Preussenelektra A.G. v. Schleswag A.G., (Windpark Reussenköge III GmbH

and Another, intervening) (Case C-379/98)

Before the Court of Justice of the European

Communities

ECJ

(Presiding, RodrÍguez Iglesias P.; Gulmann, Wathelet and Skouris PP.C.;

Edward, Puissochet, Jann, Sevón and Schintgen ( Rapporteur) JJ.) Mr Francis Jacobs, Advocate General.

13 March 2001

H1 Reference from Germany by the Landgericht Kiel (Regional Court, Kiel) under

Article 177 of the E.C. Treaty (now Article 234 E.C.). H2 State aids--electricity--reference for preliminary ruling--admissibility-- national legislation requiring electricity suppliers to purchase electricity at minimum prices and apportioning the costs of such purchase between the suppliers and upstream network operators--system established by national legislation not constituting State aid under Article 92 of the E.C. Treaty (now, after amendment, Article 87 E.C.)--advantages not granted directly or indirectly through State resources--provisions not incompatible with Article 30 of the E.C. Treaty (now, after amendment, Article 28 E.C.). H3 P operated a number of power stations and an electricity distribution network in Germany. S was a regional electricity supplier which bought electricity to supply to its customers. P owned a majority share-holding in S and S purchased electricity almost exclusively from P. National legislation required electricity suppliers, such as S, to purchase a certain proportion of their electricity at minimum prices from renewable energy sources in their area of supply. Where this obligation caused undue hardship to suppliers, they were entitled to pass on the cost of such purchases to upstream electricity network operators, such as P. In April 1998, in accordance with the provisions applying in situations of undue hardship, P paid a sum to S. P applied to the national court, seeking an order requiring S to repay a proportion of that sum. P argued that the national

legislation under which the sum had been paid was contrary to the directly applicable provisions of the Treaty on State aid and was therefore invalid. S defended the claim, *834 arguing that, while the national legislation constituted a modified aid scheme, the provision under which P paid the disputed sum to S was merely a redistribution rule and was not, taken in its own right, in the nature of State aid within Article 92 of the E.C. Treaty (now, after amendment, Article 87 E.C.). The national court sought a preliminary ruling as to the application of the Treaty provisions on State aid to this case and as to whether the national legislation was compatible with Article 30 of the E.C. Treaty (now, after amendment, Article 28 E.C.). W and L intervened in the main proceedings, challenging the admissibility of the reference for a preliminary ruling on a number of grounds. Held: Admissibility of the question for a preliminary ruling H4 (a) It was solely for the national court to determine both the necessity of a reference for a preliminary ruling and the relevance of the questions submitted to the Court. However, exceptionally, where the request bore no relationship to the facts of the proceedings, where the problem referred was hypothetical or where the Court had insufficient factual or legal material before it, a request from a national court was to be refused. [38]-[39] Union Royale Belge des Societes de Football Association and Others v. Bosman and Others (C-415/93): [1995] E.C.R. I-4921; [1996] 1 C.M.L.R. 645; Foglia v. Novello (244/80): [1981] E.C.R. 3045; [1982] 1 C.M.L.R. 585; Idéal Tourisme SA v. Belgium (C-36/99): [2000] E.C.R. I-6049; and Kachelmann v. Bankhaus Hermann Lampe KG (C-322/98): [2000] E.C.R. I-7505, followed. H5 (b) In this case, accordingly, it was for the national court to ascertain the facts which had given rise to the dispute and to establish the consequences for the judgment which it was required to deliver. P was seeking repayment of the sum paid by it under the national legislation and, therefore, the dispute was not hypothetical. While S itself had an interest in challenging the national legislation, the dispute in the main proceedings concerned the sum paid by P to S and not any aid allegedly paid by S to the producers of electricity from renewable energy sources. Accordingly, the dispute in the main proceedings could not be regarded as a procedural device to induce the Court to rule on aspects of Community law that did not serve any objective requirement relating to that dispute. That conclusion was supported by the fact that the national court allowed W and L to intervene in the main proceedings in support of S. The fact that P was S's main shareholder did not deprive the dispute of its genuine character. The questions raised by the national court relating to the Treaty were, in any event, relevant and it was, therefore, necessary for the Court to give answers to the questions referred. [40]-[53] World Wildlife Fund and Others v. Autonome Provinz Bozen and Others (C-435/97): [1999] E.C.R. I-5613; [2000] 1 C.M.L.R. 149, followed *835 . Whether the national law breached Article 92 of the E.C. Treaty (now, after amendment, Article 87 E.C.) H6 (a) There was no dispute that the national legislation conferred an economic

benefit on producers of electricity from renewable energy sources. Article 92 of the E.C. Treaty provided that any aid granted by a Member State, or through State resources, in any form whatsoever which distorted or threaten to distort competition by favouring certain undertakings or the production of certain goods was incompatible with the Common Market in so far as it affected trade between Member States. Only advantages granted directly or indirectly through State resources were to be considered aid within the meaning of Article 92. All advantages granted by the State did not, however, constitute aid. [54]-[58] Ministere Public of the Netherlands v. Van Tiggele (82/77): [1978] E.C.R. 25; [1978] 2 C.M.L.R. 528; Sloman Neptun v. Bodo Ziesemer (C 72- 73/91): [1993] E.C.R. I-887; [1995] 2 C.M.L.R. 97; Kirsammer-Hack v. Sidal (C-189/91): [1993] E.C.R. I-6185; [1994] I.R.L.R. 185; Viscido and Others v. Ente Poste Italiane (C 52-54/97), 7 June 1998: [1998] E.C.R. I-2629; [1998] 3 C.M.L.R. 184; Ecotrade Srl v. Altigorni E Ferriere di Servola SpA (C-200/97): [1998] E.C.R. I-7907; [1999] 2 C.M.L.R. 804; Industrie Aeronautiche E Meccaniche Rinaldo Piaggio v. International Factors Italia and Others (C-295/97): [1999] E.C.R. I-3735, followed. H7 (b) In the case at issue, the obligation placed on private electricity suppliers to purchase electricity produced from renewable energy sources at fixed minimum prices did not involve any direct or indirect transfer of State resources to undertakings producing that type of electricity. Therefore, the allocation of the financial burden arising from that obligation between private undertakings did not constitute a direct or indirect transfer of State resources either. In those circumstances, the fact that the purchase obligation was imposed by statute and conferred an undeniable advantage on certain undertakings was not capable of conferring upon it the character of State aid within the meaning of Article 92(1) of the E.C. Treaty. This was the case regardless of the fact that, as a result of the national legislation, undertakings such as P and S were likely to pay less tax to the State. [59]-[62] Sloman Neptun (C-72/91 & 73/91), supra; and Ecotrade (C-200/97), supra, followed. H8 (c) It was not necessary to interpret the provisions of the Treaty concerning State aid in conjunction with Article 5 of the E.C. Treaty (now Article 10 E.C.) as encompassing support measures which are decided upon by the State but financed by private undertakings. In that *836 regard, the interpretation of the provisions on State aid were to be contrasted with the Court's interpretation of Article 85 of the E.C. Treaty (now Article 81 E.C.). This Article concerned only the conduct of undertakings, while Article 92 referred directly to measures emanating from Member States. [63]-[65] Criminal Proceedings against Meng (C-2/91); [1993] E.C.R. I-5751, followed. H9 (d) Accordingly, a statutory provision such as that under consideration in the main proceedings did not constitute State aid within the meaning of Article 92 of the E.C. Treaty. [66] Whether the national law breached Article 30 of the E.C. Treaty (now Article 28 E.C.) H10 (a) Article 30 of the E.C. Treaty covered measures which were capable of hindering, directly or indirectly, actually or potentially, intra-Community trade. An

obligation placed upon traders of a Member State to obtain a certain percentage of their supplies from a national supplier limited the ability of those traders to obtain supplies from sources in other Member States. In this case, the purchase obligation in the national legislation applied only to electricity produced from renewable energy sources within the scope of that legislation and was, therefore, capable of hindering intra-Community trade. [68]-[71] Procurer du Roi v. Dassonville (8/74): [1974] E.C.R. 837; [1974] 2 C.M.L.R. 436; Campus Oil and Others v. Minister for Industry and Energy (72/83): [1984] E.C.R. 2727; [1984] 3 C.M.L.R. 544; and Du Pont de Nemours v. Unita Sanitaria Locale No. 2 di Carrara (C-21/88): [1990] E.C.R. I-889; [1991] 3 C.M.L.R. 25, followed. H11 (b) However, it was necessary to take account of the aim of the provision and of the particular features of the electricity market. In the case at issue, the national legislation served the useful aim of protecting the environment. Under Community legislation concerning the electricity market, some obstacles to trade in electricity between Member States remained in place. Accordingly, in the current state of Community law concerning the electricity market, legislation such as that under consideration in this case was not incompatible with Article 30. H12 Representation D. Sellner, Rechtsanwalt, for PreussenElektra AG. M. Nebendahl, Rechtsanwalt, for Schleswag AG. W. Ewer, Rechtsanwalt, for Windpark Reußenkoge III GmbH and Land Schleswig-Holstein. W.-D. Plessing and C.-D. Quassowski, acting as Agents, for the German Government. H. Rotkirch and T. Pynnä, acting as Agents, for the Finnish Government. V. Kreuschitz and P. F. Nemitz, acting as Agents, for the Commission of the European Communities. *837 H13 Cases referred to in the judgment: 1. Lorenz v. Germany (120/73), 11 December 1973: [1973] E.C.R. 1471. 2. Sloman Neptun v. Bodo Ziesemer (C 72-73/91), 17 March 1993: [1993] E.C.R. I-887; [1995] 2 C.M.L.R. 97. 3. Union Royale Belge des Societes de Football Association and Others v. Bosman and Others (C-415/93), 15 December 1995: [1995] E.C.R. I-4921; [1996] 1 C.M.L.R. 645. 4. Foglia v. Novello (244/80), 16 December 1981: [1981] E.C.R. 3045; [1982] 1 C.M.L.R. 585. 5. Idéal Tourisme SA v. Belgium (C-36/99), 13 July 2000: [2000] E.C.R. I-6049. 6. Kachelmann v. Bankhaus Hermann Lampe KG (C-322/98), 26 September 2000: [2000] E.C.R. I-7505. 7. World Wildlife Fund and Others v. Autonome Provinz Bozen and Others (C-435/97), 16 September 1999: [1999] E.C.R. I-5613; [2000] 1 C.M.L.R. 149. 8. Ministere Public of the Netherlands v. Van Tiggele (82/77), 24 January 1978: [1978] E.C.R. 25; [1978] 2 C.M.L.R. 528.

9. Kirsammer-Hack v. Sidal (C-189/91), 30 November 1993: [1993] E.C.R. I-6185; [1994] I.R.L.R. 185. 10. Viscido and Others v. Ente Poste Italiane (C 52-54/97), 7 June 1998: [1998] E.C.R. I-2629; [1998] 3 C.M.L.R. 184. 11. Ecotrade Srl v. Altifornia E Ferriere di Servola SpA (C-200/97), 1 December 1998: [1998] E.C.R. I-7907; [1999] 2 C.M.L.R. 804. 12. Industrie Aeronautiche E Meccaniche Rinaldo Piaggio v. International Factors Italia and Others (C-295/97), 17 June 1999: [1999] E.C.R. I-3735. 13. Criminal Proceedings against Meng (C-2/91), 17 November 1993; [1993] E.C.R. I-5751. 14. Procurer du Roi v. Dassonville (8/74), 11 July 1974: [1974] E.C.R. 837; [1974] 2 C.M.L.R. 436. 15. Campus Oil and Others v. Minister for Industry and Energy (72/83), 10 July 1984: [1984] E.C.R. 2727; [1984] 3 C.M.L.R. 544. 16. Du Pont de Nemours v. Unita Sanitaria Locale No. 2 di Carrara (C-21/88), 20 March 1990: [1990] E.C.R. I-889; [1991] 3 C.M.L.R. 25. H14 Further cases referred to by the Advocate General: 17. Foglia v. Novello (Foblia v. Novello I) (C-104/79), 11 March 1980: [1980] E.C.R. 745; [1981] 1 C.M.L.R. 45. 18. Biogen v. SmithKline Beecham Biologicals (C-181/95), 23 January 1997: [1996] E.C.R. I-717; [1997] 1 C.M.L.R. 704. *838 19. Bollmann v. Hauptzollamt Hamburg-Waltershof (62/72), 1 March 1973: [1973] E.C.R. 269. 20. Meilicke v. ADV/ORGA F. A. Meyer AG (C-83/91), 16 July 1992: [1992] E.C.R. I-4871. 21. Leclerc-Siplec v. TF1 Publicité and M6 Publicité (C-412/93), 9 February 1995: [1994] E.C.R. I-179; [1995] 3 C.M.L.R. 422. 22. Union Laitiere Normande v. French Dairy Farmers (244/78), 12 July 1979: [1979] E.C.R. 2663; [1980] 1 C.M.L.R. 314. 23. Dürbeck v. Hauptzollamt Frankfurt AM Main-Flughafen (112/80), 5 May 1981: [1981] E.C.R. 1095; [1982] 3 C.M.L.R. 314. 24. Eurico Italia v. Ente Nazionale Rigi (C 332, 333 & 335/92), 3 March 1994: [1994] E.C.R. I-711. 25. Criminal Proceedings against Fornasar and Others (C-318/98), 2 June 2000: [2000] E.C.R. I-4785. 26. Pistre, Barthes, Milhai and Oberti v. Ministere Public (C 321 & 324/94), 7 May 1997: [1997] E.C.R. I-2343; [1997] 2 C.M.L.R. 565. 27. Procureur de la République v. Waterkeyn (314-316/81 & 83/82), 14 December 1982: [1982] E.C.R. 4337; [1983] 2 C.M.L.R. 145. 28. Proceedings for Compulsory Reconstruction against Smanor SA (298/87), 14 July 1988: [1988] E.C.R. 4489. 29. Leur-Bloem v. Inspecteur der Belastingdienst (C-28/95), 17 July 1997: [1997] E.C.R. I-4161; [1998] 1 C.M.L.R. 157. 30. Giloy v. Hauptzollamt Frankfurt AM Main-Ost (C-130/95), 17 July 1997:

[1997] E.C.R. I-4291. 31. Angonese v. Cassa di Risparmio di Bolzano (C-281/98), 6 June 2000: [2000] E.C.R. I-4139; [2000] 2 C.M.L.R. 1120. 32. Van der Kooy BV and Others v. E.C. Commission (67, 68 & 70/85), 2 February 1988: [1988] E.C.R. 219; [1989] 2 C.M.L.R. 804. 33. E.C. Commission v. France (290/83), 30 January 1985: [1985] E.C.R. 439; [1986] 2 C.M.L.R. 546. 34. Steinike und Weinlig v. Germany (78/76), 22 March 1977: [1977] E.C.R. 595; [1977] 2 C.M.L.R. 688. 35. Norddeutsches Vieh- und Fleischkontor Herbert Will v. Bundesanstalt für Landwirtschaftliche Marktordnung (213-215/81), 13 October 1982: [1982] E.C.R. 3583. 36. E.C. Commission v. Greece (57/86), 7 June 1988: [1988] E.C.R. 2855; [1990] 1 C.M.L.R. 65. 37. France v. Ladbroke Racing and E.C. Commission (C-83/98 P), 16 May 2000: [2000] E.C.R. I-3271. 38. Ladbroke Racing v. E.C. Commission (T-67/94), 27 January 1998: [1998] E.C.R. II-1. 39. Belgium v. E.C. Commission (234/84), 10 July 1986: [1986] E.C.R. 2263; [1988] 2 C.M.L.R. 331. *839 40. Herbert Scharbatke v. Germany (C-72/92), 27 October 1993: [1993] E.C.R. I-5509. 41. Air France v. E.C. Commission (T-358/94), 12 December 1996: [1996] E.C.R. II-2109; [1997] 1 C.M.L.R. 492. 42. E.C. Commission v. Ireland (113/80), 17 June 1981: [1981] E.C.R. 1625; [1982] 1 C.M.L.R. 706. 43. Almelo and Others v. Energiebedfijf Ijsselmij (C-393/92), 27 April 1994: [1994] E.C.R. I-1477. 44. E.C. Commission v. Italy (C-158/94), 23 October 1997: [1997] E.C.R. I-5789. 45. Iannelli & Volpi SpA v. Meroni (74/76), 19 March 1997: [1997] E.C.R. 557; [1997] 2 C.M.L.R. 688. 46. Matra SA v. E.C. Commission (C-225/91), 15 June 1993: [1993] E.C.R. I-3203. 47. E.C. Commission v. Ireland (249/81), 24 November 1982: [1982] E.C.R. 4005; [1983] 2 C.M.L.R. 104. 48. E.C. Commission v. France (18/84), 7 May 1985: [1985] E.C.R. 1339; [1986] 1 C.M.L.R. 605. 49. E.C. Commission v. Italy (103/84), 5 June 1986: [1986] E.C.R. 1759; [1987] 2 C.M.L.R. 825. 50. Criminal Proceedings against Prantl (16/83), 13 March 1984: [1984] E.C.R. 1299; [1985] 2 C.M.L.R. 238. 51. Van de Haar and Kaveka de Meern (177 & 178/82), 5 April 1984: [1984] E.C.R. 1797; [1985] 2 C.M.L.R. 57. 52. E.C. Commission v. France (269/83), 14 March 1985: [1985] E.C.R. 837; [1985] 2 C.M.L.R. 399. 53. Corsica Ferries France v. Gruppo Antichi Ormeggiatori del Porto di Genova

and Others (C-266/96), 18 June 1998: [1998] E.C.R. I-3949; [1998] 5 C.M.L.R. 402. 54. BASF v. Präsident des Deutschen Patentamts (C-44/98), 21 September 1999: [1999] E.C.R. I-6269. 55. Schutzverband gegen Unlauteren Wettbewerb v. Tkheimdienst Sass (C-254/98), 13 January 2000: [2000] E.C.R. I-151. 56. Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (120/78), 20 February 1979: [1979] E.C.R. 649; [1979] 3 C.M.L.R. 494. 57. E.C. Commission v. Denmark (302/86), 20 September 1988: [1988] E.C.R. 4607; [1989] 1 C.M.L.R. 619. 58. E.C. Commission v. United Kingdom (207/83), 25 April 1985: [1985] E.C.R. 1201; [1985] 2 C.M.L.R. 259. 59. Aragonesa de Publicidad v. Departamento de Sanidad Y Seguridad Social de la Generalitat de Cataluna (C 1 & 176/90), 25 July 1991: [1991] E.C.R. I-4151; [1994] 1 C.M.L.R. 887. 60. E.C. Commission v. Belgium (C-2/90), 9 July 1992: [1992] E.C.R. I-4431; [1993] 1 C.M.L.R. 365. *840 61. Konsumentombudsmannen (KO) v. de Agostini (Svenska), Forlag AB and TV-Shop I Sverige AB (C 34, 35 & 36/95), 9 July 1997: [1997] E.C.R. I-3843. 62. Decker v. Caisse de Maladie des Employes Prives (C-120/95), 28 April 1998: [1998] E.C.R. I-1831; [1998] 2 C.M.L.R. 879. 63. Kohll v. Union des Caisses de Maladie (C-158/96), 28 April 1998: [1998] E.C.R. I-1931; [1998] 2 C.M.L.R. 928. 64. Dusseldorp and Others v. Minister Van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer (C-203/96), 25 June 1998: [1998] E.C.R. I-4075; [1998] 3 C.M.L.R. 873. 65. Aher-Waggon v. Germany (C-389/96), 14 July 1998: [1998] E.C.R. I-4473; [1999] 2 C.M.L.R. 589.

Opinion of Mr Advocate General Jacobs

I --Introduction A1 The present case, referred by the Landgericht (Regional Court) Kiel, concerns a German Law designed to promote the use of electricity from renewable energy sources. The Law requires regional electricity distribution undertakings to purchase at fixed minimum prices electricity produced from renewable energy sources within their area of supply and obliges upstream suppliers of electricity from conventional sources partially to compensate the distribution undertakings for the additional costs caused by that purchase obligation. A2 The national court asks, in essence, -- whether the scheme established by that Law constitutes State aid in favour of the producers of electricity from renewable energy sources within the meaning of Article 92 of the E.C. Treaty (now Article 87 E.C.), and, as a subsidiary question, -- whether the scheme is a measure equivalent to a quantitative restriction on

imports within the meaning of Article 30 of the E.C. Treaty (now Article 28 E.C.). A3 Those questions arise in proceedings in which an upstream supplier of electricity from conventional sources contests the compatibility of the Law with Community law and seeks on that ground reimbursement of sums which it had to pay to a downstream electricity distribution undertaking subject to the purchase obligation. The plaintiff electricity supplier owns a majority of the shares of the defendant distributor and both parties agree on the incompatibility of the Law in issue with Community law and national constitutional law. A4 The main issues in this case are whether the national proceedings are of a contrived nature within the meaning of Foglia v. Novello, [FN1] *841 whether only measures financed through State resources can constitute State aid and whether a national measure which treats domestic products more favourable than imported products can be justified on environmental grounds. FN1 C-104/79, Foglia v. Novello: [1980] E.C.R. 745, "Foglia v. Novello I"; C-244/80, Foglia v. Novello: [1981] E.C.R. 3045; [1982] 1 C.M.L.R. 585. "Foglia v. Novello II."

