Court of Justice 12-10-1978 ECLI:EU:C:1978:180

I — Facts and written procedure

1. In application of Article 70 of the Treaty establishing the European Coal and Steel Community and of the second paragraph of Article 10 and the second subparagraph of the third paragraph of Article 10 of the Convention on the Transitional Provisions annexed to the Treaty (hereinafter referred to as ‘the Convention’), the representatives of the governments of the Member States of the ECSC, meeting in Council, signed on 21 March 1955 an Agreement on the Establishment of Through International Railway Tariffs (hereinafter referred to as ‘the 1955 Agreement’, Official Journal, English Special Edition 1952 to 1958, p. 25), subsequently supplemented and amended by the Agreements of 16 March 1956 (Official Journal, English Special Edition 1952 to 1958, p. 40) and 23 March 1959 (Official Journal, English Special Edition 1959 to 1962, P 25).

The objectives pursued by the said agreement are inter alia those laid down in the second paragraph of Article 70 of the Treaty and more particularly in the second paragraph of Article 10 and the second subparagraph of the third paragraph of Article 10 of the abovementioned Convention, in other words:

• the elimination, in traffic between Member Sutes, of discrimination in rates and conditions of carriage of every kind which is based on the country of origin or destination of products;

• the establishment of through international tariffs incorporating a degressive factor taking account of total distance for carriage within the Community, without prejudice to the apportionment of the receipts among the carriers concerned.

2. Moreover, by means of the Council Decision of 13 May 1965 on the harmonization of certain provisions affecting competition in transport by rail, road and inland waterway (Official Journal, English Special Edition 1965 to 1966, p. 67), amended by the Council Decision of 27 January 1970 (Official Journal, English Special Edition 1970 (I), p. 64), the European Economic Community began action to eliminate disparities liable to distort competition in the transport sector.

In implementation of that decision the Council adopted the following measures:

• Regulation (EEC) No 1191/69 of the Council of 26 June 1969 on action by Member Sutes concerning the obligations inherent in the concept of a public service in transpon by rail, road and inland waterway (Official Journal, English Special Edition 1969 (I), p. 276);

• Regulation (EEC) No 1192/69 of the Council of 26 June 1969 on common rules for the normalization of the accounts of railway undertakings (Official Journal, English Special Edition 1969 (1), p. 283);

• Regulation (EEC) No 1107/70 of the Council of 4 June 1970 on the granting of aids for transport by rail, road and inland waterway (Official Journal, English Special Edition 1970 (II), p. 360) amended by Regulation (EEC) No 1473/75 of 20 May 1975 (Official Journal 1975, No L 152, p. 1);

• Decision No 75/327/EEC of 20 May 1975 on the improvement of the situation of railway undertakings and the harmonization of rules governing financial relations between such undertakings and States (Official Journal 1975, No L 152, p. 3).

The object of those measures is the improvement of the situation of railways and the long-term achievement of financial balance for them. For that purpose Article 13 of the Decision of 20 May 1975 distinguishes between:

• deficit subsidies provided for by that same provision,

• compensation granted under Regulation No 1191/69 and Regulation No 1192/69,

• financial assistance referred to in Article 5 (1) of the same decision, and

• aid granted in respect of categories of aid provided for by Article 3 of Regulation (EEC) No 1107/70 and Article 9 (2) of the said decision.

3. Since 1971 the Belgian Government has granted to the Société Nationale des Chemins de Fer Belges (hereinafter referred to as ‘the SNCB’) aid intended to compensate for the charges resulting from the application to ECSC products of the through international railway tariffs laid down in accordance with the 1955 Agreement. The grant of that aid was initially justified by Article 2 (5) of Regulation No 1191/69 of the Council as compensation for ‘tariff obligations’ within the meaning of that provision.

Article 2 (5) of Regulation No 1191/69 provides as follows

‘For the purposes of this regulation, “tariff obligations” means any obligation imposed upon transpon undertakings to apply, in particular for certain categories of passenger, for certain categories of goods, or on certain routes, rates fixed or approved by any public authority which are contrary to the commercial interests of the undertaking and which result from the imposition of, or refusal to modify, special tariff provisions.

