AuthorTh. Jestaedt; J. Derenne; T. Ottervanger
ProfessionJones Day; Lovells; Allen & Overy

Page 57

2. Outline on the availability of judicial relief (update since 1999 Report)

According to the case law of the ECJ, Member States are required to use all appropriate devices and remedies and to apply all relevant provisions of national law to protect the rights enjoyed by individuals as a consequence of the direct effect of the "standstill obligation" under Article 88 (3) EC. However, as there are no specific Community rules governing this aspect, it is for each Member State to designate the courts and tribunals having jurisdiction and to lay down detailed procedural rules44.

The objective of the following analysis is to define the causes of action that might be available in Austria to third party claimants in State aid proceedings. It is based on the 1999 Report submitted to the Commission in 1999, and it purports, in particular, to update the earlier report by giving summaries of cases specifically decided by Austrian courts which refer to Article 88 EC or deal with the issue of anti-competitive State aid more generally.

2. 1 Procedures concerning the direct effect of Article 88 (3) EC

Basically, there are three types of scenarios where an Austrian court may become involved in State aid matters:

  1. actions whereby a competitor seeks to prevent the granting of unlawful State aid (cease and desist) or claims damages following the granting of unlawful State aid;

  2. actions whereby the Austrian government (or the governmental agency granting the aid) seeks recovery of unlawful State aid; and

  3. actions against administrative decisions which allegedly violate the prohibition on State aid.

Competitors may either bring an action against the Austrian government (or the government agency granting the State aid) or against the recipient of the State aid. A recovery action can only be brought against the beneficiary of the State aid. Both types of action may either arise in cases concerning the direct effect of Article 88 (3) EC or in the course of enforcement of a negative Commission decision.

2. 2 Actions by competitors

In the event that an action by a competitor is brought before a national court, parallel proceedings before the Commission and the national court may arise in certain cases. Such parallel proceedings are usually not problematic, since the role of the national courts is restricted to that vested in them by the ECJ. As such, national courts may only investigate whether or not a State aid exists and whether the public body that granted the aid respectedPage 58 the obligation to notify the measure to the Commission. However, the national court does not have powers to assess whether or not the State aid is compatible with the Common Market45.

2.2. 1 Cease and desist

a) Preventive Action, based directly on Community Law

In the Mayreder case (see case summary below), the Vienna Trade Court ("Handelsgericht Wien") indicated (without giving any particular reasoning) that a cease and desist action in State aid matters could be based directly on Community law. In fact, Austrian law expressly or implicitly acknowledges that preventive action may be taken in some fields (for example, avoidance of personal injuries) in cases where the defendant is legally obliged to refrain from some kind of behaviour and where the claimant can show that the defendant's obligation is likely to be disregarded to its detriment in the immediate future ("vorbeugende Unterlassungsklage"). According to many legal writers, the availability of such action should be extended, by way of analogy, to all fields where the law contains an explicit prohibition of certain behaviour46.

Article 88 (3) EC, last sentence, contains a prohibition on implementing new State aid measures or amending existing State aid prior to clearance by the Commission. Pursuant to established case law of the ECJ47 this provision is capable of creating individual rights and obligations and has direct effect in the Member States. Individuals may therefore rely on the standstill obligation before the national courts, and competitors may arguably refer directly to Community law when challenging the validity of State aid measures before Austrian courts.

However, it should be noted that contrary to the legal writing mentioned above, established case law only allows for preventive action where an obligation to cease and desist results from a contract, or where the protection of an absolute right (i.e. personal integrity or property) is at stake, but not in situations where the law (as in the case of State aid rules) only protects the economic interests of third parties. Therefore, it still remains to be seen whether the rather broad concept embraced by the Vienna Trade Court in Mayreder will be followed by higher courts in the future.