II --The German Stromeinspeisungsgesetz in its successive versions and the

Commission's attitude towards that Law

1. The structure of electicity supply in Germany and the purchase obligation for electricity from renewable sources before entry into force of the

Stromeinspeisungsgestz 1990 A5 It appears from the papers before the Court that three levels can be distinguished within the German electricity sector. A6 At the first level, a few large undertakings produce the major part of the electricity consumed in Germany and operate high-voltage networks (320, 220 or 110 kilovolts). The main function of those networks is the transmission of electricity over long distances, the exchange of electricity with neighbouring networks and the supply of electricity to regional distributors. Imports and exports of electricity also take place at that level but, in general, the supply of electricity to final customers does not. A7 At the second level, around 60 regional electricity distribution undertakings operate medium-voltage networks (20, 10 or 6 kilovolts). Those networks serve to take in electricity from the first level, distribute electricity throughout the whole national territory and supply electricity either directly to mainly industrial customers or through low-voltage networks to consumers. Some electricity is also produced at that level. A8 At the third level, electricity is delivered through low-voltage local networks to final consumers. Those networks are operated either by regional distributors themselves or by local distributors which are often owned by municipalities. There is little generation of electricity at the third level. A9 At each of the three levels, the necessary infrastructure (e.g. the physical grid, transformers) is not duplicated in any given area.

A10 In common with other governments, the German authorities have for many years promoted the generation and consumption of electricity from renewable sources such as wind, water and sun with a view to increasing its share in the national electricity production. A11 It was considered necessary to support demand in parallel with taking supply-side measures such as subsidies for research and development. Before 1990 the German authorities relied in that regard on national competition law in order to oblige electricity distributors (monopolists in a given territory) to purchase electricity from renewable sources produced in their area of supply. The purchase price to be paid for that electricity was determined according to the *842 principle of avoidable costs (vermiedene Kosten). [FN2] Depending on whether the electricity distributor concerned itself produced electricity, the purchase price for electricity from renewable sources thus followed the distributor's avoidable production or purchasing costs. FN2 That policy had been endorsed by Council Recommendation 88/611 to promote co-operation between public utilities and auto-producers of electricity, [1988] O.J. L335/29.

2. The Stromeinspeisungsgesetz 1990 A12 On 7 December 1990, Germany adopted the Gesetz über die Einspeisung von Strom aus erneuerbaren Energien in das öffentliche Netz [FN3] (Law on feeding electricity from renewable energy sources into the public grid, hereinafter "the Stromeinspeisungsgesetz 1990" or "the StrEG 1990"). FN3 (1990) BGBl. I, p. 633; the StrEG 1990 entered into force on 1 January 1991. A13 That Law obliged public electricity supply undertakings -- to purchase all the electricity produced within their area of supply from renewable sources such as wind, water and sun (hereinafter "the purchase obligation") [FN4]; -- to pay for that electricity a fixed minimum purchase price calculated on the basis of the average nationwide sales price for electricity [FN5]; as regards wind-generated electricity the purchase price was fixed at 90 per cent of the average sales price of electricity supplied by electricity suppliers to final customers [FN6] (hereinafter "the minimum price rule"). FN4 Para. 2 of the StrEG 1990. FN5 Paras 2 and 3 of the StrEG 1990. FN6 Second sub-para. of para. 3 of the StrEG 1990. A14 It is common ground that in the context of the Stromeinspeisungsgesetz the term "public electricity supply undertakings" comprises undertakings both in

private and in public ownership. A15 The StrEG 1990 also contained a so-called hardship clause. [FN7] Where compliance with the purchase obligation led to "inequitable hardship" (unbillige Härte) for the electricity supply undertaking concerned, the upstream electricity supplier (usually an undertaking operating a high-voltage network) had to take over the purchase obligation and comply with the minimum price rule. Perhaps owing to its vague formulation the hardship rule was practically never applied. FN7 Para. 4 of the StrEG 1990. A16 Germany had notified the StrEG 1990 to the Commission for approval under Article 93(3) of the E.C. Treaty (now Article 88(3) E.C.) by letter of 14 August 1990 and thus before its adoption. A17 By letter of 19 December 1990, the Commission informed Germany *843 of its decision not to raise objections against the Law. According to its assessment under Article 92 of the Treaty the rate of aid varied from 28 per cent to 48 per cent depending on the renewable energy source involved and the Law would lead to additional profits of 48 million DM for the 4,000 private producers of electricity from renewable sources. The proposed Law was, however, in line with the energy policy objectives of the Community. Moreover, the share of electricity from renewable sources in the energy sector and the additional gains for producers and the effect on electricity prices were small. The Commission would re-examine the Law two years after its entry into force. A modification or a continuation of the Law would have to be notified in advance. A18 The StrEG 1990 was modified for the first time by the Law of 19 July 1994. [FN8] Among other minor changes the minimum purchase price for electricity produced from water and several other sources, previously set at 75 per cent, was raised to 80 per cent of the average sales price per kilowatt hour. The minimum price for electricity produced from wind remained unchanged at 90 per cent. FN8 (1994) BGBl. I, p. 1618. A19 In a letter to the German Government of 25 October 1996, following complaints by electricity supply undertakings, the Commission expressed doubts about the continued compatibility of the Stromeinspeisungsgesetz with the Community State aid rules. The greatest concern was caused by the calculation of the minimum purchase price for electricity generated from wind. A20 The Commission noted that the number of wind energy installations in Germany had increased from 500 in 1991 to almost 4,000 in 1995 and their output had increased from 20 Megawatt (MW) in 1990 to 1,100 MW in 1995. Technological progress had, moreover, considerably reduced the costs of producing electricity from wind. According to data from German electricity suppliers, the obligatory purchase price under the StrEG 1990 of around 0.17 DM per kilowatt hours exceeded the avoidable costs by 0.085 DM. That discrepancy would lead in 2005 to extra costs for electricity distributors of 900 million DM.

Thus, if the minimum price rule remained unchanged, there was a risk of overcompensation with the ensuing detrimental consequences for competition and for trade in electricity between Member States. A mere change of the hardship clause, as envisaged by the German Parliament, [FN9] would not terminate the distortion of competition caused by the Law, since it would merely redistribute the extra costs. FN9 See, for the compensation mechanism eventually adopted, below at para. 32. A21 The Commission therefore proposed a number of alternative amendments which would make the Law compatible with the State aid rules. The German legislature could reduce the minimum purchase price for electricity from wind to 75 per cent of the average sales price; *844 it could limit the support mechanism in time and/or according to electricity production; or it could adopt a rule according to which the purchase price was calculated on the basis of avoidable costs. A22 The Commission concluded that if the German legislature were not to amend the Law, it might feel obliged to propose "appropriate measures" to Germany within the meaning of Article 93(1) of the Treaty in order to bring the Law into line with the Community State aid rules.

3. The Stromeinspeisungsgesetz 1998 A23 On 24 April 1998, Germany adopted the Gesetz zur Neuregelung des Energiewirtschaftsrechts (Law reforming the energy supply industry) [FN10] in order to transpose into German law Directive 96/92 concerning common rules for the internal market in electricity (hereinafter "the electricity directive"). [FN11] FN10 (1998) BGBl. I, p. 730. FN11 [1997] O.J. L27/20. A24 That reform Law contained--among other important legislative changes--in paragraph 3(2) the modifications of the Stromeinspeisungsgesetz 1990 which are the subject-matter of the present proceedings. The relevant rules of the Stromeinspeisungsgesetz in its amended form (hereinafter "the Stromeinspeisungsgesetz 1998" or "the StrEG 1998") may be summarised as follows. A25 Paragraph 1 of the StrEG 1998 states under the heading "scope of application" that the Stromeinspeisungsgesetz governs the purchase and the purchase price of electricity produced from certain specified renewable sources (e.g. water, wind, sun and biomass). A first new element in comparison with the StrEG 1990 is that the StrEG 1998 applies to all kind of biomass and not only to biomass produced by agriculture and forestry work. Equally new is the provision according to which the Law applies only to electricity which has been generated in Germany.

A26 Paragraph 2 contains under the heading "purchase obligation" three different provisions. A27 The first sentence of paragraph 2 lays down the central rule, namely the purchase obligation at a fixed minimum price: Electricity supply undertakings which operate a general supply network must purchase the electricity produced within their area of supply from renewable sources and pay for the electricity supplied the price determined according to paragraph 3. A28 The second sentence of paragraph 2 lays down a new rule concerning so-called off-shore installations ("off-shore Anlagen"). Electricity produced in an installation situated outside the area of supply of an electricity supply undertaking must be purchased by a distribution or supply system operator which operates the network located closest to the production site in question. A29 *845 Under the equally new third sentence of paragraph 2 supplementary costs caused by the purchase obligation under paragraph 2 and by the new compensation mechanism under paragraph 4 [FN12] may, for accounting purposes, be allocated to the distribution or transmission activities of the electricity supply undertakings concerned, and be taken into account when calculating the tariffs for the transmission of electricity over the network of the undertakings concerned. FN12 See below, para. 32. A30 Paragraph 3 of the StrEG 1998 contains unchanged rules for the calculation of the minimum purchase price for electricity from renewable energy sources. As already stated, the minimum price per kilowatt hour for electricity produced from wind energy is fixed at 90 per cent of the average sales price per kilowatt hour of electricity supplied to final customers. A31 Paragraph 4 states in its heading (as before) "hardship clause". A32 Paragraph 4(1) contains a new compensation mechanism, which plays a central role in the main proceedings. In so far as the electricity to be purchased under paragraph 3 of the StrEG 1998 exceeds 5 per cent of the total amount of electricity supplied by the undertaking concerned, the upstream network operator must compensate that undertaking for the supplementary costs caused by the compulsory purchase of the amount of electricity exceeding that 5 per cent (the so-called "first 5 per cent ceiling", "erster 5 pro Zent Deckel). Thus, in contrast to the terms of the StrEG 1990, a producer of electricity from renewable sources may in case of "hardship" continue to supply electricity to the distributor of his area. The latter, however, gains a right to request from the upstream supplier financial compensation for the costs of purchasing electricity from renewable sources exceeding 5 per cent of his output. A33 It follows from the first and the second sentences of paragraph 4(1) that a similar 5 per cent rule applies in favour of the upstream network operator (the so-called "second 5 per cent ceiling", "zweiter 5 pro Zent Deckel"). Where the amount of electricity purchased for which that operator had to pay compensation exceeds 5 per cent of its own output, it is itself entitled to ask for compensation

from a network operator situated further upstream. Where such an upstream operator does not exist (as will normally be the case), the purchase obligation under paragraph 2 will not apply to electricity produced in installations the construction of which was not completed before the end of the year in which the second 5 per cent ceiling was reached. A34 It appears from documents submitted to the Court that before the adoption of the StrEG 1998 the Commission had asked the German authorities to supply information on the legal and political background to the adoption of the amendments to the Stromeinspeisungsgesetz. A35 Moreover, by letter of 13 March 1998 the plaintiff in the main proceedings, PreussenElektra Aktiengesellschaft ("Preussen *846 Elektra"), had asked the Commission to request Germany to notify the planned Law under the first sentence of Article 93(3) of the Treaty. A36 In a letter to PreussenElektra of 21 April 1998 the Commission stated, however, that it was doubtful whether Germany was obliged to notify the planned modifications of the Stromeinspeisungsgesetz. The Commission merely referred without comment to the German Government's arguments according to which the modifications of the StreEG were either covered by the initial authorisation of 1990 (the new rules on biomass and off-shore installations) or not relevant for State aid purposes (the new compensation mechanism in paragraph 4(1) of the StrEG 1998). In the Commission's view it was the German authorities' responsibility to decide whether to notify. The undertakings affected by the StrEG 1998 could defend their interests in "other appropriate ways". A37 As regards the minimum purchase price for electricity produced from wind, the Commission stated that it was continuing to examine the unchanged rules under the procedural regime for "existing aid" and that it still did not exclude the possibility of proposing in that respect appropriate measures to the German Government. A38 In a letter to the German Government of 29 July 1998, and thus after entry into force of the StrEG 1998, Commissioner Van Miert noted that the German legislature had not incorporated any of the proposals which the Commission had made in the letter of 25 October 1996 [FN13] and that the mechanism to calculate the purchase price for wind-generated electricity had not been changed. Even if the purchase price for electricity from wind were de facto to fall (as a consequence of lower electricity sales prices after the liberalisation of the electricity market), the Law did not introduce a sufficiently degressive element as regards the purchase price. On the other hand, important legislative changes at Community level were expected in the near future in connection with the implementation of the electricity directive and proposals for harmonised rules on electricity from renewable sources. The Commissioner therefore refrained from proposing to his colleagues a formal decision before the German Government established a report for the German Bundestag on the operation of the Stromeinspeisungsgesetz. As regards the drafting of that report the German Government was invited to co-operate closely with the Commission and to discuss extensively in the report the amount of the aid for electricity from renewable sources.

FN13 See above at paras 19 to 22.

4. Developments after the order for reference was made A39 In response to a written question of the Court the Commission gave the following information about developments after the national court referred its questions to the Court. A40 *847 On 1 April 1999, the German Law on the introduction of an ecological tax reform entered into force. A41 In the Commission's view the effects of the introduction of that tax included an increase in the purchase price for electricity from renewable sources under the StrEG 1998, which the German authorities omitted to notify in violation of the Treaty. Since the Commission had doubts whether the increase could be held compatible with the Common Market, it informed the German authorities by letter of 17 August 1999 of its decision to open the procedure provided for by the State aid rules of the Treaty. [FN14] FN14 The text of that decision is published in [1999] O.J. C 306/19. A42 On 1 April 2000, the new Gesetz für den Vorrang Erneuerbarer Energien (Law for the priority of renewable energy sources) [FN15] replaced the Stromeinspeisungsgesetz 1998 in its entirety. That new Law is again based on a purchase obligation at a fixed minimum price, but contains many new features. Most notably the purchase price is no longer linked to the (apparently falling) electricity sales prices but fixed by law for each of the different energy sources. The price for wind-generated electricity, for example, is fixed at 0.178 DM per kilowatt hour. FN15 (2000) BGBl. I, p. 305. A43 According to Press reports the Commission has initiated a procedure under the Treaty in respect of that new Law. It apparently considers that the Law should have been notified. [FN16] FN16 Handelsblatt, 13 April 2000; Financial Times Deutschland, 19 April 2000. A44 On 10 May 2000, the Commission presented a proposal for a directive on the promotion of electricity from renewable energy sources in the internal electricity market. [FN17] FN17 COM(2000) 279 final.

III --The main proceedings and the questions referred A45 The plaintiff in the main proceedings, PreussenElektra, is one of the undertakings at the first level of the German electricity sector. It operates more

than 20 power plants, conventional and nuclear, as well as a maximum-voltage and high-voltage network for the transmission of electricity. It supplies electricity over that system to regional electricity distributors, major town utility companies and large industrial undertakings. A46 The defendant, Schleswag Aktiengesellschaft ("Schleswag"), is a regional electricity distributor at the second level. It obtains the electricity needed for its customers in Schleswig-Holstein almost exclusively from PreussenElektra. A47 PreussenElektra owns 65.3 per cent of Schleswag's shares. The remaining 34.7 per cent are held by municipal authorities (Landkreise) in Schleswig-Holstein. A48 By virtue of paragraph 2 of the StrEG 1998, Schleswag is obliged to purchase electricity from renewable sources produced within its area of supply. The area where Schleswag operates presents ideal *848 conditions for the production of electricity from wind. The proportion of electricity from wind supplied to Schleswag has thus steadily increased from 0.77 per cent of its total sales in 1991 to an estimated 15 per cent in 1998. A49 The additional costs accruing to Schleswag on account of the purchase obligation and the minimum price requirement rose from 5.8 million DM in 1991 to an estimated 111.5 million DM in 1998. Taking into account the sums to be paid by PreussenElektra to Schleswag by virtue of the new compensation mechanism under paragraph 4(1) of the StrEG 1998, [FN18] Schleswag's additional costs for 1998 are 38 million DM. FN18 See para. 50 below. A50 At the end of April 1998 Schleswag's purchases of electricity produced from renewable energy sources reached 5 per cent of the total volume of electricity it had sold over the previous year. Pursuant to paragraph 4(1) of the StrEG 1998, Schleswag invoiced PreussenElektra for the additional costs entailed by the purchase of electricity from renewable energy sources, claiming monthly instalments of 10 million DM. A51 PreussenElektra transferred the instalment for May 1998, reserving the right to claim the money back at any time. A52 In the main proceedings PreussenElektra claims a portion of the May instalment, namely 500,000 DM. A53 According to the national court neither PreussenElektra nor Schleswag may pass on the additional costs created by the Stromeinspeisungsgesetz to final customers. We are told that it is in law and in fact impossible to charge higher prices for electricity supplied to final customers. That is because the Land Schleswig-Holstein has refused to authorise higher tariffs for electricity supplied to consumers and because competitive pressures have increased owing to the ongoing liberalisation of the electricity market. Those statements of the national court, which were based on the presentation by PreussenElektra and Schleswag of the facts before it, are strongly contested by the interveners. [FN19] FN19 See below at paras 85 and 86.

A54 In the main proceedings PreussenElektra contends that the payment to Schleswag had no legal basis and must be reimbursed. In its view, paragraph 4(1) of the StrEG 1998 infringes the E.C. Treaty. That is because paragraph 4(1) is part of the amendments of the Stromeinspeisungsgesetz made in 1998. Those amendments altered existing aid and thus had to be notified under the first sentence of Article 93(3) of the E.C. Treaty. Since the German authorities did not notify the amendments and did not wait for an authorisation by the Commission, they infringed the first and the third sentence of Article 93(3). Under the Court's case law the third sentence of Article 93(3) is directly effective. Paragraph 4(1) of the StrEG should therefore be disapplied. A55 *849 Schleswag maintains that the payment had a sound legal basis in paragraph 4(1) of the StrEG and does not have to be reimbursed. It agrees with PreussenElektra that the StrEG 1998 must be analysed as an altered aid scheme within the meaning of the first sentence of Article 93(3) of the Treaty. However, the compensation mechanism in paragraph 4(1) of the StrEG 1998 as such cannot be classified as an aid measure within the meaning of Article 92. It is merely a mechanism to share the burdens caused by the purchase obligation and the minimum price rule laid down in paragraphs 2 and 3 of the StrEG. On the one hand, the referring court does not have the power to decide about the lawfulness of paragraphs 2 and 3 of the StrEG because they are not relevant for the legal relationship and the resolution of the dispute between PreussenElektra and Schleswag. On the other hand, even if the referring court disapplies paragraph 4(1) of the StrEG 1998, the unlawful aid measures in paragraphs 2 and 3 of the StrEG 1998 would remain unaffected and Schleswag would have to bear the burden alone. The direct effect of the last sentence of Article 93(3) can thus not remedy or sanction effectively the unlawful situation. Paragraph 4(1) of the StrEG must therefore continue to apply. A56 The referring court states in the order for reference that if, in adopting the Law in issue, the German legislature infringed either its obligations in respect of the alteration of existing State aid under Article 93(3) of the Treaty or the prohibition of measures having equivalent effect to quantitive restrictions on imports under Article 30, theStrEG 1998 must be disapplied and PreussenElektra must be reimbursed. A57 According to the referring court, as regards, first, Article 93(3), the German authorities notified the StrEG 1990 as State aid and the Commission authorised it as such. The same authorities did not however notify the amendments of the Stromeinspeisungsgesetz which led to the StrEG 1998. [FN20] If those amendments altered existing aid within the meaning of the first sentence of Article 93(3) of the Treaty and if the outcome of those amendments (the StrEG 1998) itself constituted State aid, the amendments should have been notified. FN20 That statement is again strongly contested by the interveners; see below at paras 85 and 87. A58 The Landgericht is not sure whether the Stromeinspeisungsgesetz 1998

with its purchase obligation at a fixed minimum price and its compensation mechanism can be classified as State aid within the meaning of Article 92 of the Treaty. It refers, on the one hand, to judgments such as Van Tiggele [FN21] and Sloman Neptun, [FN22] which suggest that the StrEG 1998 does not contain State aid since the economic advantages for producers of electricity from renewable sources are financed exclusively by electricity distributors and upstream network *850 operators and not through State resources. On the other hand, such a narrow interpretation of the concept of State aid would allow Member States easily to circumvent the control mechanisms of Article 93 of the Treaty with potentially grave consequences for competition. [FN23] FN21 Case 82/77, Openbaare Ministerie of the Netherlands v. Van Tiggele: [1978] E.C.R. 25; [1978] 2 C.M.L.R. 528. FN22 Joined Cases C 72 & 73/91, Sloman Neptun v. Bodo Ziesemer: [1993] E.C.R. I-887; [1995] 2 C.M.L.R. 97. FN23 The arguments of the Landgericht will be presented in more detail in para. 109 below. A59 If the Stromeinspeisungsgesetz contains State aid, the Landgericht is convinced that owing to the Commission's authorisation the StrEG 1990 must be classified as existing aid within the meaning of Article 93(1) and that the amendments of 1998 constitute an alteration of existing aid within the meaning of the first sentence of Article 93(3) which has not been notified. A60 The Landgericht has a further doubt with regard to the compensation mechanism contained in paragraph 4(1) of the StrEG 1998. Even if the purchase obligation at an elevated minimum price [FN24] constitutes State aid in favour of the producers of electricity from renewable sources it might be argued that paragraph 4(1) itself cannot be classified as aid. In that event the Landgericht wishes to know whether the restrictive effects of Article 93(3) apply not only to the aid itself but also to implementing rules such as paragraph 4 of the StrEG 1998. FN24 Paras 2 and 3 of the StrEG 1998. A61 As regards Article 30 of the Treaty, the Landgericht considers that the duty to purchase electricity produced in Germany from renewable sources at prices which could not be obtained on the free market involves at least the risk of a fall in demand for electricity produced in other Member States. A62 In the light of those considerations the Landgericht referred to the Court the following questions for a preliminary ruling: (1) Do the rules on payment and compensation for supplies of electricity, laid down in paragraph 2 or 3 or 4 or in paragraphs 2 to 4 of the [Stromeinspeisungsgesetz 1998] ... constitute State aid for the purposes of Article 92 of the E.C. Treaty?