The provisions of the foregoing subparagraph shall not apply to obligations arising from general measures of price policy applying to the economy as a whole or to measures taken with respect to transpon rates and conditions in general with a view to the organization of the transpon market or of pan thereof.’

Article 2 (1) and Article 2 (2) provide as follows:

‘1.

Public service obligations means obligations which the transpon undertaking in question, if it were considering its own commercial interests, would not assume or would not assume to the same extent or under the same conditions.

2.

Public service obligations within the meaning of paragraph 1 consist of the obligation to operate, the obligation to carry and tariff obligations.’

4. Subsequently, because of the objections raised by the services of the Commission, the Belgian Government altered the legal basis of the aid in question by justifying the latter on the basis of Article 3 (2) of Regulauon No 1107/70 of the Council, which provides as follows:

‘—of Council Regulation (EEC) No 1192/69 … and of Council Regulation (EEC) No 1191/69 … Member States shall neither take co-ordination measures nor 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:

1. …

   …

   …

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, where payments are made to rail, road or inland waterway transpon undertakings as compensation for public service obligations imposed on them by the Sute or public authorities and covering either:

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

   • or …

3. …’

By letter of 24 June 1974 the Commission observed as follows:

‘Just as it is impossible to consider the application of through international railway tariffs for the carnage of ECSC products as a tariff obligation within the meaning of Article 2 (5) of Regulation (EEC) No 1191/69, it is impossible to consider as compatible with the Common Market, pursuant to Article 3 (2) of Regulation (EEC) No 1107/70, aid whose objective is to cover the same charges’

On 8 October 1975 it adopted a definitive view-point on this matter, declaring that the aid in question came within Articles 92 and 93 of the EEC Treaty and that it could not be justified either under Article 92 (2) and (3) of the Treaty or on the basis of Article 3 of Regulation No 1107/70.

5. The Belgian Government submitted its observations by letter of 14 November 1975. The Commission considered, having regard to those observations and to those of the Netherlands and French Governments, that it was unable to change its point of view and on 4 May 1976 adopted on the basis of Article 93 of the EEC Treaty a decision ‘on aid from the Belgian Government to the Société Nationale des Chemins de Fer Belges (SNCB) for through international railway tariffs for coal and steel’ (Official Journal 1976, No L 229, p. 24), which was notified to the Sute to whom it was addressed by letter of 6 May 1976.

Article 1 of that decision provides as follows:

‘The aid granted by the Belgian Sute to the Société Nationale des Chemins de Fer Belges (SNCB) for through international railway tariffs for coal and steel on the basis of Article 3 (2) of Council Regulation (EEC) No 1107/70 of 4 June 1970 on the granting of aids for transpon by rail, road and inland waterway, as amended by Regulation (EEC) No 1473/75 of 20 May 1975 is not compatible with the Common Market to the extent that it should be granted under Article 4 of the said regulation.

The Kingdom of Belgium shall take the necessary action, as soon as possible and at the most within three months, either to terminate the aid in question or to modify its legal base in order that this aid may be granted under the provisions of Article 4 of Regulation (EEC) No 1107/70.’

Moreover, the last recital of the preamble to that decision provides as follows:

‘… these considerations do not prevent the Belgian Government from granting the aid in question under Article 4 of Regulation (EEC) No 1107/70; … this formal distinction is an important one of principle as regards action for the progressive improvement of the situation of the railways undertaken as part of the common transport policy’.

Article 4 of Regulation No 1107/70 provides as follows:

‘Until the entry into force of Community rules adopted pursuant to Article 8 of the Council Decision of 13 May 1965 and without prejudice to the provisions of Regulation (EEC) No 1191/69 and of Regulation (EEC) No 1192/69, the provisions of Article 3 shall not apply to payments by States and public authorities to railway undertakings made by reason of any failure to achieve harmonization, as laid down in the said Article 8, of the rules governing the financial relations between railway undertakings and States, the purpose of such harmonization being to make those undenakings financially autonomous.’

The Commission, finding that the Belgian Government had not adopted the measures necessary to comply with that decision within the prescribed period, lodged the present application under the second subparagraph of Article 93 (2) of the EEC Treaty.

6. After hearing the repon of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure, having requested the panics to supply ce nain detailed information and to produce certain documents concerning the facts relating to the grant of the aid in question.