If preventive action is possible, it may also be pursued by requesting interim relief. Here, the claimant has to show (a) fumus boni iuris and (b) an immediate risk of suffering irrecoverable damages.48

Article 88 EC is only addressed to Member States. It does not impose specific obligations on private undertakings, such as to investigate the lawfulness of a specific State aid measurePage 59 and/or to refuse receipt prior to clearance by the Commission. Consequently, a direct, preventive cease and desist action against the recipient of State aid is not available (in our opinion). This is in line with the SFEI ruling49, where the ECJ stated that a recipient of State aid who fails to verify whether the State aid has been notified to the Commission in accordance with Article 88 (3) EC cannot incur liability merely on the basis of Community law. Recital 11 of Council Regulation (EC) No. 659/1999 (a procedural regulation) also suggests this by referring only to Member States as the parties bound by the notification obligation and the standstill obligation.

b) Act against Unfair Competition

The second - and main - legal basis for a competitor's cease and desist claim in State aid matters is section 1 of the Austrian Act against Unfair Competition ("UWG"). Section 1 UWG states (as does its German counterpart) that "any person who, in the course of business for purposes of competition, commits acts which are contrary to good morals may be enjoined from such acts and held liable for damages".

More specifically, section 1 UWG may be invoked in connection with Article 88 (3) EC on the basis that the Austrian government is in breach of Community law by infringing the standstill obligation, thus acting against good morals ("Vorsprung durch Rechtsbruch") and promoting the competitive interest of the beneficiary. Such a claim is somewhat compromised by the fact that any reasonable doubt which the Austrian government and/or the recipient may have as to whether the measure in question actually constitutes State aid is in itself a valid defence against the accusation of "immorality". The Austrian Supreme Court's decisions in

Transit and Tariff Association, Senior Aktuell and Spa Gardens (see case summaries below) confirm this view.

However, in addition to relying on an argument of breach of law, it may also be possible to "combat" illegal State aid by claiming directly that the State aid unfairly interferes with the normal course of business. In a case which took place well before Austria acceded to the EU50, the Austrian Supreme Court held that the State contravenes section 1 UWG if it employs means received by way of public office to promote a specific undertaking. Specifically, the Austrian Supreme Court enjoined the Austrian postal service to give one particular bank ("Postsparkasse" that also belongs to the public sector) the opportunity to use the network of post offices to distribute certain financial services without adequate financial contribution. It was held that this measure would put all other banking institutions at a competitive disadvantage, as it would be practically impossible for them to establish a comparable distribution system. Legal commentators have rightly pointed out that the PSK decision, at the end of the day, amounts to a prohibition on the State granting unfair State aid without making specific reference to Article 87 EC.

Page 60

The UWG only applies to cases where the State acts in the private economic sector. Sovereign acts (for example, individual administrative acts, ordinances or laws) do not fall within the scope of section 1 UWG.

On the other hand, claims based on section 1 UWG may be brought against the beneficiary as well as against the public authority granting the State aid. Even if the beneficiary does not itself breach Community law, it will usually have to be regarded as an accomplice. The ECJ has continuously held that undertakings to which State aid has been granted (or who have applied for State aid) may not, in principle, entertain a legitimate expectation that the aid is lawful, unless it has been granted in compliance with the procedure laid down in Article 88 EC. According to the ECJ, a diligent business person should normally be able to determine whether that procedure has been followed or not.51 One may argue that if the recipient of State aid fails to inform itself about the lawfulness of the measure in question, it already participates in the unlawful conduct.

Competitors may apply for injunctive relief under the UWG without having to show that there is an immediate risk of suffering irrecoverable damages (section 14 UWG). They may further request the defendant to remove the illegal situation (section 15 UWG; this may amount to an obligation to recover the illegal aid) and are entitled to claim damages (only if negligence or intention can be shown; see section 16 UWG).

2.2. 2 Damages

a) General

In Francovic v Italy52, the ECJ laid down the principle that Member States infringing Community law may be liable under provisions of their own internal legal system for loss suffered by individuals as a result of those infringements. For the time being, no decisions regarding claims for damages in the field of State aid have been issued by the Austrian courts. However, there is no doubt the possibility of such a remedy exists.

b) Based on the Civil Code

Section 1295 et seq. of the Austrian General Civil Code ("Allgemeines Bürgerliches Gesetzbuch" or "ABGB") provides that anybody who negligently or intentionally acts in breach of the law shall be liable for the damage resulting thereof. This general rule may be invoked against the State who breaches EC State aid rules by acting as a private party in the private economy. The beneficiary of State aid may only be liable in damages in respect of aid received in violation of the standstill obligation if it can be shown that it promoted and thus participated in the breach of law.