Is Article 92 of the E.C. Treaty to be interpreted as meaning that the underlying concept of aid also covers national rules for the benefit of the recipient of the payment, under which the costs entailed are not met, either directly or indirectly, from the public budget but are borne by individual undertakings in a sector, which have a statutory obligation to purchase at fixed minimum prices, and which are precluded by law and circumstance from passing those costs on to the final consumer? Is Article 92 of the E.C. Treaty to be interpreted as meaning that the underlying concept of aid also covers national rules which merely govern the apportionment of the costs between undertakings at the various production levels which have arisen through purchasing obligations and minimum prices, where the legislature's approach creates in practice a permanent burden for which the undertakings affected obtain no consideration? (2) In the event that the second question is answered in the negative in respect of paragraph 4 of the StrEG 1998, is Article 93(3) of the E.C. Treaty to be interpreted as meaning that its restrictive effects apply not *851 only to the benefit itself but also to implementing rules such as paragraph 4 of the StrEG 1998? (3) In the event that questions (1) and (2) are answered in the negative, is Article 30 of the E.C. Treaty to be interpreted as meaning that a quantitative restriction on imports--and/or a measure having equivalent effect as between Member States for the purposes of the aforementioned provision--arises where a provision of national law places undertakings under an obligation to purchase electricity produced from renewable energy sources at minimum prices and requires network operators to meet costs entailed for no consideration?

IV --Procedure before the Court A63 Written observations were first submitted by PreussenElektra, Schleswag, the German and Finnish Governments and the Commission. A64 After the reference was made the referring court notified to the Court an order of 23 April 1999 in which it declared that the Land Schleswig-Holstein and a producer of wind-generated electricity, Windpark Reussenköge III GmbH (collectively "the interveners") had intervened in the main proceedings by written submissions of 16 March 1999. A65 Under Article 20 of the E.C. Statute of the Court of Justice ("the Statute") the Court notified the order for reference to the interveners and they also submitted written observations. A66 At the hearing PreussenElektra, Schleswag, the Land Schleswig-Holstein, Windpark Reussenköge III, the German Government and the Commission were represented. A67 PreussenElektra maintains that the Land Schleswig-Holstein and Windpark Reussenköge III were not entitled to submit observations to the Court since they were only interveners (Nebenintervenienten) in the main proceedings and thus not covered by the concept of "parties" in Article 20 of the Statute. PreussenElektra relies, first, on the fact that under German law the concept of "party" (Partei) to the proceedings does not encompass interveners and,

secondly, on the Court's case law. [FN25] FN25 Order in Case C-181/95, Biogen v. SmithKline Beecham Biologicals: [1996] E.C.R. I-717; [1997] 1 C.M.L.R. 704 and judgment in Case 62/72, Bollmann v. Hauptzollamt Hamburg-Waltershof: [1973] E.C.R. 269. A68 As a preliminary point it must be recalled that proceedings instituted under Article 177 of the E.C. Treaty (now Article 234 E.C.) are non-contentious and are a step in an action pending before a national court. Before the Court of Justice the parties to the main action are merely invited to state their case, but are not entitled to take procedural initiatives of their own. Stricto sensu there are thus no "parties" to a preliminary ruling procedure. By the expression "parties", Article 20 of the Statute therefore refers to the parties to the action pending before the national court. [FN26] FN26 See Case 62/72 *852 , cited in n. 23, at para. [4] of the judgment. A69 As regards the question what categories of actors are "parties" to the main proceedings within the meaning of Article 20 of the Statute, it must, first, be kept in mind that the legal orders of the Member States name and classify the various participants in procedures before the national courts in different ways (terminology and classification may also vary within one legal order depending for example on the branch of the judiciary involved). The opportunity to submit observations to the Court should not, however, depend on those terminological and formal differences. A70 Secondly, the objective of Article 20 of the Statute is to give persons potentially affected by the Court's preliminary ruling the opportunity to present their views on the questions to be decided. In order to participate formally in national proceedings, the national legal orders normally require a proven interest in the outcome of the proceedings. It follows, in my view, that all persons who participate formally in national proceedings should be considered to be parties within the meaning of Article 20 of the Statute. A71 With regard to the particular situation in the present case it follows indirectly but clearly from the order in Biogen [FN27] that interveners in the main proceedings are "parties" within the meaning of Article 20 of the Statute. In that case an undertaking sought leave to intervene directly in preliminary ruling proceedings before the Court of Justice. The Court held that "a person who has not sought or been granted leave to intervene before the national court is not entitled to submit observations to this Court under that provision". [FN28] FN27 Case 181/95, cited in n. 23. FN28 Para. 6 of the order. A72 It follows a contrario that the Land Schlewswig-Holstein and Windpark Reussenköge III, which have both successfully intervened before the national

court, are "parties" to the main proceedings within the meaning of Article 20 of the Statute and were entitled to submit observations to the Court.

V --Admissibility A73 The German Government and the interveners contest the admissibility of the reference on three grounds. First, the dispute is contrived and hence, on the basis of Foglia v. Novello I and II, [FN29] the reference is inadmissible. Secondly, they refer to a number of lacunae and errors in the order for reference as regards the factual and legal background. Thirdly, the questions referred are irrelevant for the outcome of the main proceedings. FN29 Cases C-104/79 and C-244/80, Both Cited In N. 1.

1. Contrived dispute A74 The German Government and the interveners claim that PreussenElektra and Schleswag are in agreement over the desired result of the reference, namely a declaration by the Court that the *853 StrEG 1998 is contrary to Community law. That is evidenced by the fact that both parties have lodged several challenges to the StrEG before the German constitutional court. Furthermore, Schleswag is a subsidiary of PreussenElektra. Consequently, PreussenElektra could have recovered the sums in issue by internal measures without litigation before the courts. It follows also that the legal viewpoints adopted by the defendant in the main proceedings are ultimately determined by the plaintiff. Finally, PreussenElektra paid compensation to Schleswag in spite of being convinced of the illegality of the Law in issue. Those elements taken together show that PreussenElektra's claim for partial reimbursement of the compensation payment is a pretext designed to obtain a particular answer from the Court. In the light of the judgments in the two Foglia v. Novello cases and in Meilicke [FN30] the Court should declare the reference inadmissible. FN30 C-83/91, Meilicke v. ADV/ORGA: [1992] E.C.R. I-4871. A75 The Court has held that it may in certain circumstances declare a reference for a preliminary ruling inadmissible on the ground that Article 177 of the E.C. Treaty is used as a "procedural device" [FN31] or an "artificial expedient" [FN32] by parties who engage in contrived litigation. The Court considered that that was the case where the parties to the main proceedings tried to obtain a ruling that a French tax system for liqueur wines was invalid by the expedient of proceedings before an Italian court between two private individuals who were in agreement as to the result to be attained and who had inserted a clause in a contract in order to induce the Italian court to give a ruling on the point. [FN33] FN31 Foglia v. Novello II, cited in n. 1, para. [18] of the judgment. FN32 Foglia v. Novello I, cited in n. 1, para. [10] of the judgment.

FN33 Foglia v. Novello I, para. [10] of the judgment. A76 One concern underlying that case law is that it is not the Court's task to deliver advisory opinions on general or hypothetical questions, but to assist in the administration of justice in the Member States in situations where answers to the questions referred are objectively necessary for the resolution of a real dispute. [FN34] The second preoccupation is that the parties should not be allowed deliberately to create a procedural situation in which third parties potentially affected by the ruling cannot arrange for an appropriate defence of their interests. [FN35] FN34 Foglia v. Novello II, para. [18] of the judgment. FN35 Foglia v. Novello II, para. [29] of the judgment. A77 There is admittedly some similarity between Foglia v. Novello and the case now before the Court. In the first place, PreussenElektra and Schleswag are in agreement that the StrEG 1998 violates Community law. Moreover, in the particular procedural situation of the main action interested third parties such as producers of wind-generated electricity were initially precluded from putting forward their legal arguments and their version of the factual and economic background. A78 *854 It follows, however, from the judgment in Leclerc-Siplec, [FN36] where the parties agreed that the French Law prohibiting the distribution sector from advertising on television was contrary to Community law and where the main beneficiary of the contested Law (the French regional press) was not involved in the proceedings, [FN37] that those elements alone do not suffice to make the reference inadmissible. It has also to be recalled that PreussenElektra and Schleswag disagree on the consequences for the main proceedings of a ruling by the Court indicating that the purchase obligation at a minimum price is incompatible with Community law. [FN38] Interested third parties, namely the Land Schleswig-Holstein and Windpark Reussenköge III, have in the meantime intervened in the main proceedings and had the opportunity to submit observations to the Court. [FN39] FN36 Case C-412/93, Leclerc-Siplec v. TF1 Publicite and M6 Publicite [1995] E.C.R. I-179; [1995] 3 C.M.L.R. 422. FN37 See para. 1 of my Opinion in that case. FN38 See above at paras 54 and 55. FN39 See above at paras 64 to 72. A79 There are, furthermore, two decisive differences between the present

proceedings and Foglia v. Novello. On the one hand, PreussenElektra and Schleswag contest the validity of a German Law before a German court. Consequently, a central preoccupation of Foglia v. Novello, namely to prevent situations in which the courts of one State decide on the validity of the laws of another State and to grant the Member State concerned an adequate forum to defend its law, does not arise in the present case. On the other hand, and perhaps even more importantly, the conflict of interests between Preussen-Elektra and Schleswag in the main proceedings is not the result of the parties' will and of elaborate contractual arrangements, but the automatic and objective consequence of the statutory obligation laid down in paragraph 4(1) of the StrEG 1998. A80 I accept that the danger of contrived litigation is more acute where one party to the proceedings owns a majority of the shares of the other. None the less the Court has already accepted references in cases where the action was between a parent company and a subsidiary. [FN40] The degree of control which PreussenElektra has over Schleswag is disputed, but even if it enjoys the degree of control alleged by the interveners, nothing before the Court in the present case suggests that PreussenElektra made use of its alleged power to determine Schleswag's course of action in order to arrange the present dispute. On the contrary we are told that PreussenElektra has brought a similar action against a second regional electricity distributor, over which it has no control, and that those parallel proceedings have been suspended pending judgment in the present proceedings. FN40 See for example Case 244/78, Union Laitiere Normande v. French Dairy Farmers: [1979] E.C.R. 2663; [1980] 1 C.M.L.R. 314. A81 Finally, I cannot see anything wrong with PreussenElektra's decision to pay the full May instalment of DM 10 million and to claim *855 back only the comparatively small sum of DM 500,000. An undertaking which is convinced of the incompatibility of a national measure with Community law may freely decide on its litigation strategy and bring a test-case if it wishes to do so. [FN41] Such a choice is particularly understandable where legal costs are calculated by reference to the sums involved in the proceedings. FN41 Case 112/80, Dübeck v. Hauptzollamt Frankfurt AM Main-Flughafen: [1981] E.C.R. 1095; [1982] 3 C.M.L.R. 314, p. 1127 of the Opinion of Advocate General Reischl, and Joined Cases C 332, 33 & 335/92, Eurico Italia and Others: [1994] E.C.R. I-711, paras [16] and [17] of the judgment. A82 It follows from those considerations that the main proceedings between PreussenElektra and Schleswag are not of an artificial or contrived nature within the meaning of the Court's case law.

2. Lacunae and errors in the presentation of the factual and legal background A83 The interveners and the German Government contend, first, that the

referring court has not sufficiently explained on what ground of German civil law PreussenElektra can claim reimbursement of the money paid to Schleswag. A84 It is, however, for the national court before which the main action is brought, and which must bear the responsibility for the subsequent judicial decision, to determine in the light of the provisions of its legal order and the special features of the case before it the need for a preliminary ruling in order to deliver judgment. In this case the referring court has set out the reasons why it would be helpful to have the Court's replies to resolve the reimbursement claim before it and it is not apparent why those replies would have no bearing on the real situation or on the subject-matter in the main proceedings. [FN42] FN42 See, for example, Case C-318/98, Fornascar and Others: [2000] E.C.R. I-4785, judgment of 22 June 2000, at paras [27] and [28] of the judgment. A85 The interveners also challenge the correctness of two factual statements made by the national court. They claim that, contrary to what is stated in the order for reference, electricity producers and distributors are from both a legal and an economic viewpoint perfectly able to pass on the additional costs caused by the StrEG 1998 to final customers. Furthermore, the Commission has been sufficiently well "informed" within the meaning of the first sentence of Article 93(3) about all the relevant modifications before the adoption of the StrEG 1998 and Germany has therefore correctly notified the amendments in issue. A86 It appears from replies to written questions put by the Court that there are indeed serious doubts whether PreussenElektra and Schleswag are prevented from passing on the supplementary costs to final customers. [FN43] The refusals by the authorities of the Land Schleswig-Holstein to authorise higher tariffs for electricity supplied to *856 final consumers, which were invoked in order to prove that there were legal impediments to passing on supplementary costs, seem to be based on other reasons and do not imply that those authorities failed to recognise those supplementary costs as legitimate. Moreover, it appears from replies to another written question put by the Court that the StrEG 1998, [FN44] by allowing the supplementary costs to be taken into account in calculating tariffs, does allow network operators affected by the purchase obligation to pass on the supplementary costs to competitors who want to deliver electricity through the network in question. That in turn enables the network operators to pass on supplementary costs to final consumers without having to fear competition from suppliers who are not subject to the obligations of the StrEG 1998. FN43 See also the judgment by the Bundesgerichtshof of 22 October 1996, reproduced in (1997) NJW, p. 574, at p. 578. FN44 StrEG 1998, third sentence of para. 2, above at para. 29. A87 As regards the issue whether the German authorities "informed" the Commission within the meaning of the first sentence of Article 93(3) of the Treaty in 1998 before the planned modifications of the Stromeinspeisungsgesetz,

the Commission correctly stated at the hearing that the notification under Directive 83/189 laying down a procedure for the provision of information in the field of technical standards and regulations, [FN45] made by the German authorities before adoption of the amendments in 1998, cannot replace the specific notification under the first sentence of Article 93(3) of the Treaty. Furthermore, it is in my view also questionable whether simple preliminary consultations between a government and the Commission can be analysed as containing a proper notification of an alteration of aid for the purposes of Article 93. FN45 [1983] O.J. L109/8. After several amendments that Directive has in the meantime been replaced by Directive 98/34 laying down a procedure for the provision of information in the field of technical standards and regulations and of rules of Information Society services, [1998] O.J. L204/37. A88 Be that as it may, it should be remembered that Article 177 of the Treaty is based on a clear separation of functions between the national courts and the Court of Justice. It is not for the Court of Justice, but for the national court, to ascertain the facts which have given rise to the dispute and to establish the consequences which they have for the judgment which it is required to deliver. [FN46] FN46 See, for example, Case C-435/97, World Wildlife Fund and Others v. Autonome Provinz Bozen and Others: [1999] E.C.R. I-5613; [2000] 1 C.M.L.R. 149, paras [31] and [32] of the judgment. A89 It follows that the alleged lacunae and errors in the order for reference cannot affect the admissibility of the reference.

3. Relevance of the questions A90 As regards the questions on the interpretation of Articles 92 and 93 of the Treaty, the interveners claim that, independently of the issue whether the StrEG 1998 contains State aid, the standstill obligation under the third sentence of Article 93(3) does not apply and *857 PreussenElektra cannot therefore seek reimbursement of the sums paid under the StrEG 1998. A91 That is, first, because the StrEG 1998 cannot be classified as an alteration of existing aid within the meaning of the first sentence of Article 93(3). The changes adopted in 1998 were not important enough to trigger the obligations to notify and to refrain from implementing unnotified alterations of aid under Article 93(3) of the Treaty. A92 Secondly, even if the StrEG 1998 must be considered to be an alteration of existing aid, the exchange of letters between the German authorities and the Commission before and after adoption of the StrEG 1998 must be analysed as containing a correct notification of the modifications within the meaning of the first sentence of Article 93(3) and an implicit authorisation of the changes by the Commission.

A93 As regards the interveners' first argument, I consider that it is indeed not yet established--supposing the scheme at issue is to be classified as State aid--whether the amendments of 1998 were substantial enough to trigger the obligations to notify and to refrain from implementing the amended Law under Article 93(3) of the Treaty. A94 However, the Landgericht states, in my view correctly, that its question whether the StrEG 1998 contains State aid is relevant since the standstill obligation under the third sentence of Article 93(3) applies only if the measure in issue in its amended version itself constitutes State aid. The fact that the Landgericht did not refer questions on other conditions for the application of the third sentence of Article 93(3) (e.g. whether the alterations of 1998 were important enough to trigger the notification and the standstill obligations) cannot affect the relevance of the question it actually referred to the Court. A95 The interveners' second point boils down to a critique of the referring court's presentation of the facts with which I have already dealt above. [FN47] FN47 See paras 87 and 88. A96 The German Government claims that the classification of the purchase obligation as State aid cannot influence the main proceedings since the dispute between PreussenElektra and Schleswag concerns not the support mechanism itself but the apportionment of the costs of that mechanism. A97 That argument is misconceived since according to my understanding of the Law in issue the upstream electricity supplier's obligation to pay compensation under paragraph 4(1) of the StrEG 1998 is triggered only where the downstream distributor is effectively obliged to purchase electricity from renewable sources under paragraph 2 of the StrEG 1998. It thus seems that if the latter obligation is precluded by Community law the former cannot be enforced either. A98 As regards Article 30 of the Treaty the interveners contend that the case before the national court concerns a situation without any crossborder element and that the parties have not argued that they are *858 prevented from importing electricity from other Member States. In their view the Landgericht's question on Article 30 is thus of a hypothetical nature. A99 At the hearing Schleswag stated, however, that it had received an offer to purchase electricity from renewable sources produced in Sweden at a purchase price of around 0.08 DM per kilowatt hour (around half as expensive as electricity from wind under the StrEG 1998) and that it could not accept that offer owing to its obligation to purchase all electricity produced from wind within its area of supply. A100 I consider that, independently of whether or not any such concrete opportunities to import electricity are proven, the Court should rule in the present case on the national court's question on the interpretation of Article 30 of the Treaty. That is because paragraph 1 of the StrEG 1998 establishes a clear difference of treatment between electricity produced in Germany and imported electricity in that only electricity produced from renewable sources in Germany can benefit from the purchase obligation at an elevated minimum price as

contained in the StrEG. A101 I have argued in my Opinion in Pistre [FN48] that the Court should decline to rule on the application of Article 30 to imports when it is clear from the facts of the case before it that the situation in the main proceedings is wholly confined to the national territory. FN48 Joined Cases C 321, 322, 323 & 324/94, Pistre and Others: [1997] E.C.R. I-2343; [1997] 2 C.M.L.R. 565. A102 I continue to believe that the concerns which I there expressed are valid where the national measure in issue is applicable without distinction to domestic and imported products and where the case before the national court concerns not imported but domestic products. As regards such a measure, Article 30 has effects only in so far as it applies to imports, and does not affect the measure in so far as it applies to national products. [FN49] Consequently, an interpretation by the Court of Article 30 in a case involving only domestic products is either irrelevant for the outcome of the main proceedings or relevant only by virtue of a national rule prohibiting reverse discrimination. In both cases the Court would be answering a hypothetical question on imported products outside its factual context. FN49 Joined Cases 314, 315, 316/81 & 83/82, Procureur de la Republique v. Waterkeyn: [1982] E.C.R. 4337; [1983] 2 C.M.L.R. 145. A103 However, where a national measure such as the StrEG 1998 favours in law and in fact the marketing of goods of domestic origin to the detriment of imported goods, the application of the measure to domestic producers puts imported products at a disadvantage and therefore hinders, at least potentially, intra-Community trade. Measures favouring domestic products are ex hypothesi often applied in purely domestic situations. In order to be effective Article 30 must therefore apply in all cases involving a measure favouring domestic products, independently of whether alternative imports are actually *859 envisaged. Since the interpretation of Article 30 is in such cases relevant for the main proceedings, the Court should reply to the national court's questions. A104 In any event, even as regards measures applicable without distinction [FN50] and in other situations where the relevance of the questions for the main proceedings was doubtful, [FN51] the Court has replied to the questions referred. In doing so it argued mainly that it is solely for the national court before which the dispute has been brought to determine both the need for a preliminary ruling and the relevance of the questions which it submits to the Court. [FN52] FN50 See Case 298/87, Smanor: [1988] 4489 at paras [8] and [9] of the judgment. FN51 See for example Case C-28/95, Leur-Bloem v. Inspecteur der Belastingdienst/Ondernemingen Amsterdam 2: [1997] E.C.R. I-4161; [1998] 1

C.M.L.R. 157 and Case C-130/95, Giloy v. Hauptzollamt Frankfurt AM Main-Ost: [1997] E.C.R. I-4291. FN52 See also recently Case C-281/98, Angonese v. Cassa di Risparmio di Bolzano; [2000] E.C.R. I-4139; [2000] 2 C.M.L.R. 1120 judgment of 6 June 2000, paras [18] and [19] of the judgment. A105 I therefore conclude that the Court should reply to the questions referred.