II — Conclusions of the parties

The applicant claims that the Court should :

1. Declare that, by not complying with the Commission Decision of 4 May 1976 on aid from the Belgian Government to the Société Nationale des Chemins de Fer Belges (SNCB) for through international railway tariffs for coal and steel within the period prescribed by the Commission, the Kingdom of Belgium has failed to fulfil an obligation under the Treaty;

2. Order the Kingdom of Belgium to bear the costs.’

The defendant contends that the Court should:

‘Declare that the Commission's application is unfounded and order the Commission to bear the costs.’

III — Submissions and arguments of the parties

(A) The Commission claims principally that the purpose of this application is a declaration that the Kingdom of Belgium has failed to fulfil its obligations under the first subparagraph of Article 93 (2) of the EEC Treaty and not the review of the legality of the decision of 4 May 1976.

It maintains that the Belgian Government, in not complying with that decision within the prescribed period, has failed to fulfil an obligation under the Treaty and that the matter has now been referred to the Court of Justice under the second subparagraph of Article 93 (2). Thus the submissions put forward during the present procedure by the defendant should be limited to those which come within that procedure (for example a submission that there is no decision, that the decision does not prescribe a period for compliance with the decision or that the Member State has in fan complied with the decision) and which do not include the examination of the validity of the decision.

If the defendant wished to conten the validity of the decision it should have instituted proceedings before the Court of Justice in accordance with the procedure laid down in Article 173 of the Treaty which gives the Member States the opportunity of having the legality of a decision adopted by the Commission reviewed by the Court within a period of two months from the notification of the measure to the applicant.

However, as the decision of 4 May 1976 was notified to the Belgian Government on 6 May 1976 this period has long since elapsed. To permit the defendant, in those circumstances, to call in question the legality of the decision concerned would be contrary to the logic of the system of legal proceedings before the Court of Justice established by the Treaty and would infringe the principle of legal certainty which Article 173 of the Treaty is intended precisely to guarantee.

It is necessary to observe in this respect that Article 92 (1) of the Treaty, as applied by a Commission decision declaring that an aid is not compatible with the common market, is a provision which is ‘directly applicable’ within the national legal systems of the Member States. The legal protection which national courts must give third parties concerned would be seriously threatened if permission were given to contest the legality of such a decision even outside the period laid down for that purpose by Article 173 of the Treaty.

Nor, moreover, may the Belgian Government any longer call in question the legality of that decision by means of Article 184 of the Treaty, the application of which is expressly limited to proceedings involving ‘a regulation’ of the Council or of the Commission and not as in the present case a ‘decision’ of the Commission. Moreover, in the case of aid granted by a Sute it is of the utmost importance that the Commission should be able to adopt its decisions very quickly, that the Member States should reaa within the period laid down in Anide 173 of the Treaty if they wish to contest the validity of those decisions and that the Commission should be able to have at its disposal a reliable procedure to have those same decisions applied.

The Commission then observes with regard to admissibility that the decision has a correct legal basis. Although it is true that a specific provision (Anide 77) permitting certain aids is one of the rules laid down in the EEC Treaty concerning transport, nevertheless this sector is also subject to the general provisions concerning aid contained in the Treaty. An aid which may, under Anide 77 of the Treaty, benefit from a derogation from the general prohibition laid down in Article 92 is therefore subject to the procedure referred to in Anide 93 if it appears that the particular conditions of its grant are not in accordance with the provisions laying down that derogation.

With regard to the substance of the case the Commission claims in particular as follows :

• Moreover, there is no requirement with regard to the application of Article 92 (1) of the Treaty that it must be ‘proved’ that the aid in question ‘distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods’ and that it ‘affects trade between Member States’. It is sufficient for the Commission to establish that the aid in question is ‘liable’ to distort or to threaten to distort competition and to affect trade between Member Sutes.

  In this case these two conditions are fulfilled (see the fifth recital of the preamble to the decision). On the one hand, granting the aid in question enables the SNCB to keep its tariffs lower than they should be and to charge its users a more favourable tariff. On the other land, aid granted to a single undertaking or to a single mode of transport with the purpose of reducing the rates applied for international traffic automatically affects trade between Member States in that it distorts or threatens to distort competition by favouring certain undertakings or certain products.