Page 61

c) Based on the UWG

As set out above, a claim for damages may also be based on section 16 UWG.

d) Based on the Government Liability Act

In cases where State aid was granted by means of an administrative order ("Bescheid"), a competitor of the beneficiary may bring an action for damages against the State on the basis of the Government Liability Act ("AmtshaftungsG"). Pursuant to section 1 of this Act, the State shall be liable for the damage caused by its agents through unlawful and culpable behaviour in the exercise of their sovereign powers. This also covers damage resulting from violations of EC law to the extent that such provisions of EC law ought to protect individuals. The relevant provisions of the ABGB (section 1295 et seq.) apply mutatis mutandis to these illegal sovereign acts.

Procedurally, a civil court deciding a claim under the AmtshaftungsG may not itself establish the illegality of the order ("Bescheid") on which the aid is based. Rather, the competent court must apply to the Administrative Supreme Court ("Verwaltungsgerichtshof") to have the Bescheid declared void53.

2.2. 3 Public procurement

Section 52 of the Federal Act on Public Procurement ("Bundesvergabegesetz") provides in paragraph 1 (3) that an undertaking may be excluded from the bidding process if the pricing of its bid is not "plausible". In a recommendation dated 17 December 1997, the Bundes-Vergabekontrollkommission expressly stated that this provision may be applied to exclude a beneficiary of State aid from a public tender, provided that the beneficiary fails to show upon request that the aid received did not on the facts result in unduly low prices in concreto.

2. 3 Administrative proceedings
2.3. 1 Challenging administrative acts granting State aid

In cases where State aid is granted by a sovereign act (for example, an individual administrative act, ordinance or law), it is very doubtful whether competitors are legally capable of preventing the State aid measure in question at all. In particular, Austrian administrative law allows for third party objections ("Widerspruch"), although we understand that this is also available in, for example, Germany. Under Austrian law, the decisive question is whether the competitors of a beneficiary affected by a State aid decision are "parties" to the respective administrative proceedings within the meaning of section 8 of the Austrian Act on Administrative Procedure ("Allgemeines Verwaltungsverfahrensgesetz" or "AVG") and may therefore raise objections in the proceedings or even appeal against an order which, in their opinion, is in conflict with EC law. Although the definition of a "party" inPage 62 section 8 AVG is fairly broad, it does not usually encompass persons or undertakings that have a mere economic interest in the decision of the administrative authority. However, based on Factortame, the Austrian Administrative Supreme Court might be prepared to set this restriction aside in cases where the competitor of the company receiving the aid might otherwise not have the opportunity to assert its position.

2.3. 2 Invoking the principle of equal treatment in administrative proceedings

Rather than challenging the administrative act granting the State aid, a competitor may directly address the grantor and request to be granted the same benefit, in order to remove the negative effect on competition. In Austria, such claims have been based on the principle of equal treatment, a constitutional right provided for in Article 2 StGG and Article 7 BVG. The infringement of a constitutional right principally renders the administrative act that gave rise to the violation unlawful. If the competent court finally annuls the contested act due to a violation of the principal of equal treatment, the administrative authority will be obliged to alter its initial position and grant the claimant the same benefit. This approach was chosen by the claimants in the Energy Tax Rebate case (see case summary below).