VI --Question 1: The Stromeinspeisungsgesetz 1998 as State aid A106 By its first question the national court wishes essentially to know whether the scheme established by the StrEG 1998 constitutes State aid within the meaning of Article 92(1) of the Treaty in favour of the producers of electricity from renewable energy sources. By splitting its first question into three sub-questions the Landgericht may have intended to draw the Court's attention to the special features of the national measure at issue. A107 Under Article 92(1): ... any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the Common Market. A108 According to the German Government and the interveners, the StrEG 1998 does not constitute State aid. It follows, in their view, from the wording of Article 92(1), the system of the Treaty and the Court's case law [FN53] that advantages which are not granted directly or indirectly through State resources cannot be classified as State aid. A different and therefore wider definition of State aid would bring practically all national legislation regulating the relationship between enterprises within the scope of the State aid rules and would upset the division of competences between the Member States and the Community as laid down in the Treaty. The StrEG 1998 merely contains a price-fixing *860 mechanism and the ensuing advantages for the producers of electricity from renewable sources are thus financed exclusively through private resources. Since the StrEG 1998 has no impact on the State budget, it cannot be considered to be State aid within the meaning of Article 92(1). FN53 Case 82/77, Openbaar Ministerie of the Netherlands v. Van Tiggele, cited in n. 20; Joined Cases C 72 & 73/91, Sloman Neptun v. Bodo Ziesemer, cited in n. 21; Case C-189/91, Kirsammer-Hack v. Sidal: [1993] E.C.R. I-6185; Joined Cases C 52, 53 & 54/97, Viscido and Others v. Ente Poste Italiene: [1998] E.C.R. I-2629; [1988] 3 C.M.L.R. 184. A109 The referring court, PreussenElektra and Schleswag, the Finnish Government and the Commission consider that the scheme established by the StrEG constitutes State aid. In their view, the mechanism established by the StrEG 1998 can be distinguished from the ones at issue in cases such as Van Tiggele [FN54] or Sloman Neptun [FN55] where the Court refused to apply the

State aid rules. It can more readily be compared to the measures under scrutiny in Van der Kooy [FN56] and Ecotrade, [FN57] on the one hand, and E.C. Commission v. France [FN58] and Steinike und Weinlig, [FN59] on the other hand, where the Court found that State aid was involved. It follows, moreover, from the function of the State aid rules, the wording of Article 92(1) and certain statements made by the Court that financing through State resources is not an essential element of the concept of aid. If the opposite were to follow from the case law, the Court should reconsider its position in order to exclude the possibility of Member States circumventing the State aid regime. In any event the StrEG 1998 should be caught as a circumvention measure by Article 5(2) of the E.C. Treaty (now Article 10(2) E.C.) read in conjunction with Article 92. FN54 Case 82/77, cited in n. 20. FN55 Joined Cases C 72 & 73/91, cited in n. 21. FN56 Joined Cases 67, 68 & 70/85, Van der Kooy and Others v. E.C. Commission: [1988] E.C.R. 219; [1989] 2 C.M.L.R. 804. FN57 Case C-200/97, Ecotrade v. AFS: [1998] E.C.R. I-7907; [1999] 2 C.M.L.R. 804. FN58 Case 290/83, E.C. Commision v. France: [1985] E.C.R. 439; [1986] 2 C.M.L.R. 546. FN59 Case 78/76, Steinike und Weinlig v. Germany: [1977] E.C.R. 595; [1977] 2 C.M.L.R. 688. A110 As a first preliminary point it must be stressed that the issue in the present case is not whether the StrEG 1998 is compatible with the State aid rules. The assessment of the compatibility of aid measures with the Common Market falls within the exclusive competence of the Commission, subject to review by the Community Courts. Supposing that the StrEG 1998 constitutes State aid, it may still be authorisable under the Community guidelines on State aid for environmental protection. [FN60] It should not be forgotten that the promotion of production of electricity from renewable sources is one of the most important environmental objectives of the European Union. [FN61] FN60 [1994] O.J. C 72/3. FN61 See, for example, Council Recommendation 88/611 to promote co-operation between public utilities and auto-producers of electricity, cited in n. 2; Council Resolution on renewable sources of energy, [1997] O.J. C 210/1; Communication from the Commission: Energy for the future: Renewable Sources of Energy--White Paper for a Community Strategy and Action Plan, COM(97) 599 final; Council Resolution of 8 June 1998 on renewable sources of energy, [1998]

O.J. C 198/1; Proposal for a Directive of the European Parliament and of the Council on the promotion of electricity from renewable energy sources in the internal electricity market, cited in n. 16. A111 *861 At issue in the present case is therefore only the scope of application of the regime for the control of State aid. In other words, is a Member State which wishes to adopt a law such as the StrEG 1998 obliged to comply with the procedural obligations of Article 93 of the Treaty (e.g. notification and standstill), or does that type of legislation fall entirely outside that control regime? A112 Secondly, only one element of the concept of State aid is disputed. As can be seen from the arguments summarised above, the written and oral submissions have concentrated almost exclusively on the question whether the advantages for the producers of electricity from renewable sources caused by the StrEG 1998 are "granted by a Member State or through State resources" within the meaning of Article 92(1). None of those submitting observations has argued that another constitutive element of the concept of State aid is lacking. There can indeed be little doubt that the elevated minimum price for electricity produced from renewable sources, combined with the purchase obligation, confers a considerable and specific economic advantage on producers of that type of electricity, thereby distorts competition between the different categories of producers and ultimately affects trade in electricity between Member States. A113 In the light of those preliminary considerations and the arguments of the parties, I will discuss the following questions: -- Is financing through State resources a constitutive element of the concept of State aid under the Court's existing case law? -- Should the Court reconsider that case law? -- Can the advantages granted by the StrEG 1998 be regarded as being financed through State resources? -- Is the StrEG 1998 a measure equivalent to State aid prohibited by Article 5(2) of the Treaty?

1. Financing through State resources as a constitutive element of the concept of State aid under the Court's case law

A114 The phrase "granted by a Member State or through State resources" in Article 92(1) might be read in two different ways. A115 On the one hand, it might be argued that the second alternative--aid granted "through State resources"--covers measures financed through public funds, whilst the first alternative--"aid granted by a Member State"--covers all remaining measures which are not financed through State resources. Under that extensive interpretation of Article 92(1), any measure which confers economic advantages on specific undertakings, and which is the result of conduct attributable to the State, constitutes State aid independently of whether it involves any financial burden for the State. A116 On the other hand, Article 92(1) may be read as stating that aid must necessarily be financed through State resources and that the distinction *862 between aid granted by a State and aid granted through State resources serves

to bring within the definition of aid not only aid granted directly by the State, but also aid granted by public or private bodies designated or established by the State. Under that second, narrower, interpretation, the measure at issue must necessarily cost the State money and financing through public resources is a constitutive element of the definition of State aid. A117 It is now well-established case law that the second reading prevails and that only advantages which are granted directly or indirectly through State resources are to be regarded as State aid within the meaning of Article 92(1). A118 That formula was used for the first time in Van Tiggele, [FN62] which concerned a measure fixing a minimum retail price for gin. The Court followed the Opinion of Advocate General Capotorti and held: Whatever definition must be placed on the concept of an aid ... it is clear from the wording [of Article 92(1)] that ... a measure characterised by the fixing of minimum retail prices with the objective of favouring distributors of a product at the exclusive expense of consumers cannot constitute an aid .... FN62 Case 82/77, cited in fn. 20. The advantages which such an intervention in the formation of prices entails for the distributors of the product are not granted, directly or indirectly, through State resources .... [FN63] FN63 Paras [24] and [25] of the judgment. A119 That principle was arguably confirmed in Norddeutsches Vieh- und Fleischkontor, [FN64] which concerned the allocation of special tariff quotas for the importation of frozen beef and veal from non-member countries. German legislation determined the allocation of the national quota share between domestic traders. Three traders challenged that legislation, inter alia, on the ground that it constituted State aid in favour of certain other traders. FN64 Joined Cases 213, 214 & 215/81, Norddeutsches Vieh- und Fleischkontor v. Balm: [1982] E.C.R. 3583. A120 According to Advocate General VerLoren van Themaat, it was possible to argue on the basis of the distinction made in Article 92(1) between aid granted "by a Member State" and aid granted "through State resources" that the independent grant of pecuniary advantages which were not paid for by a Member State was caught by Article 92. He mentioned the example of reduced rates which a Member State might require private electricity companies to grant to certain undertakings. [FN65] FN65 Para. 5 of the Opinion. A121 The Court held, however, that the financial advantage which traders derive from receiving a share in the national tariff quota was not granted through State

resources but through Community resources, because the levy which was waived was part of Community resources. Since the measure in issue did no more than allocate a Community tariff quota it did not constitute "aid granted by a Member State" or *863 through State resources within the meaning of Articles 92 to 94 of the Treaty. [FN66] FN66 Paras [22] and [24] of the judgment. A122 The subsequent judgment in E.C. Commission v. France [FN67] caused some uncertainty. In that case, a special aid to poor farmers was financed by the operating surplus accumulated over several years by the French Caisse nationale de crédit agricole. FN67 Case 290/83, cited in fn. 57. A123 The Commission assumed that the State was the initiator of the decision to grant the aid, but that the surplus from which it was financed was generated by the management of private funds and not of State resources. It considered therefore that the aid in question was not State aid within the strict meaning of the expression but a measure having an equivalent effect to State aid prohibited by Article 5 of the Treaty. [FN68] FN68 Paras [6] to [9] of the judgment. A124 Advocate General Mancini stated on the basis of a different interpretation of the facts that the aid was not only initiated by the State, but also financed through State resources. He therefore considered that State aid within the meaning of Article 92(1) of the Treaty was involved. [FN69] FN69 Under para. 3 of the Opinion. A125 The Court did not examine whether or not the grant was in fact financed from State resources. It nevertheless held that the grant constituted State aid and made the following statements: By virtue of the generality of the terms employed in [Article 92(1)] ... any State measure, in so far as it has the effect of according aid in any form whatsoever, may be assessed on the basis of Article 92 .... As is clear from the actual wording of Article 92(1), aid need not necessarily be financed from State resources to be classified as State aid. [FN70] FN70 Paras [13] and [14] of the judgment. A126 In Van der Kooy [FN71] and Greece v. E.C. Commission, [FN72] two cases decided shortly after E.C. Commission v. France, the Court again did not require financing through State resources.

FN71 Cited in fn. 55, paras [28] and [32] to [38] of the judgment. FN72 Case 57/86, E.C. Commission v. Greece: [1988] E.C.R. 2855; [1990] 1 C.M.L.R. 65, para. [12] of the judgment and the Opinion of Slynn A.G. at p. 2867. A127 The law as it currently stands was then formulated in Sloman Neptun. [FN73] In issue was a measure enabling certain shipping undertakings flying the German flag to subject seafarers who were nationals of non-member countries to working conditions and rates of pay less favourable than those applicable to German nationals. FN73 Cited in fn. 21. A128 Advocate General Darmon suggested after a thorough discussion of the issue that the origin of the financing of an aid measure was irrelevant. In his view, Article 92(1) required only that the aid measure was the result of conduct for which a Member State was responsible. [FN74] FN74 See in particular paras 40 to 43 of the Opinion. A129 *864 The Court, however, cited Van Tiggele and held that only advantages which were granted directly or indirectly through State resources were to be regarded as State aid within the meaning of Article 92(1). That was because the wording of that provision and the procedural rules in Article 93 of the Treaty showed that advantages granted from resources other than those of the State did not fall within the scope of the State aid rules. The distinction between aid granted by the State and aid granted through State resources served to bring within the definition of aid not only aid granted directly by the State, but also aid granted by public or private bodies designated or established by the State. [FN75] FN75 Para. [19] of the judgment. A130 As regards the question whether or not the advantages arising from the measure in issue were to be viewed as being granted through State resources, the Court held that the measure sought not to create an advantage, which would constitute an additional burden for the State, but only to alter in favour of shipping undertakings the framework within which contractual relations were formed with their employees. The consequences arising from the measure, in so far as they related to the difference in the basis for the calculation of social security contributions and to the loss of tax revenue because of the low rates of pay, were inherent in the system and not a means of granting a particular advantage to the undertaking concerned. Accordingly, the measure did not constitute State aid. [FN76] FN76 Paras [20] to [22] of the judgment.

A131 The principle that State aid has to be financed directly or indirectly through State resources has been confirmed in all relevant judgments since Sloman Neptun: Kirsammer-Hack v. Sidal, [FN77] Viscido, [FN78] Ecotrade v. AFS [FN79] and Piaggio. [FN80] FN77 C-189/91, cited in fn. 52. FN78 Joined Cases C 52, 53 & 54/97, cited in fn. 52. FN79 Case C-200/97, cited in fn. 56. FN80 Case C-295/97, Piaggio v. Ifitalia and Others: [1999] E.C.R. I-3735. A132 Recently, in Ladbroke, [FN81] the Community Courts examined legislation defining the range of uses to which the French Pari mutuel urbain ("PMU") could put unclaimed winnings from bets on horse-races. Under the original legislation the use of unclaimed winnings was restricted to certain types of social security expenditure. Winnings not used for the authorised purposes had to be paid to the State. Then the French legislature extended the range of eligible uses to other activities in order to help the PMU to finance special redundancy payments to former employees. This Court agreed with the Court of First Instance that in doing so the French authorities in effect waived revenue which in principle should have been paid over to the Treasury, so that State funds were transferred to the recipient within the meaning of Article *865 92(1) of the Treaty. As regards the arguments that the sums in question had never been directly held by the State, the Court stated that those sums were continuously subject to the State's control and therefore at the disposal of the competent national authorities, which was sufficient for them to be characterised as State resources within the meaning of Article 92(1). [FN82] FN81 Case C-83/98P, France v. Ladbroke Racing and E.C. Commission, judgment of 16 May 2000, confirming the judgment of the Court of First Instance in Case T-67/94, Ladbroke Racing v. E.C. Commission: [1998] E.C.R. II-1. FN82 See paras [45] to [51] of the Court's judgment. A133 It follows that, under the law as it stands, financing through State resources is a constitutive element of the concept of State aid.

2. Should the Court reconsider its case law? A134 The national court, the Commission, PreussenElektra, Schleswag and the Finnish Government consider that financing through State resources should not be a constitutive element of the concept of aid. In their view Article 92(1) requires only that a measure is the result of action by a Member State. A135 They refer to judgments of the Court and Opinons of its Advocates General

in which financing through State resources was not considered a necessary element of the concept of aid. [FN83] They also point out that both the German Government and the Commission have always treated the mechanism contained in the successive versions of the Stromeinspeisungsgesetz as State aid. FN83 See, above, paras 120, 122 to 126 and 128 and fns 64, 69, 70, 71 and 73. A136 They make the following arguments in favour of an extensive interpretation of Article 92(1). A137 In the first place, Article 92(1) applies to aid granted "in any form whatsoever". That phrase suggests an extensive interpretation of the concept of aid. A138 Secondly, it follows from Article 3(g) of the E.C. Treaty (now Article 3(g) E.C.) that the State aid rules are one of the cornerstones of a system designed to ensure that competition in the internal market is not distorted. The objective of Articles 92 et seq. is thus to maintain equal conditions of competition between traders. A broad interpretation of the concept of aid is necessary for Article 92 to make a meaningful contribution towards the achievement of that objective. [FN84] That is probably the reason why the Court has held that in applying Article 92 regard must primarily be had to the effects of the aid on the undertakings or producers favoured. [FN85] FN84 Lenz A.G. in his Opinion in Case 234/84, Belgium v. E.C. Commission: [1986] E.C.R. 263; [1988] 2 C.M.L.R. 331, at p. 2269. FN85 Case 78/76, Steinike und Weinlig v. Germany: [1977] E.C.R. I-595; [1977] 2 C.M.L.R. 688. A139 From that teleological viewpoint a State measure conferring specific advantages on certain undertakings does not become less anticompetitive where it is financed through private and not through public resources. On the contrary, the distortion of competition might *866 be greater where the cost of the measure is borne by competitors of the aided undertakings and not by the general public. A140 The present case is a perfect illustration of such a potentially harmful situation. The StrEG 1998 affects producers of electricity from conventional sources in two ways. A141 As competitors they must live with the fact that the StrEG 1998 guarantees the producers of electricity from renewable sources a considerable amount of operating aid (the most harmful form of aid). Moreover, the amount of that operating aid is determined on the basis of the amount of electricity produced and of average sales prices of the previous year (not on the basis of production costs). Producers of electricity from renewable sources can thus unilaterally increase the aid to which they are entitled by increasing production and by reducing production costs. And owing to the purchase obligation, the producers of electricity from renewable sources do not run the usual risks of overcapacity or price fluctuations.