  The fact that the Commission acknowledged in its decision that the aid in question may be granted under Article 4 of Regulation No 1107/70 does not imply that trade between Member States is not affected by it: even aid which has such an effect may be authorized as an exception if it remains within the context of the derogations laid down in the Treaty.

• The Belgian Government underestimates the substantial difference between ‘compensation for public service obligations’ under Article 3 (2) of Regulation No 1107/70 and a ‘deficit subsidy’ coming under Article 4 of that regulation.

  In the first case, it is fair that the railway undertaking should receive compensation for the commercial disadvantage which it suffers because of a tariff obligation. The compensation thus granted is not in principle liable to have an appreciable effect on the transpon market. On the other hand, a deficit subsidy is liable to creau or to prolong inacceptable distortions on that same market and the grant thereof, although motivated by the need to achieve the financial equilibrium of railway undertakings, is therefore of a provisional nature.

• It is, moreover, incorrect to claim that the Kingdom of Belgium cannot make up ‘the disadvantages suffered internationally’ by increasing its domestic tariffs or the revenue of the SNCB would decrease and thereby increase the total deficit of that undertaking because of the constraints imposed by demand and supply and the competition on the domestic and international markets.

The railways generally apply a system of compilation of rates based on a range of three tariffs:

• general tariffs based on three main criteria of differentiation (nature of the goods, distance and laden weight);

• special tariffs applicable to particular situations; and

• special agreements.

An increase in general domestic tariffs by a rise in the terminal charge and distance charge is possible and those tariffs should be increased taking into consideration above all costs. This increase does not, however, imply that all domestic tariffs must be increased by the same amount. The other two categories — special tariffs and special agreements — enable the necessary adjustments to be made in each case and give the whole system the flexibility which is essential in order to facilitate rapid adaptation of rates to the variable situation on the transpon market.

The abolition of the aid in question should therefore logically lead to an increase in the ECSC tariffs or the total deficit would rise by an amount equal to that of the aid granted. However, to the extent to which the total charges borne by the railway network are not completely covered by the revenue, in particular because of the fact that the ECSC tariffs are inadequate, the Belgian Government is entitled to grant a deficit subsidy under the provisions of Article 4 of Regulation No 1107/70 and Article 13 of the decision of 20 May 1975.

• Even if the SNCB was, so far as the transpon in question is concerned, an undertaking entrusted with the operation of services of general interen and thus came within Article 90 (2) of the EEC Treaty, it does not nevertheless follow that it is exempt from Anide 92 of the Treaty.

  It is also subject to the provisions in the Treaty relating to the common transport policy and to the measures adopted by the Council regulating the grant of aid to such undertakings. The application of those measures, which were laid down on the basis of the need to develop a common transpon policy for railway undertakings, cannot be considered as forming an obstacle to the accomplishment in law or in fact of the special task entrusted to those undertakings and as justifying, therefore, the grant of the aid in question.

• Moreover, the obligations imposed on the SNCB by the 1955 Agreement are not per se public service tariff obligations within the meaning of Regulations Nos 1191/69 and 1107/70.

It follows from Anide 2 (5) of Regulation No 1191/69 that ‘tariff obligations’ within the meaning of that regulation are solely those which arise from direct intervention by the public authorities so as to control the level of tariffs and which do not amount to intervention by the public authorities within the context of the general economic policy or of the organization of the transpon market.

So far as Regulation No 1107/70 is concerned, Article 3 (2) thereof refers only to ‘tariff obligations not falling within the definition given in Article 2 (5) of Regulation (EEC) No 1191/69’. which are imposed on transport undertakings ‘by the Sute or public authorities’ Although the concept of tariff obligations is not defined in Regulation No 1107/70 it must, however, be understood, in the light of the definition laid down in Regulation No 1191/69, as applying solely to the obligations which result from intervention by the public authorities and which have a direct influence on the level of tariffs This is not the case with regard to obligations created by the 1955 Agreement. The latter does no more than lay down certain general rules affecting the compilation of ECSC transpon rates, creating a framework for the operation of the carriage of coal and steel and applying in an identical manner to all important railway undertakings in the common market. These rules differ, therefore, from the unilateral measures adopted by Member States which alone may be considered as public service obligations within the meaning of the two above-mentioned regulations and of the Council Decision of 13 May 1965.

