By a law of 18 December 1991, the Land of North Rhine-Westphalia transferred to the Westdeutsche Landesbank Girozentrale (WestLB), a public-law bank, the Wohnungsbauförderungsanstalt des Landes Nordrhein-Westfalen (WfA), also a public-law body, which is responsible for the granting of financial aid for the construction of housing and is wholly owned by the Land. The terms of the transfer provided that the Land was to receive in respect of the capital contributed cash remuneration at an annual rate of 0.6% after tax.

The Bundesverband deutscher Banken (Federal Association of Private German Banks) lodged with the Commission complaints regarding the regularity of that transaction under Community law. By decision of 8 July 1999, the Commission deemed the transfer of State aid to be unlawful and incompatible with the common market and, at the same time, ordered recovery of the aid. It challenged the insufficiency of the remuneration to be received by the Land as consideration for the transfer of the WfA. For the period 1992 to 1998, the difference between remuneration at market value and that paid to the Land was estimated at DM 1 579 700 000 (EUR 807 700 000), which sum is indicated as representing the total amount of the aid.

On 7 October 1999, Germany applied to the Court for annulment of the Commission's decision (Case C-376/99, currently suspended). Two further actions against that decision were brought before the Court of First Instance (on 12 October 1999) by WestLB and by the Land (Cases T-228/99 and T-233/99).

The Commission's decisions are to be immediately implemented unless suspension has been granted, on request, by the court before which the action for annulment has been brought. Since none of the parties to the abovementioned actions have requested suspension of implementation, the contested decision remains effective in its entirety and Germany notified to the Commission the measures which the Land intended to adopt pending the outcome of the actions.

A first series of measures was notified on 4 October 1999. Resulting from an agreement between the shareholders of WestLB, those measures provided that:

-    an additional share of the surpluses recorded by the bank between 1992 and 1998 was to be reserved to the Land in the event either of liquidation of WestLB or of a change in the holdings in the company's share capital owned by the shareholders. (According to the Land's calculations, that additional share would have offset the aid contested by the decision.)

-    the special reserves arising from the transfer of the WfA were to be converted into a "non-participating shareholding" of the Land for the period after 1998. The shares in the company's capital were to remain unchanged, but the Land would - in the event of future capital increases - have the right to subscribe for shares in the capital by converting part of its non-participating shareholding at a rate determined by the shareholders.

-    finally, in the event of a definitive annulment or confirmation of the decision by the Community judicature or of a finding by that judicature that the agreement is not suitable to implement the decision properly, the shareholders' agreement was to be annulled with retrospective effect.

The Commission informed Germany that the notified measures did not constitute proper implementation of the decision and, on 15 March 2000, Germany proposed other measures. Those new measures envisaged essentially that WestLB was to pay to the Land compensation in kind in the form of a freely transferable non-participating shareholding (the value of which would - according to the German authorities - be equivalent to the amount of the alleged aid).

Judging the new proposal to be likewise insufficient, the Commission, on 24 May 2000, brought an action before the Court for a declaration that Germany had failed to comply with the decision of 8 July 1999.

The Court points out, first of all, that, where the Commission finds that state aid is incompatible with the common market, it may require the State to withdraw or amend the aid and it may demand recovery thereof. Such recovery must, in principle, be carried out in accordance with the rules and procedures provided for in national law and the State remains free to choose how it wishes to recover the aid, in conformity with Community law. That means, that, where a Member State decides to recover state aid by means other than a cash payment, it must provide evidence enabling the Commission to establish that such alternative measures are suitable to achieve the result required by the decision.

The Court states that any measure adopted for the purpose of recovery must:
-    be suitable to re-establish the conditions of competition which have been distorted;
-    be capable of being identified as such by the Commission and other interested parties;
-    be unconditional and
-    be immediately applicable.

The Court finds that the measure notified to the Commission on 4 October 1999 does not satisfy those conditions since, firstly, the Land's right to receive an additional share of the surpluses recorded by WestLB relates to an uncertain future event and, secondly, the clause providing for retrospective annulment of the shareholders' agreement in the event of definitive confirmation of the Commission's decision by the Community judicature renders the measure precarious.

As regards the measure notified on 15 March 2000, the Court holds that, since the German Government conceded that it constituted only a proposal for implementation, it is not binding. The Court therefore did not consider it.

Unofficial document for media use only; not binding on the Court of Justice. Available in English, French and German. For the full text of the judgment, please consult our Internet page www.curia.eu.int  at approximately 3pm today. For further information please contact Isabelle Guibal: Tel: (00 352) 4303 3355; Fax: (00 352) 4303 2731 Pictures of the hearing are available on "Europe by Satellite" European Commission, Press and Information Service, L-2920 Luxembourg Tel: (00 352) 4301 35177; Fax: (00 352) 4301 35249, or B-1049 Brussels, Tel: (00 32) 2 2964106, Fax: (00 32) 2 2965956, or (00 32) 2 301280