It has been correctly noted that the principle of equal treatment may be dangerous from the point of view of State aid. In particular, if the initial benefit was granted in violation of the standstill obligation under Article 88 (3) EC, or if it is incompatible with the Common Market, an extension of the same benefit to other claimants may enhance the anti-competitive effect rather than eliminating it. In principle, of course, these considerations would be valid under Austrian law. No "secondary aid" may be granted if this aid, in itself, would be incompatible with EC law. On the other hand, and this was the concept embraced by the Austrian Constitutional Court in the Energy Tax Rebate case, a State benefit only constitutes State aid if it is selective, meaning that it must only have been granted to a limited number of market participants. The character of an illegal State aid measure is avoided by removing this element of selectivity. In particular with regard to tax benefits, it seems therefore that a Member State may avoid having to request repayment of the tax advantage by granting the same benefit on a non-discriminatory basis as part of its general tax system. The recipient of the initial State aid may ask whether the case for a repayment order can be rebutted by arguing that the State should be obliged to extend the measure in question to all other businesses "in the same class" rather than withdrawing the initial aid. The Energy Tax Rebate case indicates that the Austrian Constitutional Court would consider that such a defence is acceptable.

2. 4 Actions for recovery

Once the Commission has ascertained the illegality of a particular State aid measure and its incompatibility with the Common Market, it will order repayment. Abolishing unlawful State aid by means of recovery is the logical consequence of the competent court's finding that it isPage 63 unlawful.54 The technique of recovery (and the applicable rules) will largely depend on the legal basis on which the aid was granted. For instance, the nature of the aid (whether it consists of a tax incentive or a capital increase in a public undertaking) does make a major difference for recovery proceedings. In the following sections, we only consider the straightforward case of the granting of State aid in the form of direct monetary transfers. Even here one has to distinguish between two different types of cases:

* where the aid was granted by contract under civil law; or

* where the aid was granted by an administrative order.

2.4. 1 Aid granted by contract

If the aid was awarded by contract, the rules of the Austrian General Civil Code ("ABGB") apply. Pursuant to section 879 ABGB, a contract is void (and may be revoked with retroactive effect) if it infringes bonos mores or a statutory prohibition. Based on the ECJ's case law in Lorenz and its progeny, it is hardly disputable that the EC State aid rules contain statutory prohibitions within the meaning of section 879 ABGB.

Consequently, a contract granting aid which infringes Article 87 (1) is void and restitution can be granted pursuant to the ABGB provisions on unjust enrichment (section 877 ABGB).

2.4. 2 Aid granted by an individual administrative act ("Bescheid")

Under Austrian law, an order ("Bescheid") can only be revoked under exceptional circumstances. In particular, it can be declared void by a higher court if it suffers from a defect explicitly threatened by nullity under applicable law (section 68 paragraph 4 (4) AVG; special rules apply in tax matters). However, to date it is still unclear whether the provisions of the EC Treaty relating to State aid are qualified statutory prohibitions within the meaning of section 68 paragraph 4 (4) AVG. We believe that this is the case with particular regard to the unconditional obligation of the Member States to give full effect to EC law.

2.4. 3 Comment

In our view, the remedies provided by the Austrian legal system for the recovery of State aid granted under a civil law contract seem to be satisfactory. This is primarily due to the fact that the ABGB in general offers an extensive legal framework for the recovery of unlawfully granted payments or other benefits. However, a number of issues remain unsolved regarding the recovery of aid granted by way of a Bescheid, For instance, it is unclear whether the order revoking a Bescheid for failure to comply with Article 87 EC may also provide details of how repayment shall be executed (for example, interest). Moreover, section 68 paragraph 4 AVG does not provide for the avoiding of orders issued by the highest administrative court.

Page 64

With regard to such measures, Austria could therefore find itself in a position where it is unable to comply with Community rules for the recovery of State aid on the basis of the law as it stands. Here again, the Administrative Supreme Court might be forced to set aside those provisions of the AVG that would render recovery of State aid impossible. For the time being, no recovery proceedings have yet been initiated in Austria, and many waters therefore still need to be tested.

3. List of cases with summaries
3. 1 Actions brought by competitors before the civil courts

In all available cases, the claimants (competitors of the beneficiary of the State aid) applied for a cease and desist order claiming an infringement of section 1 UWG. In some instances, the claimants also directly relied on EC State aid provisions, in particular Article 87 EC. In one available case (the Spa Gardens case), the Supreme Court found that illegal State aid had been granted and upheld the action brought by the competitor. To our knowledge, no proceedings for damages for breach of the EC State aid rules have yet been initiated.