A142 Moreover, it is not the general taxpayer but the producers of electricity from conventional sources themselves which have to pay the bill for the aid measure in question. Consequently, they also lose valuable resources which they could otherwise use in order to compete. The mechanism established by the StrEG therefore affects competition between the different categories of electricity producers to a greater extent than would a simple State subsidy financed from the general budget. A143 Thirdly, it has also to be kept in mind that all State revenue is ultimately provided by private individuals through taxes. Whatever the nature and the number of intermediate entities, the financial burden of an economic advantage conferred by the State on specific undertakings is thus, in any event, always borne by individuals and traders. [FN86] FN86 Darmon A.G., in his Opinion in Joined Cases C 72 & 73/91, Sloman Neptun, cited in fn. 21 at para. 40. A144 It is therefore formalistic to apply the State aid rules in cases where certain undertakings are required to pay money into a State fund whence it is redistributed to competitors, [FN87] and not to apply those rules in cases such as the present, where affected undertakings have to make direct payments to their competitors. FN87 See, for example, Case 78/76, Steinike und Weinlig v. Germany, cited in fn. 84; Case 290/83, E.C. Commission v. France, cited in fn. 57. A145 Finally, it is argued that there is a danger of circumvention of the State aid rules. If financing through State resources were a necessary element of the definition of aid, Member States might be tempted to devise schemes which confer important economic advantages on certain domestic undertakings, entail grave consequences for competition and cross-border trade in Europe, do not cost the Member State concerned any money, and, on top of all that, escape the Commission's control under Article 93 of the Treaty. A146 *867 The Commission expressly invites the Court to reconsider its existing case law in view of recent developments in the Community legal order and in the light of the mechanism established by the StrEG 1998. After the completion of the internal market and with the beginning of monetary union, selectively applied aid measures are the last remaining instrument which the Member States can use to confer competitive advantages on their domestic undertakings. On examination by the Commission those aid measures may well be found compatible with the Common Market. It is, however, of paramount importance to subject them to the control mechanisms contained in Article 93 of the Treaty which guarantee the necessary discipline and transparency. In defining the concept of State aid, the Court should thus give more weight to the objective of the State aid rules and their overall effectiveness. A147 PreussenElektra and the Commission also argue that the StrEG 1998 cannot be compared with the measures under scrutiny in the cases where the

Court held that State aid has to be financed through State resources. The rule established in those cases should therefore not be of general application and should in particular not be applied in the present case. A148 In Van Tiggele the measure in issue, fixing a minimum retail price for gin, had different effects because consumers were free to buy or not to buy gin and could also choose between different brands. The financial burden was on final consumers. The intention was to protect domestic producers against lower cost imports. Therefore the measure infringed Article 30 of the Treaty. By contrast, under the regime established by the StrEG 1998, the advantage for producers of electricity from renewable sources is financed by competitors and not by the general public. [FN88] The undertakings affected are obliged to purchase all the electricity produced from renewable sources within their area and cannot take a free purchase decision. Upstream suppliers are also automatically obliged to pay compensation. They pay even without receiving anything in return. The purpose of the StrEG 1998 is primarily not to impede imports but to improve the competitive position of the producers of electricity from renewable sources. FN88 See, for the doubts as regards that statement, para. 86. A149 Furthermore, in contrast to the measures in issue in Sloman Neptun, Kirsammer-Hack and Viscido, the StrEG obliges competitors to transfer money directly to the aided undertakings. The economic advantages for the producers of electricity from renewable sources and the costs for the affected undertakings are obvious and can be easily quantified. A150 I accept that there is some force in the above arguments in favour of an extensive understanding of the concept of State aid. I am none the less of the opinion that financing through State resources is a necessary *868 element of the concept of State aid and that the Court should adhere to its current case law. A151 That is, first, because, even if the phrase "granted by a Member State or through State resources" can be interpreted in different ways, the reading suggested by the Court in Sloman Neptun, Kirsammer-Hack and Viscido is more natural and raises fewer consequential problems. A152 According to the Court's understanding, the first alternative, "aid granted by a Member State", covers normal aid measures financed from public funds and granted directly by the State. The second alternative (aid granted through State resources) covers the rarer and residual category of aid financed through State resources which is granted not directly by the State but by public or private bodies designated or established by the State. If one adheres to that interpretation, the presence of the second alternative in Article 92(1) can be easily explained by the fact that the authors of the Treaty wanted to preclude circumvention of the State aid rules through decentralised and/or privatised distribution of aid. A153 Under the alternative reading suggested by the supporters of an extensive interpretation of Article 92(1), the second alternative (aid granted through State resources) covers measures financed through public funds, whilst the first alternative (aid granted by a Member State) covers all remaining measures which

are not financed through State resources. Such an understanding of Article 92(1) presupposes that the authors of the Treaty put a concept covering a residual category of cases (aid not financed through State resources) before the concept covering the normal category of cases. That is neither the natural nor the usual way to proceed when drafting legislation. A154 Moreover, in a systematic interpretation of the Treaty, the heading of the section "Aids granted by States" must be intended to cover both alternatives in Article 92(1) namely "aid granted by a Member State" and "aid granted through State resources". Since the wording of the first alternative is almost identical [FN89] with the wording of that heading, it seems difficult to argue (as the supporters of an extensive interpretation must do) that the first alternative--"aid granted by a Member State"--covers only the residual category of State measures which are financed through private resources. FN89 In the German version of the Treaty the wording is actually identical, namely in both cases "staatliche beihilfen". A155 Secondly, there is a fundamental problem with the teleological argument developed by the supporters of an extensive reading of Article 92(1). When defining the objective of the State aid rules they run the risk of assuming what has to be proved, namely that the rules are intended to apply to all State measures. In the light of the heading of the relevant section and the wording of Article 92(1) it could equally be argued that the State aid rules are intended to protect competition only from State measures which are financed through public funds and *869 not from all types of State measures. If that is the objective of Articles 92 et seq., "aid granted by a Member State or through State resources" cannot be interpreted as extensively as suggested. A156 Thirdly, a systematic argument in favour of the Court's interpretation can be made in connection with the procedural rules contained in Article 93. That provision protects the interests of the competitors of the aided undertaking and the Member States in which those competitors are established, [FN90] the interests of the Member State granting the aid and of the aided undertaking who both want the aid to be implemented as rapidly as possible, [FN91] and the interests of the Member States in their entirety. [FN92] By contrast, no rule in the system established by Article 93 addresses the specific problems of undertakings which have to finance the aid granted to other undertakings. If, however, Article 92(1) systematically covered measures financed from private resources, one would expect to find in Article 93 rules dealing with their procedural rights and obligations. Furthermore, it is difficult to see how a decision by the Commission ordering the recovery of unlawful State aid could be implemented where that aid has been paid by one group of undertakings to another group of undertakings. FN90 Art. 93(2). FN91 See, for example, "without delay" in Article 93(3).

FN92 Third sub-para. of Article 93(2). A157 A fourth argument in favour of the Court's solution is that it provides more legal certainty. I do not agree with the interveners and the German Government, who claim that the more extensive interpretation of Article 92(1) would bring practically all national legislation regulating the relationship between enterprises within the scope of the State aid rules. Most national legislation of that type would in any event not constitute State aid because it does not satisfy the requirement of selectivity, which means that it does not favour certain undertakings or the production of certain goods within the meaning of Article 92(1). It follows, however, that the more extensive interpretation would oblige the Member States, affected undertakings, the Commission, the national courts and ultimately the Community Courts to decide in respect of all legislation regulating the relationship between enterprises whether it does confer selective advantages on certain undertakings within the meaning of Article 92(1). Since such an assessment is a difficult exercise with an uncertain outcome, it seems preferable that legislation regulating the relationship between private actors is, as a matter of principle, excluded from the scope of the State aid rules. A158 Finally, the danger of the Member States adopting on a large scale support measures for certain domestic undertakings which are financed through private resources, have the same anti-competitive effects as normal State aid and escape the Commission's control, should not be exaggerated. The undertakings required to finance such *870 measures will use all legal and political means at their disposal to combat the measures in question. In the present case, PreussenElektra and Schleswag have challenged the StrEG 1998 in a number of proceedings before the German constitutional court. Moreover, a measure which has the same negative effects on competition and intra-Community trade as aid financed through the State resources is likely to infringe other rules of the Community legal order. [FN93] The Commission can then act under Article 169 of the E.C. Treaty (now Article 226 E.C.). FN93 For example Article 30 of the Treaty; see Case 82/77, Openbaar Ministerie of the Netherlands v. Van Tiggele, cited in fn. 20. A159 I therefore conclude that financing through State resources is a constitutive element of the concept of State aid under Article 92(1) of the Treaty and that the Court should not depart from its case law.

3. Can the advantages conferred by the StrEG 1998 be regarded as being financed

through State resources? A160 The referring court, PreussenElektra and the Commission argue that the advantages conferred by the StrEG 1998 on producers of electricity from renewable sources should be regarded as financed through State resources. They reach that conclusion on the basis of three alternative lines of reasoning.

(a) Potential loss in tax revenue A161 The national court states that the StrEG 1998 negatively affects the earnings of the undertakings which are subject to the purchase obligation and to the obligation to pay compensation. A reduction in earnings entails in turn a corresponding loss in tax revenue. A162 It follows, however, from the case law that a potential loss of tax revenue for the State as a result of the application of a system such as the one established by the StrEG 1998 cannot in itself justify treating that system as aid. [FN94] It is true that State aid may sometimes be financed through a waiver of State revenue. [FN95] But in the present case, the resources from which the advantages for producers of electricity from renewable sources are financed do not come from the alleged loss in tax revenue but from the undertakings subject to the StrEG and probably ultimately from consumers. The loss in question is thus merely an inherent side-effect of the StrEG 1998. FN94 See Joined Cases C 72 & 73/91, Sloman Neptun, cited in fn. 21, para. [21] of the judgment; Case C-200/97, Ecotrade v. AFS, cited in fn. 56, para. 36. FN95 Case C-83/98 P, France v. Ladbroke Racing and E.C. Commission, cited in fn. 80.

(b) Conversion of private resources into State resources A163 According to the Commission and PreussenElektra, the mechanism established by the StrEG 1998 converts private resources into public resources. In their view, it has effects analogous to the ones produced by taxation in that it withdraws resources from the private sphere and *871 commites them to a public interest objective. That is particularly evident as regards the obligation to pay compensation under paragraph 4(1) of the StrEG 1998. Under that provision, upstream suppliers have to pay money to downstream distributors without receiving anything in return. There is thus no relevant difference between the present case and cases in which parafiscal charges are used to finance aid measures. A164 It is true that State aid is often financed through revenue from parafiscal charges. [FN96] Furthermore, State resources within the meaning of Article 92(1) are not necessarily owned by public authorities and may in fact have always remained in the hands of the aided undertakings. That is the normal situation where the State grants aid through a waiver of revenue. A good example in that regard is the extension of the range of eligible uses to which the PMU could put unclaimed winnings from bets on horse-races in Ladbroke. [FN97] It is also established that State resources do not necessarily come from permanent assets of the public sector. In Air France, the balance produced by deposits with and withdrawals from the accounts of the French Caisse des dépôts et consignations, which the Caisse was able to use as if the funds represented were permanently at its disposal, was therefore covered by the concept of State resources. [FN98]

FN96 See, for example, Case C-72/92, Herbert Scharbatke v. Germany: [1993] E.C.R. I-5509, para. [18]. FN97 Case C-83/98 P, cited in fn. 80, paras [45] to [51] of the judgment. FN98 Case T-358/94, Air France v. E.C. Commission: [1996] E.C.R. II-2109; [1997] 1 C.M.L.R. 492, paras [66] and [67] of the judgment. A165 The common denominator of all the relevant cases is however that in one way or another the State exercised control over the resources in question. In the case of parafiscal charges the money becomes the property of the State before it is redistributed to the aided undertakings. In the case of a waiver of revenue the State renounces sums which it was in principle entitled to claim. State resources within the meaning of Article 92(1) of the Treaty are therefore only resources which are at the disposal of public authorities. [FN99] FN99 See the formulae used in Ladbroke at para. 50, and in Air France in para. 68. A166 In the present case the sums to be transferred under the StrEG 1998 never are and never will be at the disposal of the German authorities. No public authority enjoys at any moment any rights with regard to those sums. In fact, they never leave the private sphere. If one of the undertakings refuses to comply with its obligations under the StrEG 1998, the other has to go to court. If the argument of the Commission and PreussenElektra were to be accepted then all sums which one person owes another by virtue of a given law would have to be considered to be State resources. That seems an impossibly wide understanding of the notion. It follows that the private resources to be transferred under the StrEG 1998 are at no time State resources within the meaning of Article 92(1) of the Treaty. A167 *872 In reality, the Commission and PreussenElektra are inviting the Court to treat the StrEG 1998 by analogy with measures financed through parafiscal charges. But any legitimate analogy presupposes a lacuna or, in other words, a situation which is not governed by an existing rule. It follows from the discusison above that such a clear-cut rule already exists, namely that measures financed exclusively through private resources are outside the scope of the State aid rules. The analogy suggested by the Commission and PreussenElektra would thus effectively abolish the distinction between publicly financed and privately financed measures.

(c) Reduced earnings of publicly owned undertakings as State resources A168 According to the Commission, it follows from the judgments in Ecotrade [FN100] and Van der Kooy [FN101] that an aid measure financed by undertakings which are partially or entirely owned by the State must be viewed as being financed through State resources within the meaning of Article 92(1).

The Commission relies on data published in 1996 [FN102] and contends that a majority of the capital of six of the nine big undertakings at the first level of the German electricity market is owned by the State and that 60 per cent of the shares of all regional electricity suppliers are equally owned by public authorities (in most cases by cities and communes). It follows, in the Commission's view, that the purchase obligation and the compensation mechanism established by the StrEG 1998 constitute State aid at least in so far as they affect undertakings owned by the State. Since the StrEG 1998 does not differentiate between publicly and privately owned undertakings, the Law in its entirety should have been notified. FN100 Case C-200/97, cited in fn. 56. FN101 Joined Cases 67, 68 & 85, cited in fn. 55. FN102 The Commission refers to Eugene D. Cross, Electric Utility Regulation in the European Union--A Country by Country Guide, 1996, pp. 133 to 136. A169 In Van der Kooy, the Court had to decide whether a preferential tariff applying to natural gas sold by Nederlandse Gasunie to glasshouse growers in the Netherlands constituted State aid. Nederlandse Gasunie was a company incorporated under private law, 50 per cent of whose capital was held directly or indirectly by the State. A170 Advocate General Slynn discussed not only whether the tariff had been imposed by the State but also whether State resources were involved. The Commission had held in the contested decision that the aid was financed through State resources and the applicants had contested that finding. [FN103] In the Advocate General's view, the aid in question was financed through public funds since the State surrendered its share of the profits which would have been made by Nederlandse Gasunie had prices been higher. [FN104] FN103 See the report for the hearing, point III A 3 at p. 236. FN104 See the Opinion at p. 250. A171 *873 The Court, however, did not examine whether State resources were involved. It asked only whether the State was responsible for fixing the tariff in question. That might be explained by the uncertainty at the time about the state of the law caused by E.C. Commission v. France. [FN105] Whatever the reasons, since the Court apparently did not view financing through State resources as a constitutive element of the concept of State aid, Van der Kooy cannot be invoked as authority for the proposition that a reduction in profits of a State-owned undertaking amounts to financing through State resources. FN105 See above at para. 122.

A172 Ecotrade [FN106] and Piaggio [FN107] both concerned an Italian Law which allowed certain insolvent industrial undertakings to be placed under extraordinary administration and to be granted special protection from execution by creditors by way of derogation from the ordinary rules of insolvency. The Court held that the expression "aid" necessarily implied advantages granted directly or indireclty through State resources or constituting an additional charge for the State or for bodies designated or established by the State for that purpose. In the Court's view, the Italian Law under examination was intended to apply selectively for the benefit of certain undertakings which owed particularly large debts to certain, mainly public, classes of creditors. It was highly likely that the State or public bodies would be among the principal creditors of the undertakings in question. Moreover, several other features of the system established by the Law could entail an additional burden for the State, compared to the situation that would have arisen had the usual insolvency rules been applied. On the basis of those indications, the Court left it to the national court to make the necessary findings in order to establish whether State aid was involved. FN106 Case C-200/97, cited in fn. 56. FN107 Case C-295/97, cited in fn. 79. A173 I must confess that I am not entirely sure how to interpret the judgments in those two cases. [FN108] It is, for example, not clear whether the Law under examination as such or only its application in a particular case might constitute State aid. Furthermore, contrary to what the Commission seems to assume, the Court did not expressly state that financing of an aid measure through reduced earnings of State-owned undertakings might be viewed as financing through State resources within the meaning of Article 92(1) of the Treaty. In order to explain why State resources might be involved, the Court mentioned as potentially affected creditors merely "public classes of creditors", [FN109] "the State or public bodies" [FN110] and "public authorities". [FN111] In my view, therefore, the judgments in those cases again provide no clear authority. FN108 See also the comments of Ruiz-Jarabo A.G., Opinion in Piaggio, para. 30. FN109 Case C-200/97, Ecotrade, cited in fn. 56, para. [38] of the judgment. FN110 Paras [38] and [41] of the judgment. FN111 Paras [41] and [43] of the judgment. A174 If Ecotrade and Piaggio are none the less to be interpreted as *874 suggesting that financing of a measure through reduced earnings of publicly owned undertakings may constitute financing through State resources, then two qualifications are necessary.

A175 First, I consider that a general measure which confers advantages on one group of undertakings at the expense of another group of undertakings cannot be classified as State aid merely because one or a small number of undertakings of the latter group are partially or totally owned by the State. Such an understanding of the concept of financing "through State resources" would bring a vast amount of legislation regulating the relations between enterprises within the scope of the State aid rules. Moreover, it would have absurd results in that a Member State would probably have to exempt the publicly owned undertakings from the obligations affecting the other undertakings in order to comply with the State aid rules. That would obviously distort competition between the different types of undertakings on the financing side of the measure. Those considerations might explain why the Court emphasised in Ecotrade and in Piaggio that the State or public bodies should be the "principal creditors" or be among the "chief creditors" of the undertaking in difficulty. A176 In the present case the German Government stated, in its reply to a written question of the Court, that currently only two out of eight undertakings at the first level of the German electricity market are controlled by the State. As regards the second level of regional distribution, no detailed data could be provided, but ownership structures were subject to rapid change with a clear tendency towards private ownership. It is also important to note that, in contrast to Ecotrade and Piaggio, no other public bodies such as social security institutions or public banks are involved on the financing side. A177 Consequently, the advantages for the producers of electricity from renewable sources are financed exclusively by undertakings incorporated under private law of which apparently a majority is privately owned. In those circumstances, the mechanism established by the StrEG 1998 cannot be viewed as being financed "through State resources". A178 Secondly, PreussenElektra itself is privately owned and holds, as already stated, 65.3 per cent of the shares of Schleswag. The application of the StrEG 1998 in the concrete case did not therefore involve any additional financial burden for the State or reduced earnings of publicly owned undertakings. A179 It follows that the Commission's argument relying on financing of the aid through reduced earnings of publicly owned undertakings must be rejected.

4. Is the StrEG 1998 a measure equivalent to State aid prohibited by Article 5(2) of the Treaty?

A180 The Commission maintains that if the StrEG 1998 is not to be regarded as State aid in the strict sense it constitutes a measure *875 intended to circumvent the State aid rules. The Court has held in connection with Articles 3(g) and 85 of the Treaty that Article 5 requires the Member States not to introduce or maintain in force measures, even of a legislative or regulatory nature, which may render ineffective the competition rules applicable to undertakings. [FN112] The StrEG 1998, which has all the harmful effects of State aid in spite of being financed by private resources, poses a similar threat to the effectiveness of Articles 92 and 93. A measure such as the StrEG 1998 therefore infringes Article 5(2) of the Treaty, read in connection with Articles 92 and 93. Since there are already

appropriate procedures under Article 93 to deal with infringements of the State aid rules, it would be wrong to sanction the infringement of Article 5, through the procedure under Article 169 of the E.C. Treaty (now Article 226 E.C.). An infringement of Article 5, read in conjunction with Articles 92 and 93, is therefore best dealt with by a teleological extension of the notion of State aid in Article 92(1). FN112 See for example Case C-2/91, Meng: [1993] E.C.R. I-5751, para. [14] of the judgment. A181 The Commission had already used a similar line of argument in E.C. Commission v. France. [FN113] That case concerned a special aid to poor farmers financed by the operating surplus accumulated over several years by the Caisse nationale de crédit agricole. Since the surplus was generated by the management of private funds, the Commission considered that no State aid within the strict meaning of the expression was involved. It argued, therefore, that it was a measure having an equivalent effect to State aid prohibited by Article 5 of the Treaty and on the basis of that assumption it brought proceedings under Article 169 of the Treaty. [FN114] FN113 Case 290/83, cited in fn. 57. FN114 Paras [6] to [9] of the judgment. A182 The Court held that the procedure under Article 169 of the Treaty did not provide all parties concerned with the same guarantees as the procedure under Article 93(3). The Commission therefore had to use the latter procedure if it wished to establish that a scheme was aid incompatible with the Common Market. Articles 92 and 93 left no space for a parallel concept of "measures equivalent to aid" which were subject to different rules from those which apply to aid properly so-called. A183 It is clear from that judgment that the idea of "measures equivalent to aid" which infringe Article 5(2) and can be sanctioned under Article 169 of the Treaty has no foundation in the Treaty. A184 In the present case the Commission suggests, if I understand its arguments correctly, something slightly different, namely that the StrEG 1998 as a "measure equivalent to aid" infringes Article 5(2) of the Treaty and that it should be sanctioned under Article 93 by virtue of an extensive interpretation of the concept of aid under Article 92(1). A185 In my view, that argument is flawed. There are several conceivable *876 sanctions for an infringement of a prohibition such as Article 5(2). But I cannot see how the infringement of that general prohibition can trigger an extension of the scope of application of another set of special rules prohibiting a particular kind of State measures. One has also to keep in mind that the assumption underlying the Commission's argument is that measures financed through private resources do not constitute State aid. If the Commission's arguments were to be

accepted, Article 5 of the Treaty could be used to extend the reach of the Treaty. In reality the Commission suggests an extensive teleological interpretation of Article 92(1) which includes measures financed through private resources. For the reasons indicated above I am not in favour of such an extensive interpretation. A186 I accordingly conclude that the mechanism established by the StrEG 1998 does not contain State aid within the meaning of Article 92(1) of the Treaty.

