
35/02 (ex NN 10/2000) — Portugal), of 11 December solidarity and equality among all Portuguese
2002 on the part of the scheme adapting the national tax nationals.
system to the specific characteristics of the autonomous
region of the Azores with regard to the tax reductions
insofar as it takes the view that the tax reductions for
natural and legal persons having their tax residence in the
Autonomous Region of the Azores constitute State aid;
— Inadequate statement of reasons with regard to the effect
3. in the alternative, declare the present application well- on intra-Community trade and significant restrictions on
founded and annul in part the contested decision insofar competition:
as it finds incompatible with the common market the tax
reductions applicable to undertakings operating in the
financial sector and orders the applicant to recover the
amount concerned; The contested decision provides inadequate reasons inas-
much as it neither explains nor justifies the impact of
reductions in personal income tax (IRS) and in corpor-
4. order the defendant to pay the costs of the proceedings, ation tax (IRC), applicable to any person having their tax
including those incurred by the applicant. residence in the Autonomous Region of Azores, on trade
between the Member States or the significant distortion
of competition which will arise from the abovementioned
measures. It merely states that, because some of the
undertakings pursue economic activities involving trade
Pleas in law and main arguments between the Member States, it follows, by some obscure
fatalistic logic, that the condition regarding the effect on
— Errors of law in the application of Article 87(1) EC: trade is met.

— Erroneous description of the measures in question


as State aid by reference to the concept of territorial
selectiveness:
— Manifest error of assessment of the facts for the purposes
The constitutional and legal circumstances of the of Article 87(3)(a) EC, breach of the principles of
relationship between the Portuguese State and its sound administration, equality and proportionality and
autonomous regions mean that analysis of the infringement of Article 299(2) EC:
C 112/12 EN Official Journal of the European Union 10.5.2003

The additional costs of transport and related infrastruc- Furthermore, the defendant infringed the principle of
ture, energy, health, education, industry and services proportionality inasmuch as, in view of the elementary
resulting from the remoteness and insularity of the finding that the situation was absolutely identical with
Autonomous Region of the Azores also affect all under- regard to the abovementioned structural costs for under-
takings in the financial sector. Thus, the elevated cost of takings in the region which operate in the financial sector,
transporting goods to and from mainland Portugal and it should have similarly considered compatible with
between the islands is also reflected in that type of the common market the tax reductions applicable to
activity, since much of the equipment which banking and undertakings which operate in the financial sector, just as
insurance activities require is not available on the local it did in respect of undertakings not operating in the
market and must be imported and, in certain cases, financial sector and in the same terms.
transported between various islands. Furthermore, in
view of the dearth of specialists and qualified staff in the
Azores and the problems facing the educational system
there, certain specialised services which banks need are
not available in the region. They therefore have to
be provided by specialists from continental Portugal
(maintenance of equipment, auditing, consulting, trainers
for courses, etc.) In such cases, it is clear that anyone
employing such specialists ends up bearing air transport, Action brought on 28 February 2003 by the Commission
accommodation and subsistence costs. Likewise, short- of the European Communities against the Portuguese
comings in the education system and the lack of special- Republic
ists and qualified staff in the region results in a lack of
specific training being offered, the alternative being to
send staff to continental Portugal. However, undertakings (Case C-92/03)
operating outside the financial sector are, in the main,
small- and medium-sized enterprises operating in or for
(2003/C 112/21)
the local market, with establishments or installations on
only one island. Consequently, the additional costs arising
from ‘the effect of the special circumstances of the
Azores’ affect them much less than banking or insurance
institutions which have offices spread out across various An action against the Portuguese Republic was brought
islands. Moreover, the region’s economic underdevelop- before the Court of Justice of the European Communities on
ment and the lower income and purchasing power of its 28 February 2003 by the Commission of the European
population penalise, to a greater extent, that kind of Communities, represented by A. Caeiros and M. Konstantinidis,
activity. acting as Agents, with an address for service in Luxembourg.

The applicant claims that the Court should:

1. Declare that, by failing to adopt the provisions necessary


to attribute priority to the treatment of waste oils by
regeneration, irrespective of whether technical, economic
By failing to take account of studies previously submitted or administrative constraints make it possible, the Portu-
in State aid cases relating to the Autonomous Region of guese Republic has failed to fulfil its obligations under
Madeira and the correlation with all the additional costs Article 3(1) of Council Directive 75/439/EEC ( 1) of
quantified and set out and which arise directly from the 16 June 1975 on the disposal of waste oils (as amended
structural deficiencies of the Autonomous Region of the by Directive 87/101/EEC), as amended by Directive 87/
Azores so far as concern also those undertakings which 101/EEC (2) of 22 December 1986;
operate in the financial sector, the defendant manifestly
infringed the principle of sound administration. 2. Order the Portuguese Republic to pay the costs.

Pleas in law and main arguments

None of the legislative or regulatory provisions referred to by


By the same token, the contested decision further the Portuguese authorities as having been adopted in order to
infringes the principle of equality, since it flagrantly implement Directive 75/439/EEC attributes priority to the
discriminates against undertakings operating in the finan- treatment of waste oils by regeneration. The Portuguese
cial sector, which are affected just as much as or more authorities themselves confirm that, 12 years after the date set
than others by the ‘the effect of the special circumstances by Directive 87/101/EEC, they have still not adopted the
of the Azores’. necessary measures to attribute such priority.