3.1. 1 Vienna Trade Court ("Handelsgericht Wien"), judgment of 29 February 1996 (Mayreder case) (D)

Facts and legal issues: an Austrian construction firm, Mayreder, incurred operative losses from about 1991 and was on the brink of bankruptcy at the end of 1995. Another Austrian construction group, Alpine, offered to take over Mayreder at a price of ATS 100 million provided that Mayreder's creditors (suppliers and, in particular, creditor banks) waived ATS 350 million of accounts receivable. Some of these creditor banks (namely Girocredit, Creditanstalt and Bank Austria) were owned by the State.

A competitor of Alpine, Ilbau, was also interested in acquiring Mayreder and argued that this waiver of claims would constitute illegal State aid under Article 87 EC. Ilbau did not only submit a complaint to that effect to the Commission, but it also applied for a cease and desist order (also by way of a preliminary injunction) to the Vienna Trade Court.

Decision: the Vienna Trade Court applied the market economy rule to the case in question. It held that, prima facie, the waiver of claims by a creditor bank in order to rescue an insolvent company and to avoid even greater losses is common, also in the private sector. Therefore, in the Vienna Trade Court's opinion, Ilbau failed to show that a private investment bank would not have granted the same concessions to Mayreder or Alpine as the State-owned banks did in the present case. On these grounds, the claim for a cease and desist order was dismissed. This decision has become final.

Comment: this decision dating from the early years of Austria's membership demonstrates the Austrian courts' general awareness of EC State aid rules and their willingness to apply them. Rather than rejecting the action on the grounds provided by national law (i.e. the 64 Austria UWG), the Vienna Trade Court made clear, by applying the EC concept of the market economy rule, that EC law provisions will be also considered in proceedings governed by national law. Retrospectively, the case raises interesting questions with regard to the burden of proof when State aid measures are contested in the civil courts. According to general rules of procedure, the claimant must provide factual evidence supporting its allegations. In this context, evidence must be provided, in particular, on the question of whether a specific measure constitutes State aid. In Mayreder, this allegation was difficult to sustain, as private banks actually consented to a waiver of debts similar to that made by the State-owned banks. The Vienna Trade Court was therefore able to draw a direct comparison.

3.1. 2 Supreme Court ("Oberster Gerichtshof"), judgment of 22 June 1999 (Tariff Association case ) (D)

Facts and legal issues: the Austrian government and the Federal State of Upper Austria jointly granted State aid to a company operating coach transportation services. The affected routes were also serviced by another company (a concessionary line operator) that was a member of a tariff association established between several private transportation companies and public bodies, such as, primarily, the Austrian government and the Federal State of Upper Austria ("Tariff Association"). The primary objective of the Tariff Association was to establish a uniform tariff system for transport services within the entire region.

The recipient of the aid was not itself a member of the Tariff Association. However, facing competition from the concessionary line operator, the beneficiary was economically forced to charge the (lower) standardised tariff of the Tariff Association. The aid granted in the form of an annual fee was actually intended to enable the recipient of the aid to adopt the standardised tariff without running the risk of being eliminated from the market.

The claimant, the concessionary line operator, sought an injunction (under section 1 UWG) despite receiving aid from the Tariff Association as well, to force the grantors, the defendants, to cease paying any further aid to the "outsider".

Decision: the Supreme Court found in favour of the defendants. The Supreme Court stated that a public body can, in general, infringe section 1 UWG by abusively granting aid to market operators from means available to it as a result of its special public law status. However, the Supreme Court also pointed out that the claimant had also received aid from the defendants for servicing the routes concerned, notwithstanding that the aid had been granted to support the claimant's general activities under the umbrella of the Tariff Association. Therefore, the defendants had not unreasonably favoured the claimant's competitors and not abused their sovereign powers.

Comment: the decision confirms that aid granted by a public body may be challenged by a competitor on the basis of section 1 UWG regardless of whether or not the financial aid constitutes State aid within the meaning of the EC Treaty. Given the purely nationalPage 66 character of the aid granted to the beneficiaries, it seems doubtful whether EC State aid rules would have been applicable at all to the contested State aid measures. As the grantor had not discriminated against competitors, there was no need for the Supreme Court to refer to EC State aid rules in particular.