VII --Question 2: The reach of the standstill obligation in Article 93(3) of the Treaty

A187 By its second question, the referring court wishes to ascertain whether the restrictive effects of Article 93(3) of the E.C. Treaty apply not only to the aid measure itself but also to implementing rules such as the compensation mechanism under paragraph 4(1) of the StrEG 1998. A188 It asks that question, however, only in the event that the purchase obligation at a minimum price under paragraphs 2 and 3 of the StrEG 1998 constitutes State aid while the compensation mechanism in paragraph 4(1) does not. A189 Given the reply to the first question, the second question does not therefore arise.

VIII --Question 3: The Stromeinspeisungsgesetz 1998 as a measure having equivalent effect to a quantitative restriction on imports

1. Preliminary considerations

A190 By its third question, the referring court wishes to know whether a mechanism such as that established by the StrEG 1998 constitutes a quantitative restriction on imports or a measure having equivalent effect within the meaning of Article 30 of the Treaty. A191 In the referring court's view, the obligation on German network operators to purchase electricity produced from renewable sources within their area of supply might reduce demand for electricity produced in other Member States and is therefore to be classified as a measure having equivalent effect to a quantitative restriction on imports. A192 Both PreussenElektra and Schleswag consider that the StrEG 1998 is incompatible with Article 30 of the Treaty. In their view, the obligation to purchase a certain amount of electricity produced from renewable sources in Germany affects their ability to import electricity *877 from other Member States. That restriction on imports cannot, as a directly discriminatory measure within the meaning of the Court's case law, [FN115] be justified on environmental grounds. It cannot be justified under Article 36 of the Treaty either, since the protection of the environment is not included among the interests protected by that Article. In any event, the StrEG 1998 infringes the principle of proportionality. FN115 Case 113/80, E.C. Commission v. Ireland: [1981] E.C.R. 1625; [1982] 1

C.M.L.R. 706, para. [11] of the judgment. A193 The interveners, the German Government and the Commission argue essentially that the measure in issue either does not restrict intra-Community trade to an appreciable extent or is justified on grounds of the protection of the environment or of security of electricity supply. A194 In view of the suggested reply to the first two questions, the Court's answer to the national court's third question may be decisive for the outcome of the main proceedings. Moreover, the legal issues raised by that question are both complex and of general importance. A195 Unfortunately, however, the issues have not been fully discussed by the parties, and the Court is not fully informed of the facts. Until now the litigation about the validity of the Stromeinspeisungsgesetz has concentrated on its effects either on the undertakings which have to finance the mechanism [FN116] or on the undertakings competing with the producers of electricity from renewable sources. [FN117] The national court's third question deals by contrast with a third effect of the StrEG 1998, but one hitherto largely neglected, namely its impact on cross-border trade in electricity. Moreover, it is not clear precisely how and to what extent imports of electricity from other Member States are in practice affected by the operation of the StrEG 1998, and in particular, for example, whether imports of electricity from renewable resources are technically feasible at all and whether such electricity can be distinguished from electricity generated from conventional sources. FN116 As already stated, PreussenElektra and Schleswag have challenged the constitutionality of the Stromeinspeisungsgesetz before the German constitutional court. FN117 That is the logic behind the referring court's first and second question. A196 Owing to that lack of argument and background information, the Court might find it necessary to reopen the oral procedure in respect of the third question. In the alternative it might merely indicate in general terms the interpretation of the rules on free movement of goods and leave the final assessment to the referring court. For the same reasons I will consider the issues, despite their importance, only briefly. In the absence of argument, only tenative views seem possible.

2. Article 30 of the Treaty A197 The first point to be made is that the rules on the free movement of goods apply. Electricity constitutes goods for the purposes of Title I in *878 Part Three of the E.C. Treaty and thus also for Article 30 which is part of that Title. [FN118] Furthermore, the mechanism established by the StrEG 1998 does not in my view constitute State aid within the meaning of Article 92(1) of the Treaty. On that view the difficult question whether a measure which falls under the State aid rules might nevertheless also be caught by Article 30 of the Treaty [FN119] does

not arise. FN118 Case C-393/92, Almelo: [1994] E.C.R. I-1477, para. [28] of the judgment; Case C-158/94, E.C. Commission v. Italy: [1997] E.C.R. I-5789, paras [14] to [20]. FN119 See, on the one hand, Case 74/76, Iannelli v. Meroni: [1977] E.C.R. 557; [1977] 2 C.M.L.R. 688, paras [10] to [17] of the judgment, Case C-225/91, Matra v. E.C. Commission: [1993] E.C.R. I-3203, para. [41]; see, on the other hand, Case 249/81, E.C. Commission v. Ireland: [1982] E.C.R. 4005; [1983] 2 C.M.L.R. 104, para. [18], Case 18/84, E.C. Commission v. France: [1985] E.C.R. 1339; [1986] 1 C.M.L.R. 605, para. [13], Case 103/84, E.C. Commission v. Italy: [1986] E.C.R. 1759; [1987] 2 C.M.L.R. 825, para. [19] and Case C-21/88, Du Pont de Nemours Italiana: [1990] E.C.R. 889; [1991] 3 C.M.L.R. 25, para. [20]. A198 Since the StrEG 1998 does not prohibit totally or partially the importation of electricity from other Member States, it cannot be considered a quantitative restriction on imports within the meaning of Article 30 of the Treaty. A199 I consider, however, that the purchase obligation at a minimum price as laid down in the StrEG 1998 is to be regarded as a measure having effect equivalent to a quantitative restriction on imports. A200 PreussenElektra and Schleswag contend in that respect that the mechanism established by the StrEG 1998 restricts imports of electricity in two ways. In the first place, the purchase obligation obliges the network operators in Germany to purchase a certain proportion of their electricity supplies from national producers of electricity from renewable sources and, to that extent, limits the possibility of importing electricity, for example from Scandinavia. In that connection Schleswag claims, as already mentioned, [FN120] that it was offered electricity produced from renewable sources in Sweden at a relatively low price and that in fact it could not accept that offer owing to its obligation to purchase all the wind-generated electricity produced within its area of supply. PreussenElektra claims, secondly, that the operation of the StrEG 1998 in northern Germany affects transmission capacities for the import and export of electricity, since the feeding of wind-produced electricity into the medium-voltage networks of the German regions close to the Danish border creates bottlenecks in electricity transmission between Denmark and Germany at the high-voltage level. FN120 See above at para. 99. A201 According to the Court's case law, Article 30 covers all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade. [FN121] Any obligation to purchase a certain amount of products from national suppliers limits to that extent the possibility of importing the same *879 product. [FN122] Even the mere encouragement by the legislature to purchase domestic products must be

regarded as a measure having an effect equivalent to a quantitative restriction on imports. [FN123] FN121 Case 8/74, Procureur du Roi v. Dassonville: [1974] E.C.R. 837; [1974] 2 C.M.L.R. 436, para. [5] of the judgment. FN122 Case 72/83, Campus Oil v. Minister for Industry and Energy: [1984] E.C.R. 2727; [1984] 3 C.M.L.R. 544, para. [16] of the judgment; see also Case C-21/88, Du Pont de Nemours Italiana, cited in fn. 118, para. [11]. FN123 Case 249/81, E.C. Commission v. Ireland, cited in fn. 118, paras [27] to [29] of the judgment, and Case 103/84, E.C. Commission v. Italy, cited in fn. 118, para. [24]. A202 In the present case, paragraph 1 of the StrEG 1998 expressly limits the purchase obligation to electricity generated in Germany. [FN124] It appears from replies to a written question put by the Court that the newly introduced "off-shore rule" contained in the second sentence of paragraph 2 of the StrEG 1998 [FN125] is not designed to extend the purchase obligation to electricity generated from renewable sources outside Germany, but merely covers coastal installations producing on German territory. The StrEG 1998 therefore favours the marketing of electricity of German origin to the detriment of imported electricity and prevents the undertakings concerned from purchasing some of the supplies they need from undertakings situated in other Member States. Since the StrEG 1998 thus hinders, at least potentially, intra-Community trade, it must be regarded as falling under Article 30 of the Treaty. FN124 See above at para. 25. FN125 See above at para. 28. A203 The interveners and the German Government argue that the electricity from renewable sources which falls under the StrEG 1998 corresponds to only 1 per cent of German electricity consumption. Since the purchase obligation affects only an insignificant part of the electricity market, intra-Community trade is, in their view, not really affected. A204 Under the Court's current case law it is not clear whether there is a de minimis rule in relation to Article 30 of the Treaty, excluding from the scope of Article 30 of the Treaty all measures lacking an appreciable effect on trade. [FN126] Even if there were such a rule, it would not apply in the present case. Both in absolute and in relative terms (for example in terms of potential imports from Denmark or Sweden), cross-border electricity trade amounting to 1 per cent of total German electricity consumption is manifestly not a negligible quantity. That would be so a fortiori if one looked at effects on trade in electricity from renewable sources alone.

FN126 See, on the one hand, for example, Case 16/83, Prantl: [1984] E.C.R. 1299; [1985] 2 C.M.L.R. 238 *880 , para. [20] of the judgment, Joined Cases 177 & 178/82, Van de Haar and Kaveka de Meern: [1984] E.C.R. 1797; [1985] 2 C.M.L.R. 57, para. [13], Case 269/83, E.C. Commission v. France: [1985] E.C.R. 837, [1985] 2 C.M.L.R. 399, para. [10], Case 103/84, E.C. Commission v. Italy, cited in fn. 118, para. [18]; see, on the other hand, for example, Case C-266/96, Corsica Ferries France v. Gruppo Antichi Ormeggiatori del Porto di Genova and Others: [1998] E.C.R. I-3949; [1998] 5 C.M.L.R. 402, para. [31], Case C-44/98, BASF v. Präsident des Deutschen Patentamts: [1999] E.C.R. I-6269, and by implication Case C-254/98, Schutzverband gegen Unlauteren Wettbewerb v. TK-Heimdienst Sass, judgment of 13 January 2000, para. [30]. A205 Accordingly, a mechanism such as that established by the StrEG 1998 must be considered as a measure having effect equivalent to a quantitive restriction on imports and is therefore in principle prohibited by Article 30 of the Treaty.

3. Justification A206 The referring court asks only whether a mechanism such as that established by the StrEG 1998 must be considered to fall under Article 30 of the Treaty. In order to give a useful reply I will also examine possible justifications for the restriction of trade entailed by the measure in issue.

(a) Security of supply A207 As regards, first, Article 36 of the Treaty, the interveners, the German Government and the Commission rely on the possibility afforded by that rule of restricting imports on grounds of public security, which includes, in their view, security of electricity supply. In that connection they also refer to Article 8(4) of the Electricity Directive [FN127] which provides: A Member State may, for reasons of security and supply, direct that priority be given to the dispatch of generating installations using indigenous primary energy fuel sources to an extent not exceeding in any calendar year 15 per cent of the overall primary energy necessary to produce the electricity consumed in the Member State concerned. FN127 Cited in fn. 12. A208 In my view, Article 8(4) of the Electricity Directive cannot be invoked in the present case. That rule must be interpreted strictly since it is an exception to the general principle contained in Article 8(2) of the Directive, namely that transmission system operators must dispatch generating installations and make use of interconnector transfers in their area on the basis of objective, transparent and non-discriminatory criteria with due regard to the proper functioning of the internal market in electricity. According to its clear wording, Article 8(4) applies only in respect of "generating installations using indigenous primary energy fuel

sources", in the French version "sources combustibles indigènes" and in the German version "einheimische Primärenergieträger als Brennstoffe". Wind is neither a "fuel source" in that sense nor an "indigenous commodity". Consequently, Article 8(4) does not apply. In any event, Article 8(4) allows differential treatment only on the basis of the origin of the primary energy fuel source used and not on the basis of the location of the generation installation. A209 In my view, Article 36 cannot be relied on either in respect of security of supply. The Court admittedly held in Campus Oil that the aim of ensuring a minimum supply of petroleum products at all times is to be regarded as capable of constituting an objective covered by the *881 concept of public security. [FN128] In the first place, however, it is doubtful whether recourse to Article 36 is still possible given the fact that the Electricity Directive provides for types of measures necessary to ensure security of supply. [FN129] Moreover, wind as an energy source is not yet as important for the modern economy as petroleum products. The special economic role of petroleum products was a decisive factor in the Court's rather exceptional judgment in Campus Oil. [FN130] Finally, the StrEG 1998 pursues essentially environmental objectives and the admittedly positive consequence for security of energy supply are only side-effects of the Law in issue. FN128 Case 72/83, cited in fn. 120, para. [35], of the judgment. FN129 Para. [27] of the judgment. FN130 Para. [34] of the judgment. A210 In any event, the measure as it stands might be found incompatible with the second sentence of Article 36 of the Treaty and the principle of proportionality. It is not clear that the exclusion from the scope of the StrEG 1998 of electricity from renewable sources produced in other Member States contributes to the achievement of the objective of security of supply. It might therefore constitute arbitrary discrimination against electricity from renewable sources from other Member States.

(b) Protection of the environment A211 The second ground of justification relied on by the interveners, the Commission and Germany is the protection of the environment. In that connection they refer, first, to Articles 3(2), 8(3) and 11(3) of the Electricity Directive and, secondly, to the protection of the environment under the Treaty. A212 I am not convinced that the mechanism established by the StrEG 1998 is covered by any of those provisions of the Electricity Directive. A213 Under Article 3(2) of the Directive, Member States may impose on undertakings operating in the electricity sector, in the general economic interest, public service obligations which may relate among other things to environmental protection. It is, however, expressly stated that those obligations must be non-discriminatory. In the present case, the purchase obligation imposed on network

operators applies only to electricity produced in Germany. A214 Articles 8(3) and 11(3) entitle Member States to require transmission system operators and distribution system operators when dispatching generation installations to give priority to generating installations using renewable energy sources. Those provisions must be interpreted narrowly as exceptions to the general non-discrimination rules in Articles 8(2) and 11(2). Unlike Article 8(4), which allows within certain limits discrimination on grounds of the geographical origin of the "primary energy fuel source" concerned, Articles 8(3) and 11(3) allow only distinctions between different *882 modes of production of electricity. It follows that a measure such as the StrEG 1998, which favours domestic electricity over imported electricity of the same type, cannot be justified on the basis of those provisions. A215 Can the restriction on imports caused by the StrEG 1998 none the less be justified under the Treaty in the interest of environmental protection? A216 The protection of the environment is not listed in Article 36 of the Treaty. The Court has, however, held that certain obstacles to free movement must be accepted in so far as those obstacles may be regarded as necessary in order to satisfy imperative requirements recognised by Community law. [FN131] According to settled case law, the protection of the environment is one of the imperative requirements which may limit the application of Article 30 of the Treaty. [FN132] FN131 Case 120/78, Rewe v. Bundesmonopolverwaltung für Branntwein: [1979] E.C.R. 649; [1979] 3 C.M.L.R. 494, para. [8] of the judgment. FN132 Case 302/86, E.C. Commission v. Denmark: [1988] E.C.R. 4607; [1989] 1 C.M.L.R. 619, para. [9] of the judgment. A217 The StrEG 1998 undoubtedly pursues environmental objectives of considerable importance. The production of electricity from renewable sources may make a significant contribution to the reduction of the emission of greenhouse gases and to the preservation of finite conventional energy sources. As can be seen from the impressive figures quoted by the Commission, [FN133] the StrEG 1998 seems to be a particularly efficient mechanism for increasing the use of renewable sources of energy. FN133 See above at para. 20. A218 It is, however, doubtful whether it is possible to rely in the present case on grounds of environmental protection. A219 The first problem is that since the Electricity Directive provides for the above harmonised rules on permissible national measures for the promotion of electricity from renewable sources, the possibility of relying on imperative requirements under the Treaty might be excluded. However, specific Community measures on the promotion of electricity from renewable energy sources in the internal market are currently being discussed but have not yet been adopted,

[FN134] which means that the Member States continue to enjoy a degree of freedom in that field. FN134 See above at para. 44. A220 The second problem is that, as PreussenElektra correctly contends, it was until recently well-established case law that imperative requirements could not be relied on to justify national measures which were not applicable to domestic products and imported products without distinction. [FN135] FN135 See, for example, Case 113/80, E.C. Commission v. Ireland *883 , cited in fn. 114, para. [11] of the judgment; Case 207/83, E.C. Commission v. United Kingdom: [1985] E.C.R. 1201; [1985] 2 C.M.L.R. 259, para. [22]; Joined Cases C-176/90, Aragonesa de Publicidad Exterior and Publiuia: [1991] E.C.R. I-4151; [1994] 1 C.M.L.R. 887, para. [13]. A221 As regards the StrEG 1998, electricity produced from renewable sources in Germany benefits from the purchase obligation at a minimum price and the same type of electricity produced in neighbouring Member States does not. The StrEG 1998 thus treats electricity of domestic origin differently, both in law and in fact, from imported electricity. On the basis of the case law mentioned in the previous paragraph, environmental protection could not therefore be invoked by way of justification. A222 The Commission seeks to rely on the Walloon Waste case. [FN136] It suggests that a similar approach should be followed in the present case in order to rely on grounds of environmental protection. FN136 Case C-2/90, E.C. Commission v. Belgium: [1992] E.C.R. I-4431; [1993] 1 C.M.L.R. 365. A223 That case concerned a measure which prohibited the storage, tipping, or dumping in Wallonia of waste originating in another Member State or in a region of Belgium other than Wallonia. On the issue whether the measure could be justified by imperative requirements of environmental protection, the Court reasoned essentially as follows. A224 According to the Court, it was true that imperative requirements could be taken into account only in the case of measures which applied without distinction to both domestic and imported products. But, in assessing whether or not a barrier was discriminatory, account had to be taken of the particular nature of waste, of the principle under Article 130r(2) of the E.C. Treaty (now, after amendment, Article 174(2) E.C.) that environmental damage should be remedied at source and of the principles of self-sufficiency and proximity set out in the Basle Convention on the control of transboundary movements of hazardous wastes and their disposal. Having regard to the differences between waste produced in different places and to the connection of waste with its place of production the measure in issue could not be regarded as discriminatory.

[FN137] FN137 Paras [34] to [36] of the judgment. A225 In my view, the reasoning in Walloon Waste is flawed and should not be relied on in the present case. The question whether or not a measure applies without distinction to domestic and imported products is from a logical point of view a preliminary and neutral one. Its only function under the Court's case law is to determine which grounds of justification are available. I consider therefore that in assessing whether a measure is directly discriminatory regard cannot be had to whether the measure is appropriate. A226 But the judgment in Walloon Waste also shows something else, namely that it is desirable that even directly discriminatory measures can sometimes be justified on grounds of environmental protection. A227 Moreover, there are indications that the Court is reconsidering its earlier case law. The Court has relied on imperative requirements in cases in which it was at least doubtful whether the measure could be *884 considered as applying without distinction. [FN138] In Dusseldorp, the Court expressly left open whether a discriminatory restriction of exports could in principle be justified on environmental grounds. [FN139] Perhaps the most striking case is Aher-Waggon. [FN140] That case concerned a German measure making registration of aircraft in Germany conditional upon compliance with noise limits. That measure did, it seems to me, directly discriminate between domestic aircraft and imported aircraft in that aircraft previously registered in another Member State could not be registered in Germany even though aircraft of the same construction which had already obtained German registration before the German measure was adopted could retain that registration. The Court held, however, without assessing whether the measure was directly discriminatory, that a barrier of that type could be justified by considerations of public health and environmental protection. [FN141] FN138 See, for example, Joined Cases C 34, 35 & 36/95, KO v. de Agostini and TV-Shop: [1997] E.C.R. I-3843, paras [44] and [45] of the judgment; Case C-120/95, Decker v. Caisse de Maladie des Employes Prives [1998] E.C.R. I-1831; [1998] 2 C.M.L.R. 879, paras [36] and [39]; and with regard to services Case C-158/96, Kohll v. Union des Caisses de Maladie: [1998] E.C.R. I-1931; [1998] E.C.R. I-1931. FN139 Case C-203/96, Dusseldorp and Others v. Minister Van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer: [1998] E.C.R. I-4075; [1998] 3 C.M.L.R. 873, paras [44] and [49] of the judgment. FN140 Case C-389/96, Aher-Waggon v. Germany: [1998] E.C.R. I-4473; [1999] 2 C.M.L.R. 589. FN141 Para. [19] of the judgment.

