Action brought on 16 November 2005 — Italian Republic v Commission

(Case T-424/05)

(2006/C 22/41)

Language of the case: Italian

Parties

Applicant(s): Italian Republic (represented by: Paolo Gentili, Avv. dello Stato)

Defendant(s): Commission of the European Communities

Form of order sought

The applicant(s) claim(s) that the Court should:

Pleas in law and main arguments

The present action, brought by the Italian Republic, is concerned with Commission decision No C(2005) 3302 of 6 September 2005.

By that decision, the Commission declared to be incompatible with the common market the provisions of Article 12 of Decree Law No 269/2003, converted into Law No 326/2003.

It provides, essentially, that the rate of tax replacing income tax levied on the net profits of the various types of investment funds and open-ended investment companies is to be reduced from 12.5 % to 5 % where the funds or companies invest during the calendar year at least two-thirds of the value of their assets, for more than one-sixth of the fund's business days, in small or medium-sized quoted capitalisation funds. Such funds or companies are referred to as being 'specialised'.

According to the Commission, the measure is selective, favouring, first, small or medium-sized capitalisation undertakings as compared with others, channelling certain funds towards them; second, they favour the specialised funds or companies, as compared with general funds or companies, by allowing them to assign greater income to individual units, since the income is subject to a lower replacement tax. Moreover, it is a measure which has no connection with the general tax system and in fact constitutes nothing more than operational aid. Finally, there is no reason for any derogation in favour of the measure under Article 87(3)(c) EC.

According to the Italian Government, the decision is vitiated, first, from the procedural point of view, because the decision to initiate the procedure under Article 88(2) EC was adopted without a prior exchange of views between the Commission and the Italian administration, as provided for in Regulation No 659/99 concerning procedures for State aid (first plea).

Next, no adequate reasons are given concerning the basic profile put forward by the Italian Government in the course of the procedure: in the Italian legislation (which transposes the directives on regulation of financial markets), unit trusts and open-ended investment companies are classified merely as independent funds divided into units. They do not therefore constitute undertakings within the meaning of Community law. The Commission took note of that situation, but observed that 'in certain cases' such investment instruments constitute undertakings; however, the Commission did not specify in what cases and under what conditions open-ended investment companies and funds acquire that status (second plea).

The third plea alleges infringement of Article 87 EC, on the basis that open-ended investment funds and companies cannot, by virtue of their nature, ever be regarded as undertakings within the meaning of Community law, in so far as they are merely forms of collective ownership of transferable securities. However, even if they are regarded as such, the alleged aid is not selective, because any interested party (companies managing 'contractual' unit trusts or promoting open-ended investment companies) could establish specialised instruments alongside general instruments, and thus take advantage of the relief available.

The fourth plea criticises the decision for taking the view that the beneficiaries of the alleged aid are quoted small or medium-sized capitalisation companies when in fact the real beneficiaries of the relief are merely the subscribers to the funds or open-ended investment companies, which means, potentially, anybody: accordingly, the relief does not target undertakings and is not selective. The Commission has not demonstrated that direct relief for subscribers gave rise to indirect relief for the said companies.

The fifth plea again alleges infringement of Article 87 EC and an inadequate statement of reasons for the Commission's decision that the measure has an impact on intra-Community competition, despite the fact that its economic impact is minimal (according to the Commission itself, amounting in 2004 to Euro 1 100 000.00). Nor has the Commission clarified the classification as operational aid, since the replacement tax is not a management cost for intermediaries who manage collective investment instruments. It is clear from the purpose of strengthening small and medium-sized capitalisation companies that, as far as the latter are concerned, the measure is of a structural nature.

The sixth plea criticises the part of the decision that rejects recourse to a derogation under Article 87(3)(c) EC. The aim of widening the asset base of companies with limited capitalisation, which find it more difficult than widely quoted companies to gain access to the venture-capital market, is in fact an economic policy objective which displays links with the abovementioned provision allowing derogations.