3.1. 3 Supreme Court ("Oberster Gerichtshof"), judgment of 22 March 2001 (Senior Aktuell case) (F)

Facts and legal issues: the defendant in this case was a society associated with the Vienna Chamber of Commerce. It received aid for organising a trade fair. The claimant challenged the aid on the basis of section 1 UWG in connection with Article 88 EC before the Vienna Trade Court, and, at the same time, filed a complaint with the Commission for infringement of Article 87 EC. The defendant argued, inter alia, that the aid at issue already existed at the time Austria acceded to the EU and therefore qualified as existing State aid.

Decision: the Supreme Court found in favour of the defendant. The Supreme Court confirmed that a State aid only infringes section 1 UWG in the event that the recipient of the benefit acted in an illegal manner and was subjectively aware that its behaviour was unlawful. Since financial aid granted before Austria's accession to the EU is valid until the Commission finds the aid incompatible with the Common Market, the beneficiary could not be held liable.

Comment: the decision is particularly interesting as it provides further detail on the conditions that must be satisfied in order to rely on section 1 UWG in matters involving aspects of EC State aid. On the basis of the decision, it is clear that a cease and desist order under section 1 UWG will only be granted if (i) the aid was granted unlawfully AND (ii) the beneficiary was subjectively aware of the unlawfulness of the aid. Thus, even where the State aid granted was illegal, section 1 UWG does not apply if the beneficiary received the aid in good faith.

3.1. 4 Supreme Court ("Oberster Gerichtshof"), judgments of 16 July 2002 and 4 May 2004 (Spa Gardens case) (F)

Facts and legal issues: a municipality in Styria which owned a thermal bath ("spa garden") was interested in providing tourism in that region. To that effect, the municipality granted certain special benefits to a specific hotel operator. The benefits consisted of concessions by the grantor for booking a certain number of rooms in the beneficiary's hotel, favourable treatment by means of recommendations to spa guests, and the beneficiary's inclusion in some of the grantor's marketing operations. A competitor of the beneficiary, another hotel operator in the region, challenged the beneficiary's preferential treatment and initiated proceedings for an interlocutory injunction against the grantor.

Page 67

Decisions: the Supreme Court ruled in favour of the claimants. Where a public body grants aid, it must refrain from treating an individual company unreasonably favourably. The Supreme Court referred to the legal principle of equal treatment which a public body must respect where its activities pertain to the private sector. This is especially important where aid is granted.

Comment: rather than ruling on the State aid issue, the Supreme Court based its decision on the general legal principle of equal treatment which the State or other public body must respect when it acts in the private sector. The case provides the only example where a cease and desist order under section 1 UWG was actually granted.

3. 2 Decisions taken by administrative courts

In the two cases described below, the claimants contested an administrative act for violation of EC State aid rules, since it had the effect of discriminating against the claimants. In the Energy Tax Rebate case, the claimants brought proceedings before the Constitutional Court claiming that their constitutional rights of equal treatment and protection of property had been violated by a federal statute. The Constitutional Court, largely of its own motion, raised the question of the compatibility of the respective act with Article 87 EC.

3.2. 1 Supreme Administrative Court ("Verwaltungsgerichtshof"), decision of 20 March 2003 (AMA case) (B)

Facts and legal issues: a company operating a slaughterhouse challenged an administrative act ("Bescheid") issued by Agrarmarkt Austria ("AMA"), the governmental body which, inter alia, administers aid in the agricultural sector. Under a federal law concerning the organisation of agricultural markets, AMA levied a compulsory charge on different agricultural products. This money was then used to finance the promotion of certain agricultural goods. In the case of meat, the contribution was payable by companies operating slaughterhouses. The claimant lodged an appeal with the Administrative Supreme Court, claiming that the levying of the contribution violated, inter alia, EC State aid rules. According to the complaint, the contributions had to be paid by all slaughterhouses and stockbreeders. However, the funds were used mainly or exclusively for the promotion of products that participated in the national quality label scheme ("AMA-Gütesiegel"), a scheme in which the claimant's products did not take part. Since the levy did not benefit all contributors but only a small group, the mandatory contribution allegedly constituted illegal State aid, as did its use by AMA.