A228 Thus, on the one hand, "it cannot be ruled out that the relevance of the distinction between Article 30 [formerly Article 36] interests and rule of reason exceptions is on the decline. [FN142] On the other hand, the Court has not formally abandoned the rule that imperative requirements cannot be invoked in connection with directly discriminatory measures. FN142 Jan H. Jans, European Environmental Law, 2nd ed., 2000, p. 251; see also Peter Oliver, "some further reflections on the scope of Articles 28-30 (30-36) E.C., Common Market Law Review 1999, p. 783, at pp. 804 to 806. A229 In view of the fundamental importance for the analysis of Article 30 of the Treaty of the question whether directly discriminatory measures can be justified by imperative requirements, the Court should, in my view, clarify its position in order to provide the necessary legal certainty. A230 Two specific reasons might be invoked in favour of a more flexible approach in respect of the imperative requirement of environmental protection. In the first place, the amendments to the Treaties agreed in Amsterdam show a heightened concern for the environment even though Article 36 itself was not amended. [FN143] FN143 See, for example, the preamble to the E.U. Treaty, Article 2 E.U., Article 2 E.C., Article 6 E.C., Article 95 E.C., Article 174 E.C. and Article 175 E.C. A231 Of particular importance is Article 6, which now provides that: "environmental protection requirements must be integrated into the definition and implementation of the Community policies referred to *885 in Article 3 including therefore the internal market", and which adds: "in particular with a view to promoting sustainable development". As its wording shows, Article 6 is not merely programmatic; it imposes legal obligations. A232 Special account must therefore be taken of environmental concerns in interpreting the Treaty provisions on the free movement of goods. Moreover, harm to the environment, even where it does not immediately threaten--as it often does--the health and life of humans, animals and plants protected by Article 36 of the Treaty, may pose a more substantial, if longer-term, threat to the ecosystem as a whole. It would be hard to justify, in these circumstances, giving a lesser degree of protection to the environment than to the interests recognised in trade treaties concluded many decades ago and taken over into the text of Article 36 of the E.C. Treaty, itself unchanged since it was adopted in 1957. A233 Secondly, to hold that environmental measures can be justified only where they are applicable without distinction risks defeating the very purpose of the measures. National measures for the protection of the environment are inherently liable to differentiate on the basis of the nature and origin of the cause of harm, and are therefore liable to be found discriminatory, precisely because they are based on such accepted principles as that "environmental damage should as a

priority be rectified at source" (Article 130r(2) of the E.C. Treaty). Where such measures necessarily have a discriminatory impact of that kind, the possibility that they may be justified should not be excluded. A234 On the assumption that environmental requirements can properly be invoked (on whatever basis) in the present case, it must next be established whether the StrEG 1998 complies with the principle of proportionality. Again only the briefest comments are possible at this stage. A235 The Commission contends that the mechanism established by the StrEG 1998 is proportionate since it rectifies environmental damage, namely the damage caused by gas emissions resulting from conventional generation of electricity, at source in accordance with Article 130r(2) of the Treaty. Furthermore, by feeding electricity from renewable sources into local networks less electricity is lost through transmission over long distances. A236 In relation to the Commission's first argument, I cannot see why electricity from renewable sources produced in another Member State would not contribute to the reduction of gas emissions in Germany to the same extent as electricity from renewable sources produced in Germany. In both cases the domestic production of electricity from conventional sources, and the attendant pollution, will be reduced to the same extent. In that respect the limitation of the purchase obligation to electricity produced in Germany does not seem proportionate. A237 As regards the Commission's second argument, I consider that the *886 national court must make the assessments needed to establish whether it is really necessary that producers in other Member States of electricity from renewable sources should be excluded from the scope of the StrEG 1998. A238 I accordingly conclude that a mechanism such as that established by the Stromeinspeisungsgesetz 1998 must be regarded as a measure having effects equivalent to a quantitative restriction on imports within the meaning of Article 30 of the Treaty and is therefore prohibited unless it can be justified on the facts on grounds of environmental protection.

IX --Conclusion A239 For the above reasons the questions referred should in my opinion be answered as follows: (1) A measure such as the Stromeinspeisungsgesetz 1998, in obliging privately owned electricity undertakings to purchase electricity from renewable energy sources at a minimum price, does not constitute State aid within the meaning of Article 92(1) of the E.C. Treaty (now Article 87(1) E.C.); (2) Where the obligation to purchase is confined to electricity generated in the Member State concerned, such a measure is prohibited by Article 30 of the E.C. Treaty (now, after amendment, Article 28 E.C.) unless it is justified on grounds of protection of the environment. JUDGMENT 1 By order of 13 October 1998, received at the Court on 23 October 1998, the Landgericht Kiel (Regional Court, Kiel) referred to the Court for a preliminary

ruling under Article 177 of the E.C. Treaty (now Article 234 E.C.) three questions on the interpretation of Article 30 of the E.C. Treaty (now, after amendment, Article 28 E.C.), Article 92 of the E.C. Treaty (now, after amendment, Article 87 E.C.) and Article 93(3) of the E.C. Treaty (now Article 88(3) E.C.). 2 The questions were raised in proceedings between PreussenElektra AG ("PreussenElektra") and Schleswag AG ("Schleswag") concerning the repayment of sums paid by the former to the latter pursuant to paragraph 4(1) of the Gesetz über die Einspeisung von Strom aus erneuerbaren energien in das öffentliche Netz (Law on feeding electricity from renewable energy sources into the public grid) of 7 December 1990 "the Stromeinspeisungsgesetz"), [FN144] as amended by paragraph 3(2) of the Gesetz zur Neuregelung des Energiewirt-schaftsrechts (New law for the energy industry) of 24 April 1998 (the 1998 Law"). [FN145] FN144 (1990) BGBl. I, p. 2633. FN145 (1998) BGBl. I, p. 730. *887 Legislative background 3 The Stromeinspeisungsgesetz came into force on 1 January 1991. According to paragraph 1, headed "Scope of Application", it governed, in its initial version, the purchase by public electricity supply undertakings of electricity generated exclusively from hydraulic energy, wind energy, solar energy, gas from waste dumps and sewage treatment plants, or products or residues and biological waste from agriculture and forestry work, as well as the compensation payable for such electricity. 4 It is common ground that the term "public electricity supply undertaking" covers both private undertakings and undertakings belonging partially or wholly to the public sector. 5 The Gesetz zur Sicherung des Einsatzes von Steinkohle in der Verstromung und zur Änderung des Atomgesetzes und des Stromeinspeisungsgesetzes (Law ensuring the supply of coal to power stations and amending the Law on Nuclear Energy and the Stromeinspeisungsgesetz) of 19 July 1994 ("the 1994 law") [FN146] extended the scope of the Stromeinspeisungsgesetz, as defined in paragraph 1 thereof, to electricity from the wood industry. The 1998 Law replaced the reference to products or residues and biological waste from agriculture and forerstry and to the wood industry by the expression "biomass" and stated that the Stromeinspeisungsgesetz was to apply to electricity produced from the listed sources of renewable energy "within the area of validity of this Law. FN146 (1994) BGBl. I, p. 1618. 6 Paragraph 2 of the Stromeinspeisungsgesetz, headed "Obligation to Purchase", provides that electricity supply undertakings are obliged to purchase the electricity produced in their area of supply from renewable energy sources

and to pay for it in accordance with the provisions of paragraph 3. As amended by the Law of 1998, which added a second and a third sentence, that article is worded as follows: Electricity supply undertakings which operate a general supply network shall be obliged to purchase the electricity produced in their area of supply from renewable sources of energy and to pay compensation for those inputs of electricity in accordance with paragraph 3. For production installations which are not situated within the area of supply of a grid operator, that obligation shall apply to the undertaking whose network suitable for the feeding in of the electricity is closest to the installation. For accounting purposes, the extra costs resulting from the application of paragraphs 2 and 4 may be imputed to distribution or transmission and taken into account when determining compensation for transit. 7 Paragraph 3 of the Stromeinspeisungsgesetz, as amended by the 1998 law, headed "Amount of the compensation", provides: 1. In respect of electricity produced from hydraulic energy, from gas from waste dumps and sewage treatment plants and from biomass, the compensation shall amount to at least 80 per cent of the average sales price per kilowatt hour of electricity supplied to all final customers by *888 electricity supply undertakings. In the case of hydro-electric power stations or installations for the treatment of gas arising from waste dumps or sewage treatment plants the capacity of which exceeds 500 kilowatts, that rule shall apply only to that part of the total amount of electricity fed in during a given accounting year which corresponds to 500 divided by the capacity of the installation in kilowatts; the capacity is defined by the annual average of the maximum effective capacity measured for each month. The price of the surplus electricity shall amount to at least 65 per cent of the average sales price within the meaning of the first sentence. 2. In respect of electricity produced from solar or wind energy, the compensation shall amount to at least 90 per cent of the average sales price within the meaning of the first sentence of sub-paragraph 1. 3. The average sales price to be taken into account for the purposes of sub-paragraphs 1 and 2 shall be the value published each year by the Federal Statistics Office for the last calendar year but one, expressed net of turnover tax in pfennigs per kilowatt hour. In calculating the compensation pursuant to sub-paragraphs 1 and 2, figures are to be rounded to two decimal places. 8 Whereas, following the amendment made to the Stromeinspeisungsgesetz by the 1994 Law, the compensation fixed for the electricity referred to in paragraph 3(1) rose from 75 per cent to 80 per cent of the average sales price per kilowatt hour of electricity supplied to all final customers, that fixed for electricity from solar and wind energy, referred to in paragraph 3(2), has not varied since the entry into force of the Stromeinspeisungsgesetz. 9 In its initial version, paragraph 4 of the Stromeinspeisungsgesetz, headed "Hardship Clause", was worded as follows: 1. The obligations under paragraphs 2 and 3 shall not apply where compliance with them would cause undue hardship, or would make it impossible for the electricity supply undertaking to comply with its obligations arising from the Bundestarifordnung Elektrizität of 18 December 1989. [FN147] In such a case,

the obligations are transferred to the upstream electricity supply undertaking. FN147 (1980) BGBl. I, p. 2255. 2. There is undue hardship in particular where the electricity supply undertaking would be obliged to raise its prices to a level significantly higher than those of similar or upstream supply undertakings. 10 The 1998 Law made several amendments to paragraph 4 of the Stromeinspeisungsgesetz. First, it added two new sub-paragraphs, which have become sub-paragraphs 1 and 4. It also made certain amendments to the former sub-paragraph 1, which became the new sub-paragraph 2. The former sub-paragraph 2, which remained unchanged, became the new sub-paragraph 3. Thus, as amended by the 1998 law, paragraph 4 of the Stromeinspeisungsgesetz is worded as follows: 1. In so far as the kilowatt hours to be compensated for exceed 5 per cent of the total kilowatt hours supplied by the electricity supply undertaking through its network during a calendar year, the upstream network operator shall be obliged to reimburse the electricity supply undertaking in respect of the supplementary costs resulting from the kilowatt hours *889 exceeding that share. In the case of upstream network operators, the burden constituted by the right to reimbursement within the meaning of the first sentence also forms part of those supplementary costs. If there is no such operator, the obligation laid down in the first sentence of paragraph 2 ceases, as regards electricity supply undertakings in the circumstances referred to in the first and second sentences, at the beginning of the first calendar year after those circumstances arose, in the case of installations not yet essentially completed at that time. In the case of wind turbines, the relevant time is the installation of the mast and the rotor. 2. The obligations laid down in paragraphs 2 and 3 shall not exist where, even if the reimbursement clause in sub-paragraph 1 is applied, compliance with them would cause undue hardship. In such a case, the obligations are transferred to the upstream network operator. 3. There is undue hardship in particular where the electricity supply undertaking would be obliged to raise its prices to a level significantly higher than those of similar or upstream supply undertakings. 4. The Federal Minister for the Economy shall make a report to the Bundestag as the effects of the hardship clause not later than 1999, and in any event in time for another compensatory provision to be adopted before the consequences referred to in the third sentence of sub-paragraph 1 arise. 11 The order for reference and the written observations submitted to the Court show that, by letter of 14 August 1990, the German Government notified to the Commission as a State aid the draft Law which, after adoption, became the Stromeinspeisungsgesetz, in accordance with Article 93(3) of the Treaty. By letter of 19 December 1990, the Commission authorised the notified draft on the basis, first, that it was in accordance with the energy policy aims of the European Communities, and secondly, that renewable sources of energy constituted only a small part of the energy sector and that the additional revenues and the

repercussions on electricity prices with minor. The Commission nevertheless requested the German Government to send it information on the application of the Stromeinspeisungsgesetz, the latter having to be re-examined two years after its entry into force, and emphasised that any amendment or extension of that law should be subject to prior notification. 12 The order for reference and the written observations submitted to the Court also show that, following numerous complaints from electricity supply undertakings, the Commission informed the Federal Minister for the Economy in a letter of 25 October 1996 of its doubts as to whether, in view of the increase in the production of electricity derived from wind energy, the Stromeinspeisungsgesetz was still compatible with the aid provisions of the Treaty. In that letter, the Commission made several proposals for amendment in relation to the provisions on wind energy and stated that, if the Bundestag were not prepared to amend the Stromeinspeisungsgesetz in that respect, the Commission might find itself obliged to propose appropriate measures to Germany within the meaning of Article 93(1) of the Treaty, in order to make the Law compatible with Community rules on aid. 13 *890 It is also apparent from the written observations of Windpark Reußenkoge III GmbH ("Windpark") and of Land Schleswig-Holstein, who intervened in the main proceedings, and from those of the Commission, that, at the request of the latter, the German Government informed the Commission of the progress of the work on the draft new Law for the energy industry. In a letter of 29 July 1998, after the entry into force of the 1998 Law, the Commission informed the Federal Minister of the Economy that, having regard to current developments at Community level, concerning in particular possible proposals for harmonising the rules on the feeding in of electricity from renewable energy sources, it did not expect to take a formal decision concerning the Stromeinspeisungsgesetz, as amended by the 1998 law, before the ministerial report on the effects of the hardship clause, provided for in paragraph 4(4) thereof, was drawn up, even though the German legislature, at the time of the adoption of the 1998 Law, had not taken account of the proposals formulated in its letter of 25 October 1996. 14 Finally, a footnote published with the 1998 Law states that the latter, paragraph 1 of which is headed "Gesetz über die Elektrizitäts- und Gasversorgung" (Law on the supply of electricity and gas), transposed into national law Directive 96/92 concerning common rules for the internal market in electricity. [FN148] FN148 [1997] O.J. L27/20. 15 The third recital in the preamble to that Directive confirms that it in no way affects the application of the Treaty, in particular the provisions concerning the internal market and competition, and Article 8(3) and (4) in Chapter IV, "Transmission system operation", provides as follows: 3. A Member State may require the system operator, when dispatching generating installations, to give priority to generating installations using

renewable energy sources or waste or producing combined heat and power. 4. A Member State may, for reasons of security of supply, direct that priority be given to the dispatch of generating installations using indigenous primary energy fuel sources, to an extent not exceeding in any calendar year 15 per cent of the overall primary energy necessary to produce the electricity consumed in the Member State concerned. 16 In addition, Article 11(3) in Chapter V, "Distribution system operation", provides: A Member State may require the distribution system operator, when dispatching generating installations, to give priority to generating installations using renewable energy sources or waste or producing combined heat and power. The main proceedings and the questions referred 17 PreussenElektra operates more than 20 conventional and nuclear power stations in Germany as well as a maximum-voltage and *891 high-voltage electricity distribution network, through which it feeds electricity to regional electricity suppliers, medium-scale local undertakings and industry. 18 Schleswag is a regional electricity supplier which buys electricity to supply to its customers in Schleswig-Holstein almost exclusively from PreussenElektra. 19 PreussenElektra owns 65.3 per cent of Schleswag's shares. The remaining 34.7 per cent are held by various municipal authorities in Schleswig-Holstein. 20 By virtue of paragraph 2 of the Stromeinspeisungsgesetz, Schleswag is obliged to purchase electricity from renewable sources produced within its area of supply, including wind-generated electricity. The order for reference shows that the proportion of wind-generated electricity in Schleswag's total turnover in electricity sales, which was 0.77 per cent in 1991, has increased continuously to an estimated 15 per cent in 1998. In consequence, the additional costs accruing to Schleswag on account of the obligation to purchase at the minimum price laid down by the Stromeinspeisungsgesetz rose from DM 5.8 million in 1991 to an estimated DM 111.5 million in 1998, of which only DM 38 million remained the responsibility of Schleswag, taking into account the application of the compensation mechanism introduced into paragraph 4(1) of the Stromeinspeisungsgesetz by the 1998 Law. 21 At the end of April 1998 Schleswag's purchases of electricity produced from renewable energy sources reached 5 per cent of the total volume of electricity it had sold over the previous year. Schleswag therefore invoiced PreussenElektra, pursuant to paragraph 4(1) of the Stromeinspeisungsgesetz, as amended by the 1998 Law ("the amended Stromeinspeisungsgesetz"), for the additional costs entailed by the purchase of electricity from renewable energy sources, initially claiming from it monthly instalments of DM 10 million. 22 PreussenElektra transferred the instalment for May 1998, reserving the right to claim the money back at any time. That is what it did by making an application to the Landgericht Kiel for the repayment of DM 500,000, representing the part of the sum paid to Schleswag in compensation for the additional costs entailed by the latter's purchase of wind-generated electricity. The Landgericht states, in its

order for reference, that those additional costs cannot be passed on to Schleswag's customers since the Minister for Energy of Land Schleswig-Holstein refused to approve an application by Schleswag to amend its tariffs. 23 Before the Landgericht, PreussenElektra argued that the sum claimed had been paid to Schleswag without a valid legal reason and should be recoverable, since paragraph 4 of the Stromeinspeisungsgesetz, as amended, on which that payment was based, was contrary to the directly applicable provisions of the Treaty on State aid and could not therefore be applied. The plaintiff argued that prior to the entry into force of the 1998 Law it would have been necessary, in order to *892 amend the scope of the Stromeinspeisungsgesetz and introduce a rule for sharing additional costs, as the 1998 Law did, to have recourse to the procedure laid down by Article 93 of the Treaty; this Germany had omitted to do. PreussenElektra therefore requested that Schleswag be ordered to repay to it the sum of 500,000 DM, together with interest at 5 per cent as from 15 July 1998. 24 Schleswag contended that that claim should be dismissed. Whilst recognising that the Stromeinspeisungsgesetz, as amended, contained a modified aid scheme, it maintained that paragraph 4 was merely a redistribution rule, intended to mitigate the consequences which electricity supply undertakings suffered by reason of paragraphs 2 and 3 of the amended Stromeinspeisungsgesetz, and, taken on its own, was not therefore in the nature of aid within the meaning of Article 92 of the Treaty. In the first place, paragraphs 2 and 3 of the amended Stromeinspeisungsgesetz did not affect the legal relationship between PreussenElektra and Schleswag, with the result that the Landgericht could not disapply them in the main proceedings. Secondly, the non-application of paragraph 4 of the amended Stromeinspeisungsgesetz left intact the obligation of Schleswag to purchase electricity produced from renewable energy sources at fixed minimum prices. The penalty effect of the direct application of the third sentence of Article 93(3) of the Treaty did not, therefore, enable the unlawful aid constituted by paragraphs 2 and 3 of the amended Stromeinspeisungsgesetz to be penalised or prevent the application of paragraph 4 of the amended Stromeinspeisungsgesetz, so that the payment in question must be regarded as having been made on a sound legal basis. 25 The Landgericht found, first that the Commission had not been informed, in accordance with Article 93(3) of the Treaty, of the amendments made to the Stromeinspeisungsgesetz by the 1998 Law, and considered that the question whether the new version of the latter represented in whole or in part constituted State aid within the meaning of Article 92 of the Treaty remained relevant, even if the German Government and the Commission had already classified the original content of the Stromeinspeisungsgesetz as aid in the context of the notification made in 1990. The Landgericht considered that even if the amendments to the Stromeinspeisungsgesetz by the 1998 Law were to be regarded as modifying the original scheme, the procedure under Article 93(3) of the Treaty did not have to be applied to the modified scheme unless the latter itself constituted a system of aid within the meaning of Article 92 of the Treaty. 26 The Landgericht found, secondly, that the obligation to purchase electricity produced in Germany from renewable energy sources on conditions which could

not be obtained on the open market might depress demand for electricity produced in other Member States, which might constitute an obstacle to trade between Member States prohibited by Article 30 of the Treaty. 27 In those circumstances, considering that interpretation of Articles *893 30, 92 and 93(3) of the Treaty was necessary to enable it to resolve the dispute before it, the Landericht Kiel decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling: 1. Do the rules on payment and compensation for supplies of electricity, laid down in paragraph 2 or 3 or 4 or in paragraphs 2 to 4 of the Gesetz Über die Einspeisung von Strom aus erneuerbaren Energien in das öffentliche Netz of 7 December 1990, [FN149] as amended by Article 3(2) of the Gesetz zur Neuregelung des Energiewirtschaftsrechts of 24 April 1998 [FN150] constitute State aid for the purposes of Article 92 of the E.C. Treaty? FN149 (1990) BGBl. I, p. 2633. FN150 (1998) BGBl. I, p. 730 (734-736). Is Article 92 of the E.C. Treaty to be interpreted as meaning that the underlying concept of aid also covers national rules for the benefit of the recipient of the payment, under which the costs entailed are not met, either directly or indirectly, from the public budget but are borne by individual undertakings in a sector, which have a statutory obligation to purchase at fixed minimum prices, and which are precluded by law and circumstance from passing those costs on to the final consumer? Is Article 92 of the E.C. Treaty to be interpreted as meaning that the underlying concept of aid also covers national rules which merely govern the apportionment of the costs between undertakings at the various production levels which have arisen through purchasing obligations and minimum prices, where the legislature's approach creates in practice a permanent burden for which the undertakings affected obtain no consideration? 2. In the event that the [first] question is answered in the negative in respect of paragraph 4 of the [amended] Stromeinspeisungsgesetz: Is Article 93(3) of the E.C. Treaty to be interpreted as meaning that its restrictive effects apply not only to the benefit itself but also to implementing rules such as paragraph 4 of the [amended] Stromeinspeisungsgesetz? 3. In the event that the first and second questions are answered in the negative: Is Article 30 of the E.C. Treaty to be interpreted as meaning that a quantitative restriction on imports--and/or a measure having equivalent effect as between Member States for the purposes of the aforementioned provision--arises where a provision of national law places undertakings under an obligation to purchase electricity produced from renewable energy sources at minimum prices and requires grid operators to meet the costs entailed for no consideration? Admissibility