(B) The defendant replies first of all that although the provisions of the Treaty are based on the principle of legal certainty, they are also concerned to reconcile that principle with that of natural justice according to which any person faced with a situation in which his rights are at issue should be able to defend those rights and to appeal against any decision imposed on him. For this reason the principle of legal certainty, after the expiry of the period for the lodging of an application for annulment, is far from absolute. Article 184 of the Treaty provides for an exception to that principle and another exception was permitted by the Court in Joined Cases 6 and 11/69, Commission of the European Communities v French Republic [1969] ECR 523, from which it follows precisely that where the measure called in question has no legal basis and must be considered null and void, it is also possible to put forward the plea of illegality in spite of the fact that the period for lodging a direct anion has expired.

Finally, it is necessary to recall a third exception, in other words that the Court may, by means of Article 177 of the Treaty, be called upon to give a ruling as to the validity of a Commission decision even after the expiry of the above-mentioned period. Moreover, it is particularly important to distinguish a ‘reasoned opinion’ within the meaning of Article 169 of the Treaty from a ‘decision’ taken under Article 93 of the Treaty. First, the two measures in question both constitute a stage in a procedure with the same objective, in other words a possible declaration that a Member State has infringed its obligations under the Treaty. By virtue of this common characteristic, the procedures resulting in one or other of those measures should therefore grant the same guarantees of defence to the Member Sute concerned whether proceedings have been instituted against that Sute under Article 169 or under Article 93 of the Treaty. Secondly, there is a basic difference between the measures referred to by those two provisions. When the Commission issues a ‘reasoned opinion’ it merely indicates to the Member Sute concerned the existence of an infringement against the Treaty, after giving it an opportunity to submit its observations in that respect. A ‘decision’ within the meaning of Anide 93, on the other hand, constitutes the rule of law whose infringement is invoked by the Commission. In this case the Commission is using the discretion given it by Anide 93 to sute what it considers to be an infringement against Anide 92.

A diren action under Article 173 of the Treaty is indeed possible but the action, compared to the guarantees of defence given within the context of Article 169, is only secondary protection because of the fan that the decision taken on the basis of Article 93 is constitutive Thus the possibility of a direct action cannot prevent the Court, where an action is brought before it, from being under a duty to examine the whole problem by analogy with the procedure under Article 169.

The defendant concludes on this point by emphasizing that the considerations developed by the Court in Joined Cases 6 and 11 /69 mentioned above also apply to the present case in view of the constitutive nature of the Commission decision based on Article 93 and that it is, in any case, normal for the Court to consider the problem which forms the substance of the case in this case, since this problem may come before it again in the form of a question submitted to it for a preliminary ruling or as the result of a subsequent but analogous Commission decision.

The defendant, without putting forward a genuine defence but in order better to determine the problems of the substance of the case, observes that the Commission lodged its application wrongly relying upon Article 93 (2) of the EEC Treaty. Any procedure under that anide can only concern aid which in the first place comes within Article 92 of the EEC Treaty. However, the compensation referred to in Anide 2 (5) of Regulation No 1191/69 and that in question in Anide 3 (2) and Anide 4 of Regulation No 1107/70 does not come within the scope of Anide 92. That anide in fan provides that the aid described therein is incompatible ‘save as otherwise provided in this Treaty’. One of those derogations is precisely laid down in Anide 77 of the Treaty which declares that aids are compatible with the 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’.

Proceeding to the discussion of the substance of the case, the defendant claims that in order to justify a procedure on the basis of Anide 93 of the EEC Treaty it is necessary to establish that the aid in question is incompatible with the common market within the meaning of Article 92 of the Treaty or more exactly that:

• it affects trade between Member Sutes;

• it distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods.

1. So far as the first of those conditions is concerned it is necessary to note that in contrast to the provisions of Anide 85 (1) of the Treaty a mere possibility of affecting trade is insufficient: trade must be dearly and actually affected by the aid in question. This implies that the burden of proof which the Commission must discharge in this respect is heavier than that required by the above-mentioned Article 85. However, in the present case no such evidence has been supplied. The Commission itself has moreover admitted that the aid in question may be granted to the extent to which it is linked to Anide 4 of Regulation No 1107/70. Secondly, the Commission's reasoning is based on a false premise, in other words that the SNCB could compensate for the charge arising from through international tariffs by an increase in the domestic tariffs whereas, because of the measure in question, it can keep its rates lower than they should be. The international tariffs are calculated on the basis of two national factors, the national terminal charge and the national distance charge. However, the level of those two factors cannot be established on the basis of the international tariff but on the basis of the supply and demand on the national and international market, of the competition on those two markets between the various means of transpon and of the cost price of transport. The present level of domestic tariffs is in fact the level which maximizes the revenue of the SNCB, taking into account costs and the connexion between the national and international tariff. In these circumstances, to increase the national rate would have the effect, in view of the existing situation as regards competition, of reducing the volume of transpon by rail so greatly that it would inevitably result in a decrease in the SNCB's revenue. It is moreover impossible from the practical and operational point of view to attempt to reduce by means of special tariffs and special agreements the unfavourable effects on competition which result from the burden of the through international tariffs. Besides, it is unjustifiable to make users of the national network bear the loss in revenue caused by international obligations which do not take into account the actual cost of international transpon by increasing the national charges out of proportion to the actual cost of national transpon and to the possibilities of the market.

2. So far as the second of the abovementioned conditions is concerned, the evidence of threats to competition required by Anide 92 may be compared to that required within the context of Anide 85 (1) of the Treaty in respect of ‘concerted practices’: within the context of Article 92 the Commission must show concrete effects or at lean a threat of concrete effects. There too the Commission has however been guilty of a failure to act. Moreover, since the subsidy in question in the very opinion of the Commission may be granted on the basis of Anide 4 of Regulation No 1107/70, there can be no question in this case that the aid ‘distons or threatens to distort competition by favouring certain undertakings or the production of certain goods’. Far from distorting competition, the objective of the aid in question is, on the contrary, to compensate for a real economic disadvantage imposed on the SNCB and to redress a situation affected by the imposition, contrary to its economic interests, of through international tariffs.

• Besides, even supposing that the aid granted is incompatible with the common market within the meaning of Anide 92 (1) of the EEC Treaty, it is necessary to apply Article 90 (2) of the Treaty since the SNCB is precisely an undertaking entrusted with the operation of services of general economic interest. It follows from this bitter provision that the SNCB is subject to any provisions of the Treaty, including Articles 85 to 94, only to the extent to which their application does not form an obstacle to the performance in law or in fact of the particular task given it. This is so in the present case, in view of the fact that it is impossible for the Belgian State to reabsorb, by an increase in the domestic tariffs, the substantial loss of revenue caused to the SNCB by the through international tariffs and the essentially provisional nature — even the Commission admits this — of a deficit subsidy.

• In order to define the ‘tariff obligations’ to which Article 3 (2) of Regulation No 1107/70 refers, it is necessary to refer to the general definition of ‘public service’ obligation given in Article 2 (1) of Regulation No 1191/69 which, in the express words of Article 2 (2) also includes tariff obligations. It follows from this general definition that the concept of tariff obligation in the broad sense of the word to which Anide 3 (2) refers, in contrast to that of tariff obligation in the strict sense of the word, used in Article 2 (5) of Regulation No 1191/69, applies to any obligation concerning tariffs which ‘if it were considering its own commercial interests, [the transpon undertaking] would not assume or would not assume to the same extent or under the same conditions’. However, the obligation arising from the 1955 Agreement corresponds precisely to such a definition.

  First of all, the Commission itself is aware that the 1955 Agreement does not take sufficient account of certain cost factors and is thus contrary to the commercial interests of the railways. Secondly, the 1955 Agreement, far from merely laying down a method for the calculation of international tariffs, establishes the level of those tariffs by creating a link between them and the domestic tariffs whose level cannot be freely fixed at the will of the SNCB. The rules imposed by the Agreement are far from being ‘general’. They concern only the users of the railways and not users of other means of transport, are addressed specifically only to a very clearly defined number of undertakings and refer only to the carriage of ECSC products: they are therefore quite ‘specific’ rules.