Decision: the Administrative Supreme Court confirmed that national authorities must not apply national legal provisions that infringe a directly applicable provision of EC law, including Article 88 (3) EC. The Administrative Supreme Court referred to ECJ case law55 and held that, in general, parafiscal taxes may constitute State aid if, for instance, only certain recipients benefit from the way in which the funds are spent. Therefore, as thePage 68 claimant alleged (and in contrast to the view put forward by AMA), the relevance of EC State aid provisions mainly depended on how the levies were used. In this respect, AMA failed to determine whether the funds consisting of the individual contributions had been used acceptably for general marketing measures, or rather for promoting meat products participating in the national quality label scheme, in a disproportionate manner. For procedural errors, the case was referred back to the authority that issued the administrative act.

Comment: the Administrative Supreme Court strongly supported a strict application of EC State aid law. Notably, the Administrative Supreme Court confirmed that a provision of national law allowing for preferential treatment of certain individual may under certain conditions constitute illegal State aid, and that such a provision may not be applied by the administrative authorities.

3.2. 2 Constitutional Court ("Verfassungsgerichtshof"), decision of 13 December 2001; following a reference to the ECJ for a preliminary ruling on 8 November 2001 (Energy Tax Rebate case) (B)

Facts and decisions: this case concerned a number of different proceedings before various Austrian courts and authorities in relation to the Austrian Energy Tax Rebate Act ("Energieabgabenvergütungsgesetz" or "EAVG") introduced in 1996. The EAVG granted a tax rebate for the use of electricity by undertakings whose activities consisted primarily in the manufacture of goods. Several companies in the service industry complained that their applications for similar tax rebates had been rejected by the competent authorities. These complaints were, inter alia, brought before the Constitutional Court. The claimants claimed that the EAVG violated their constitutional rights of equal treatment and protection of property by granting the tax rebate only to a specific industry sector.

The ECJ, in proceedings referred to it by the Constitutional Court, held that national measures granting a rebate on energy tax to companies active in the manufacture of goods (and not any other companies) were selective and constituted State aid within the meaning of Article 87 EC.

On the basis of the ECJ ruling, the Constitutional Court annulled the administrative acts rejecting the claimants' claims and referred the case back to the authorities.

In the meantime, the Commission had approved the energy rebates for the period from 1 June 1996 to 31 December 2001 as State aid compatible with the Common Market by decision of 22 May 2002. Subsequently, the Austrian authorities again rejected the pending complaints noting that they were no longer bound by the findings of the Constitutional Court in the light of this new development. The claimants challenged the negative administrative decisions again before the Administrative Supreme Court, claiming reimbursement for the period before the Commission decision authorising the State aid had been issued. ThePage 69 Administrative Supreme Court stayed the proceedings and referred the case to the ECJ, essentially asking whether the standstill obligation contained in Article 88 (3) precluded the application of the EAVG for the period before the aid had been authorised by the Commission, even where the Commission later found the aid to be compatible with EC State aid provisions. The preliminary ruling of the ECJ is pending.

The new reimbursement rules for 2002 and 2003, which became effective on 1 January 2002, have again been qualified as State aid by the Commission and criticised for distorting competition. However, the Commission and the Austrian government finally agreed that, since Austria had acted in good faith, recovery of the tax rebates granted in 2002 and 2003 was not necessary. An entirely new reimbursement law has meanwhile entered into force with effect from 30 July 2004.

Comments: both the ECJ and the Constitutional Court made clear that any benefits granted in a selective manner constitute State aid within the meaning of Article 87 EC. Interestingly, the Constitutional Court interpreted the ECJ ruling in such a way that only the authorities' denial of equal tax rebates to service providers (rather than manufacturer) was illegal, not the EAVG as such.