28 Windpark and Land Schleswig-Holstein ("the interveners in the main proceedings") and the German Government challenge the admissibility of all or part of the reference for a preliminary ruling. 29 First, the interveners in the main proceedings argue that there are a number of omissions or errors of fact in the order for reference. 30 They submit that the referring court was wrong to hold, first, that the Commission had not been informed of the amendments made to the Stromeinspeisungsgesetz by the 1998 Law and, secondly, that electricity supply undertakings could not, for practical and legal *894 reasons, pass on to final consumers the expenses borne by them by way of the compensation referred to in paragraph 3 of the amended Stromeinspeisungsgesetz. 31 Secondly, the interveners in the main proceedings and the German Government maintain that the dispute in the main proceedings is not a genuine dispute but a spurious one. 32 The plaintiff and the defendant in the main proceedings agree that the combined provisions of paragraphs 2 to 4 of the amended Stromeinspeisungsgesetz are contrary to Community law. PreussenElektra nevertheless made the compensatory payment provided for in paragraph 4 of the amended Stromeinspeisungsgesetz, but immediately demanded partial repayment. Furthermore, PreussenElektra is the main shareholder in Schleswag and therefore has a dominant influence on the decisions and legal positions of the latter. 33 Thirdly, the interveners in the main proceedings and the German Government argue that the questions referred are not relevant for the purposes of resolving the dispute in the main proceedings. 34 As to the questions concerning the interpretation of Articles 92 and 93 of the Treaty, the interveners in the main proceedings point out that, in accordance with the case law of the Court of Justice, [FN151] it is for the internal legal system of every Member State to determine the legal procedure which will ensure that the third sentence of Article 93(3) of the Treaty has direct effect. The referring court has not indicated whether, and on what conditions, PreussenElektra might be entitled in German law to repayment of the sums it claims, and has therefore not demonstrated the relevance of the questions referred in relation to national law. FN151 Case 120/73, Lorenz: [1973] E.C.R. 1471, para. [9]. 35 The interveners in the main proceedings further argue that, according to settled case law, [FN152] the Court of Justice has jurisdiction to interpret the concept of aid within the meaning of Article 92 of the Treaty only where the preliminary examination procedure provided for in Article 93(3) of the Treaty has not been complied with. However, in the first place, the initial version of the Stromeinspeisungsgesetz was notified to the Commission and authorised by it and in the second place the amendments made to it by the 1998 Law did not alter the aid within the meaning of Article 93(3) of the Treaty, which would have required fresh notification. In any event, the exchange of correspondence which took place before and after the adoption of the 1998 Law between the German

authorities and the Commission was equivalent to, on the one hand, notification by the German Government of the amendments which that law had made to the Stromeinspeisungsgesetz, and, on the other, implied authorisation by the Commission of those amendments. FN152 See in particular Joined Cases C72 & 73/91, Sloman Neptun: [1993] E.C.R. I-887; [1995] 2 C.M.L.R., paras [11] and [12]. 36 The German Government takes the view that a reply to the questions concerning Article 92 of the Treaty is not necessary in order *895 to enable the referring court to give judgment because the only decisive question in the main proceedings was whether Schleswag was entitled to a compensatory payment under paragraph 4 of the amended Stromeinspeisungsgesetz, a provision which, however, governed merely the distribution of the costs resulting from the payment of compensation for the feeding in of the electricity and did not include any aid for the benefit of the persons to whom the compensation was directed. 37 As for the question concerning Article 30 of the Treaty, the interveners in the main proceedings and the German Government argue that the dispute in the main proceedings has no cross-border element, and furthermore the plaintiff and the defendant in those proceedings have not demonstrated that the amended Stromeinspeisungsgesetz prevents them from importing electricity from other Member States. 38 It should be remembered that it is settled law that in the context of the co-operation between the Court of Justice and the national courts provided for by Article 177 of the Treaty, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (see, inter alia, Case C-415/93, Bosman). [FN153] FN153 [1995] E.C.R. I-4921; [1996] 1 C.M.L.R. 645, para. [59]. 39 Nevertheless, the Court has also stated that, in exceptional circumstances, it can examine the conditions in which the case was referred to it by the national court, in order to assess whether it has jurisdiction (see, to that effect, Case 244/80, Foglia). [FN154] The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, Bosman [FN155]; Case C-36/99, Ideal Tourisme [FN156]; Case C-322/98, Kachelmann [FN157]).

FN154 [1981] E.C.R. 3045; [1982] 1 C.M.L.R. 585, para. [21]. FN155 Cited above, para. [61]. FN156 [2000] E.C.R. I-6049, para. [20]. FN157 [2000] E.C.R. I-7505, para. [17]. 40 In this case, as regards, first, the alleged omissions and factual errors in the order for reference, it is sufficient to note that it is not for the Court of Justice but for the national court to ascertain the facts which *896 have given rise to the dispute and to establish the consequences which they have for the judgment which it is required to deliver (see, in particular, Case C-435/97, World Wildlife Fund [FN158]). FN158 [1999] E.C.R. I-5613; [2000] 1 C.M.L.R. 149, para. [32]. 41 Secondly, it should be noted that the action brought by PreussenElektra seeks repayment of the sum which it had to pay to Schleswag to compensate for the additional cost arising for the latter from the purchase of wind-generated electricity, made pursuant to the purchase obligation laid down by the amended Stromeinspeisungsgesetz, from producers of that type of electricity established in its area of supply. 42 The dispute in the main proceedings cannot, therefore, be regarded as hypothetical in character. 43 It is true that, like PreussenElektra, Schleswag has an interest in paragraphs 2 and 3 of the amended Stromeinspeisungsgesetz, laying down that purchase obligation and fixing the price to be paid in consequence, being regarded as constituting unlawful aid, thereby enabling it to escape payment. However, the dispute in the main proceedings does not concern the aid which, pursuant to paragraphs 2 and 3 of the amended Stromeinspeisungsgesetz, Schleswag allegedly gives to the producers of electricity from renewable energy sources, but the part of that alleged aid which PreussenElektra has had to reimburse to Schleswag by virtue of paragraph 4 of the amended Stromeinspeisungsgesetz. 44 Since those obligations on Schleswag and PreussenElektra flow directly from the amended Stromeinspeisungsgesetz, the dispute in the main proceedings between the plaintiff and the defendant cannot be regarded as a procedural device arranged by the parties to the main action in order to induce the Court of Justice to take a position on certain problems of Community law that do not serve any objective requirement inherent in the resolution of the dispute. 45 That conclusion is supported by the fact that the referring court allowed Windpark and Land Schleswig-Holstein to intervene in the main proceedings in support of Schleswag, arguing that paragraphs 2 and 3 of the amended Stromeinspeisungsgesetz are lawful. 46 In those circumstances, the fact that PreussenElektra is Schleswag's main

shareholder is not capable of depriving the dispute between them of its genuine character. 47 Finally, it should be noted that, in its order for reference, the Landgericht sufficiently defined the national legislative background and clearly explained why it considers that the questions which it raises are relevant and that a reply to those questions is necessary for resolving the dispute. 48 Concerning, first, the questions relating to Articles 92 and 93, the referring court has indicated in particular, as is apparent from paragraph [26] of this judgment, that the question whether the *897 amended Stromeinspeisungsgesetz constitutes aid needs to be resolved before going on to consider whether the amendments which the 1998 Law made to the initial version of the Stromeinspeisungsgesetz constitute an alteration of aid, within the meaning of Article 93(3) of the Treaty, requiring implementation of the procedure laid down in that provision in order to adopt the alteration. 49 The referring court has also explained that if, wrongly, the preliminary examination procedure has not been complied with, it will be its responsibility, in accordance with its national law, to draw the consequences from the direct effect of the third sentence of Article 93(3) of the Treaty by holding the altered scheme in the Stromeinspeisungsgesetz inapplicable and ordering return of the payments made by PreussenElektra to Schleswag. 50 As the interveners in the main proceedings themselves acknowledge, the argument that the Court of Justice has jurisdiction to interpret the concept of aid within the meaning of Article 92 of the Treaty only when the preliminary examination procedure under Article 93(3) has not been complied with requires an interpretation of the criterion of "alteration of aid or of the scope of the suspensory effect of the third sentence of Article 93(3), and such interpretation is precisely the subject-matter of some of the questions referred. 51 The same applies to the argument of the German Government that a reply to the questions concerning Article 92 of the Treaty is unnecessary in so far as, in the main proceedings, only paragraph 4 of the amended Stromeinspeisungsgesetz governs relations between PreussenElektra and Schleswag. Indeed, the questions concerning Article 92 of the Treaty concern precisely the point whether paragraph 4 of the amended Stromeinspeisungsgesetz constitutes, on its own or in combination with paragraphs 2 and 3, a system of aid for the purposes of that provision. 52 As for the question concerning Article 30 of the Treaty, suffice it to say that it is not obvious that the interpretation sought bears no relation to the actual facts of the main action or its purpose. 53 It follows from the above considerations that answers must be given to the questions referred. The interpretation of Article 92 of the Treaty 54 It should be noted as a preliminary observation, first, that there is no dispute that an obligation to purchase electricity produced from renewable energy sources at minimum prices, such as that laid down by paragraphs 2 and 3 of the

amended Stromeinspeisungsgesetz, confers a certain economic advantage on producers of that type of electricity, since it guarantees them, with no risk, higher profits than they would make in its absence. 55 In addition, as the reply by the German Government to a written question of the Court shows, the public authorities have a majority *898 shareholding in only two of the eight main German undertakings which produce electricity and operate high-tension transmission networks, one of which is PreussenElektra. That reply also shows that PreussenElektra is a wholly-owned subsidiary of another company which is 100 per cent privately owned. Moreover, as stated in paragraph 19 of this judgment, Schleswag is held as to 65.3 per cent by PreussenElektra and as to only 34.7 per cent by certain municipal authorities of Land Schleswig-Holstein. 56 In the light of the above, the first question referred should be understood as asking, essentially, whether legislation of a Member State which, first, requires private electricity supply undertakings to purchase electricity produced in their area of supply from renewable energy sources at minimum prices higher than the real economic value of that type of electricity, and, secondly, allocates the financial burden arising from that obligation amongst those electricity supply undertakings and upstream private electricity network operators, constitutes State aid within the meaning of Article 92(1) of the Treaty. 57 It should be recalled in that respect that Article 92(1) of the Treaty provides that any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods is, in so far as it affects trade beween Member States, incompatible with the Common Market. 58 In that connection, the case law of the Court of Justice shows that only advantages granted directly or indirectly through State resources are to be considered aid within the meaning of Article 92(1). The distinction made in that provision between "aid granted by a Member State" and aid granted "through State resources" does not signify that all advantages granted by a State, whether financed through State resources or not, constitute aid but is intended merely to bring within that definition both advantages which are granted directly by the State and those granted by a public or private body designated or established by the State (see Case 82/77, Van Tiggele [FN159]; Sloman Neptun [FN160]; Case C189/91, Kirsammer-Hack [FN161]; Joined Cases C 52, 53 & 54/97, Viscido [FN162]; Case C-200/97, Ecotrade [FN163]; Case C-295/97, Piaggio [FN164]). FN159 [1978] E.C.R. 25; [1978] 2 C.M.L.R. 528, para. [24] and [25]. FN160 Cited above, para. [19]. FN161 [1993] E.C.R. I-6185, para. [16]. FN162 [1998] E.C.R, I-2629; [1998] 3 C.M.L.R. 184, para. [13]. FN163 [1998] E.C.R. I-7909; [1999] 2 C.M.L.R. 804, para. [35].

FN164 [1999] E.C.R. I-3735, para. [35]. 59 In this case, the obligation imposed on private electricity supply undertakings to purchase electricity produced from renewable energy sources at fixed minimum prices does not involve any direct or indirect transfer of State resources to undertakings which produce that type of electricity. 60 Therefore, the allocation of the financial burden arising from that *899 obligation for those private electricity supply undertakings as between them and other private undertakings cannot constitute a direct or indirect transfer of State resources either. 61 In those circumstances, the fact that the purchase obligation is imposed by statute and confers an undeniable advantage on certain undertakings is not capable of conferring upon it the character of State aid within the meaning of Article 92(1) of the Treaty. 62 That conclusion cannot be undermined by the fact, pointed out by the referring court, that the financial burden arising from the obligation to purchase at minimum prices is likely to have negative repercussions on the economic results of the undertakings subject to that obligation and therefore entail a diminution in tax receipts for the State. That consequence is an inherent feature of such a legislative provision and cannot be regarded as constituting a means of granting to producers of electricity from renewable energy sources a particular advantage at the expense of the State (see, to that effect, Sloman Neptun [FN165] and Ecotrade [FN166]). FN165 Cited above, para. [21]. FN166 Cited above, para. [36]. 63 In the alternative, the Commission maintains that, in order to preserve the effectiveness of Articles 92 and 93 of the Treaty, read in conjunction with Article 5 of the E.C. Treaty (now Article 10 E.C.), it is necessary for the concept of State aid to be interpreted in such a way as to include support measures which, like those laid down by the amended Stromeinspeisungsgesetz, are decided upon by the State but financed by private undertakings. It draws that argument by analogy from the case law of the Court of Justice to the effect that Article 85 of the E.C. Treaty (now Article 81 E.C.), read in conjunction with Article 5 of the Treaty, prohibits Member States from introducing measures, even of a legislative or regulatory nature, which may render the competition rules applicable to undertakings ineffective (see, in particular, Case C-2/91, Meng [FN167]). FN167 [1993] E.C.R. I-5751, para. [14]. 64 In that respect, it is sufficient to point out that, unlike Article 85 of the Treaty, which concerns only the conduct of undertakings, Article 92 of the Treaty refers directly to measures emanating from the Member States.

65 In those circumstances, Article 92 of the Treaty is in itself sufficient to prohibit the conduct by States referred to therein and Article 5 of the Treaty, the second paragraph of which provides that Member States are to abstain from any measure which could jeopardise the attainment of the objectives of the Treaty, cannot be used to extend the scope of Article 92 to conduct by States that does not fall within it. 66 The answer to the first question referred must therefore be that a statutory provision of a Member State which, first, requires private electricity supply undertakings to purchase electricity produced in their area of supply from renewable energy sources at minimum prices *900 higher than the real economic value of that type of electricity, and, secondly, distributes the financial burden resulting from that obligation between those electricity supply undertakings and upstream private electricity network operators, does not constitute State aid within the meaning of Article 92(1) of the Treaty. 67 In the light of that answer, there is no need to reply to the second question referred, which was raised only in so far as the obligation to purchase at minimum prices did constitute State aid, whereas the allocation of the resulting financial burden did not. Interpretation of Article 30 of the Treaty 68 In its third question, the referring court asks in substance whether the rules concerned are compatible with Article 30 of the Treaty. 69 In that respect, it must first be borne in mind that, according to the case law of the Court, Article 30 of the Treaty, in prohibiting all measures having equivalent effect to quantitative restrictions on imports, covers any national measure which is capable of hindering, directly or indirectly, actually or potentially, intra-Community trade (Case 8/74, Dassonville [FN168]). FN168 [1974] E.C.R. 837; [1974] 2 C.M.L.R. 436, para. [5]. 70 Secondly, the case law of the Court also shows that an obligation placed on traders in a Member State to obtain a certain percentage of their supplies of a given product from a national supplier limits to that extent the possibility of importing the same product by preventing those traders from obtaining supplies in respect of part of their needs from traders situated in other Member States (see, to that effect, Case 72/83, Campus Oil [FN169]; Case C-21/88, Du Pont de Nemours Italiana [FN170]. FN169 [1984] E.C.R. 2727; [1984] 3 C.M.L.R. 544, para. [16]. FN170 [1990] E.C.R. I-889; [1991] 3 C.M.L.R. 25, para. [11]. 71 In this case, paragraphs 1 and 2 of the amended Stromeinspeisungsgesetz expressly state that the purchase obligation imposed on electricity supply undertakings applies only to electricity produced from renewable energy sources

within the scope of that statute and within the respective supply area of each undertaking concerned, and is therefore capable, at least potentially, of hindering intra-Community trade. 72 However, in order to determine whether such a purchase obligation is nevertheless compatible with Article 30 of the Treaty, account must be taken, first, of the aim of the provision in question, and, secondly, of the particular features of the electricity market. 73 The use of renewable energy sources for producing electricity, which a statute such as the amended Stromeinspeisungsgesetz is intended to promote, is useful for protecting the environment in so far as it contributes to the reduction in emissions of greenhouse gases which are amongst the main causes of climate change which the European Community and its Member States have pledged to combat. 74 *901 Growth in that use is amongst the priority objectives which the Community and its Member States intend to pursue in implementing the obligations which they contracted by virtue of the United Nations Framework Convention on climate change, approved on behalf of the Community by Council Decision 94/69, [FN171] and by virtue of the Protocol of the third conference of the parties to that Convention, done in Kyoto on 11 December 1997, signed by the European Community and its Member States on 29 April 1998 (see, inter alia, Council Resolution 98/C 198/01 renewable sources of energy [FN172] and Decision 646/2000 adopting multiannual programme for the promotion of renewable energy sources in the Community (Altener) (1998 to 2002) [FN173]). FN171 [1994] O.J. L33/11. FN172 [1998] O.J. C198/1. FN173 [2000] O.J. L79/1. 75 It should be noted that that policy is also designed to protect the health and life of humans, animals and plants. 76 Moreover, as stated in the third sentence of the first sub-paragraph of Article 130r(2) of the E.C. Treaty, environmental protection requirements must be integrated into the definition and implementation of other Community policies. The Treaty of Amsterdam transferred that provision, in a slightly modified form, to Article 6 of the Treaty, which appears in Part One, headed "Principles". 77 In addition, the 28th recital in the preamble to Directive 96/92 expressly states that it is "for reasons of environmental protection" that the latter authorises Member States in Articles 8(3) and 11(3) to give priority to the production of electricity from renewable sources. 78 It should also be noted that, as stated in the 39th recital in its preamble, the Directive constitutes only a further phase in the liberalisation of the electricity market and leaves some obstacles to trade in electricity between Member States in place. 79 Moreover, the nature of electricity is such that, once it has been allowed into

the transmission or distribution system, it is difficult to determine its origin and in particular the source of energy from which it was produced. 80 In that respect, the Commission took the view, in its Proposal for a Directive 2000/C 311 E/22 on the promotion of electricity from renewable energy sources in the internal electricity market, [FN174] submitted on 10 May 2000, that the implementation in each Member State of a system of certificates of origin for electricity produced from renewable sources, capable of being the subject of mutual recognition, was essential in order to make trade in that type of electricity both reliable and possible in practice. FN174 [2000] O.J. C311 E/320. 81 Having regard to all the above considerations, the answer to the third question must be that, in the current state of Community law concerning the electricity market, legislation such as the amended *902 Stromeinspeisungsgesetz is not incompatible with Article 30 of the Treaty. Costs 82 The costs incurred by the German and Finnish Governments and the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. R1 Order On those grounds, THE COURT, in answer to the questions referred to it by the Landgericht Kiel by order of 13 October 1998, HEREBY RULES: 1. Statutory provisions of a Member State which, first, require private electricity supply undertakings to purchase electricity produced in their area of supply from renewable energy sources at minimum prices higher than the real economic value of that type of electricity, and, second, distribute the financial burden resulting from that obligation between those electricity supply undertakings and upstream private electricity network operators do not constitute State aid within the meaning of Article 92(1) of the E.C. Treaty (now after amendment, Article 87(1) E.C.). 2. In the current state of Community law concerning the electricity market, such provisions are not incompatible with Article 30 of the E.C. Treaty (now, after amendment, Article 28 E.C.).

(c) Sweet & Maxwell Limited [2001] 2 C.M.L.R. 36 END OF DOCUMENT