  Moreover, the fact that the obligations arising from the 1955 Agreement spring from the implementation of the ECSC Treaty does not enable the conclusion to be drawn that they do not constitute tariff obligations. There is no reason why an obligation arising from the ECSC Treaty cannot constitute a tariff obligation where it satisfies all the characteristics of such an obligation. Besides, Article 3 (2) of Regulation No 1107/70 makes no distinction between public service obligations imposed on the Member States by virtue of their own legislative power and public service obligations imposed on the Member States as the result of a Community measure. Moreover, the tariff obligation imposed on the SNCB does not arise directly or indirectly from such a measure since the 1955 Agreement is not, in fact, a measure adopted by the Council but an agreement governed by public international law which is, it is true, provided for in Article 10 of the Convention but was freely negotiated and approved by the representatives of the Member States of the ECSC. This agreement goes further than Anide 10 of the Convention and Article 70 of the ECSC Treaty which the abovementioned Article 10 of the Convention is designed to implement, since it does not take into account in the rules for the compilation of rates for international carriage by rail of the transpon costs for the railway networks and, in particular, of the fan that international transpon does not exhibit the same features as domestic transport. The Agreement does not, thus, permit railway undertakings the possibility granted to other carriers of taking into account for the purpose of fixing their rates in international traffic as well as in domestic traffic costs corresponding to the various types of transport. The Agreement does not, therefore, merely apply the prohibition on discrimination: it goes further and involves a tariff obligation which may, if not must, be the subject of compensatory payments.

  The Commission itself has, moreover, recognized that the 1955 Agreement is imbued with concepts concerning tariff policy held by the governments and railways in the 1950s while fundamental changes have meanwhile occurred in this respect. In proposing to the Member States that this Agreement should be replaced by a new agreement involving realistic obligations for the railways it has acknowledged by implication that the 1955 Agreement involves for the railways obligations going beyond the mere application of the rule against discrimination laid down in the ECSC Treaty.

IV — Oral procedure

The parties presented oral argument at the hearing on 28 June 1978.

The Advocate General delivered his opinion at the hearing on 21 September 1978.

Admissibility

5 The Kingdom of Belgium objects that the application is inadmissible on the ground that it has no legal basis in the second subparagraph of Article 93 (2) of the Treaty.

6 In support of that objection it maintains that the compensation referred to both in Article 3 (2) and in Article 4 of Regulation No. 1107/70, constituting aid within the meaning of Article 77 of the Treaty, is, by virtue of that provision, removed from the scope of Article 92 of the Treaty, the first paragraph of which specifies expressly that it applies ‘save as otherwise provided in this Treaty’.

7 It claims that as the Commission's intervention in the present case cannot, therefore, be justified within the context of Article 92 of the Treaty, Article 93 cannot provide a valid legal basis for the present application.

8 Although in its defence the Belgian Government put forward this objection as ‘a mere observation’ made not ‘as a defence but solely in order better to determine the problems relating to the substance of the case’, it is however necessary to examine the validity of that objection.

9 By this objection, the Kingdom of Belgium claims in substance that the Commission Decision of 4 May 1976 is defective for lack of competence, a defect which, as it is one of those referred to in Article 173 of the Treaty, cannot, for the reasons given below, be examined within the context of this procedure.

10 Moreover, the effect of the application of Article 77 of the Treaty, which acknowledges that aid to transport is compatible with the Treaty only in well-defined cases which do not jeopardize the general interests of the Community, cannot be to exempt aid to transport from the general system of the Treaty concerning aid granted by the States and from the controls and procedures laid down therein.

11 To this effect, Article 3 (1) of Regulation No 1107/70, which was not amended by the above-mentioned Regulation No 1473/75, enumerates the cases and conditions in which an aid granted under Article 77 of the Treaty may be justified pursuant to that provision and Article 2 thereof specifies that ‘Articles 92 to 94 of the Treaty shall apply to aids granted for transport by rail, road and inland waterway’.

12/13 Since the Commission's action in this case was motivated by the finding that the aid in question comes within the prohibition laid down in Article 92 of the Treaty the application lodged as a result of that action therefore has its legal basis in the second subparagraph of Article 93 (2) of the Treaty. The objection of inadmissibility raised by the Kingdom of Belgium is therefore unfounded.

The substance of the case

14 The Kingdom of Belgium claims essentially that the initiation of a procedure on the basis of Article 93 of the Treaty against the aid in question is all the more unjustified in the present case, since the Commission has not established that this aid fulfils the conditions of incompatibility laid down in Article 92 (1).

15 Therefore the Kingdom of Belgium contests the validity of the present application by calling in question the legality of the decision of 4 May 1976 by which the Commission declared that the aid in question was incompatible with the common market.

16 The Commission maintains that since the Belgian Government did not lodge against that decision an application for annulment within the period of two months laid down by the third paragraph of Article 173 of the Treaty it is therefore now barred from contesting the legality of that decision within the context of these proceedings.

17 Article 93 (2) of the Treaty, which gives the Commission the necessary power to ensure application of and compliance with the principle laid down in Article 92, provides for a special procedure enabling that institution to give a ruling, apart from the exceptional and specific case referred to in the third subparagraph of Article 93 (2), as to the compatibility with the Treaty of both aid granted by the State or through State resources and, pursuant to Article 93 (3), of plans to grant or alter aid and to decide if necessary that it should be abolished or altered.

18 For this purpose, the first subparagraph of Article 93 (2) provides that if, after giving notice to the parties concerned to submit their comments, the Commission finds that aid is not compatible with the common market having regard to Article 92, or that such aid is being misused, ‘it shall decide that the Sute concerned shall abolish or alter such aid within a period of time to be determined by the Commission’.

19 Such a decision is, under the fourth paragraph of Article 189 of the Treaty, ‘binding in its entirety upon those to whom it is addressed’.

20 In so far as the Member Sute to whom it is addressed considers that it is unable to comply with that decision because it is legally unfounded it may contest the legality thereof by having recourse to the legal remedies available to it under Article 173 of the Treaty on the conditions laid down by that provision.

21 In view of the fact that the periods within which applications must be lodged are intended to safeguard legal certainty by preventing Community measures which involve legal effects from being called in question indefinitely, it is impossible for a Member Sute which has allowed the stria time-limit laid down in the third paragraph of Article 173 to expire without contesting by the means available under that article the legality of the Commission decision addressed to it to be able to call in question that decision by means of Article 184 of the Treaty when an application is lodged by the Commission on the basis of the second subparagraph of Article 93 (2) of the Treaty.

22 First, the objection provided for in Article 184 of the Treaty is limited under that provision to proceedings ‘in which a regulation of the Council or of the Commission is in issue’ and can in no case be invoked by a Member Sute to whom an individual decision has been addressed.

23 Secondly, it follows from the wording of the second subparagraph of Article 93 (2) of the Treaty, in particular from the words ‘in derogation from the provisions of Articles 169 and 170’, that the purpose of the application referred to therein may only be a declaration that the Member Sute concerned has failed to comply with a Commission decision compelling it to abolish or alter an aid within a specific period, whereas in the case of Articles 169 and 170 the application is directed against any failure of a Member Sute to fulfil one of its obligations under the Treaty.

24 In these circumstances, to permit a Member Sute to whom a decision adopted under the first subparagraph of Article 93 (2) has been addressed to call in issue the validity of that decision when an application referred to in the second subparagraph of Article 93 (2) has been lodged, in spite of the expiry of the period laid down in the third paragraph of Article 173 of the Treaty, would be impossible to reconcile with the principles governing the legal remedies established by the Treaty and would jeopardize the stability of that system and the principle of legal certainty upon which it is based.

25 Although it is true that the validity of a Community measure may be called in question by means of the procedure for obtaining a preliminary ruling referred to in Article 177 of the Treaty, in spite of the expiry of the period laid down in the third paragraph of Article 173 such a procedure, which is laid down in respect of all measures adopted by the institutions and corresponds solely to the requirements of the national courts, is nevertheless subject to objectives and rules different from those which govern the applications referred to in Article 173 of the Treaty, and cannot justify a derogation from the principle of the time-barring of applications as a result of the expiry of the periods within which proceedings must be brought, without thereby depriving Article 173 of its legal significance.

26 In the present case the Kingdom of Belgium does not contest that it has not complied with the Commission Decision of 4 May 1976.

27 The Kingdom of Belgium has therefore failed to fulfil its obligation under Article 93 in conjunction with Article 189 of the Treaty.

Costs

29 Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.

30 The defendant has failed in its submissions.