3.2. 3 Administrative Supreme Court ("Verwaltungsgerichtshof"), decision pending; following a reference to the ECJ for a preliminary ruling on 3 March 2005 (VAT case) (B)

Facts and legal issues: the claimant, a dentist, claimed to be eligible for certain VAT exemptions (waiver on adjusting deductions in the course of a transition from VAT liability to VAT exemption for medial services). The question arising before the Administrative Supreme Court was whether the exemptions constituted State aid within the meaning of Article 87 EC. The Administrative Supreme Court referred the case to the ECJ.

Decision: the ECJ followed the view of the lower courts and held that the tax exemptions should be deemed to qualify as State aid. The ECJ noted that the exemptions benefited only a specific sector, namely doctors, thereby fulfilling the condition of selectivity under Article 87 1) EC. The Austrian government had argued that the measure should not be qualified as State aid because it pursued an objective of general social interest, namely facilitating the provision of medical services. The decision of the Administrative Supreme Court is currently pending.

Comment: as in the AMA and the Energy Tax Rebate cases, the question arose whether certain measures benefiting only a restricted number of individuals (here a specific sector) may infringe EC State aid rules. On the basis of the ECJ's ruling, it is to be expected that the Administrative Supreme Court will declare the tax exemptions to be illegal State aid.

Page 70

Name of case
Type of proceedings
Provision applied
Status of proceedings
Mayreder Vienna Trade Court Cease and desist order section 1 UWG Article 87 EC completed No violation of section 1 UWG Action dismissed
Transit and Tariff Association Supreme Court Cease and desist order section 1 UWG completed No discrimination of competitors hrough aid Action dismissed
Senior Aktuell Supreme Court Cease and desist order section 1 UWG Article 87 EC completed No violation of section 1 UWG Action dismissed
Spa Gardens Supreme Court Cease and desist order section 1 UWG completed Defendants infringed principle of equal treatment Violation of section 1 UWG Action upheld
AMA Administrative Supreme Court Appeal against administrative decision Article 87 EC Article 88 (3) EC lower court to decide Parafiscal taxes may constitute State aid if used in an unjust manner Contested act annulled
Energy Tax Rebate Constitutional Court ECJ Administrative Supreme Court Appeal against administrative decision Preliminary ruling Commission decision (Article 87 EC) Article 87 EC Article 88 (3) EC pending State aid compatible with Common Market Complaints rejected Preliminary ruling on reimbursement pending
VAT Administrative Supreme Court ECJ Appeal against administrative decision Preliminary ruling Article 87 EC Article 88 (3) EC pending Tax exemptions are State aid Administrative Supreme Court to take final decision


[44] See, for instance, Case C-431/93, Jeoren van Schijndel and Johannes Nicholaas Cornelis van Veen v Stichting [1995] ECR I-4705.

[45] See, for assistance, Case C-77/72, Capolongo v Maya [1973] ECR 611, Case C-74/76, Ianelli v Meroni [1977] ECR 557 and the Notice on cooperation between national courts and the Commission in the State aid field, para. (b).

[46] See Reiscjaier in Rummel, ABGB II, - 1294, No. 23.

[47] See, in particular, Case C-120/73, Lorenz v Germany [1973] ECR 1471 or Case C-44/93, Namur Les Assurance du Credit v Office National du Ducroire and Belgium [1994] ECR I-3829.

[48] See section 381 of the Austrian Enforcement Act ("Exekutionsordnung").

[49] Case C-39/94, SFEI v La Poste [1996] ECR I-3577.

[50] PSK - ÖBl 1990, 55.

[51] See, for example, Case C-24/95, Rheinland-Pfalz v Alcan [1997] ECR I-1591.

[52] Joined Cases C-6/90 and C-9/90, Francovich and others v Italy [1991] ECR I-5357.

[53] See section 11 AmtshaftungsG and Article 131 (2) of the Austrian Constitution.

[54] See Case C-169/95, Spain v Commission (Province of Tervel) [1997] ECR I-135.

[55] Case C-78/90, Compagnie commercial de L'Ouest v Receveur principal des douanes de la Pallice Port [1992] ECR I-1847.

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT