Belgium

AuthorTh. Jestaedt; J. Derenne; T. Ottervanger
ProfessionJones Day; Lovells; Allen & Overy
Pages543-558

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4. Belgium
4. 1 National authorities responsible for recovery

In Belgium, a variety of national and regional bodies can be responsible for the recovery of aid, of their own initiative or following a negative Commission decision.

Indeed, in recovery cases, the Belgian Federal Government, the Walloon region, the Flemish region, the Belgian Social Security office, as well as public bodies responsible for granting financial assistance have taken measures to recover aid.

The Belgian Permanent Representation to the EC is generally the intermediary for correspondence between the Commission and the relevant authorities responsible for recovering the aid. Sometimes, the relevant authorities communicate directly with the Commission.

Actions concerning the recovery of aid will normally be brought before the civil courts.

4. 2 Rules applicable to recovery
4.2. 1 Civil recovery procedure

Under Belgian law, the addressees of negative Commission decisions can only be the relevant Belgian public authorities responsible for granting the unlawful State aid. Such a decision cannot therefore be directly used as an enforceable instrument ("titre exécutoire"), requiring the beneficiary of the unlawful aid to reimburse this aid (it should be noted that, under EC law, only Member States -and not the regional or local powers of a State -can be addressees of such a decision).

In the Belgian recovery cases examined, it is apparent that, in order to recover unlawful aid, the Belgian authorities follow the general Belgian civil rules relating to the recovery of a debt.

a) Description of the debt recovery procedure

The first step of this procedure requires the creditor (in this case, the relevant Belgian authority responsible for the recovery of the unlawful aid) to send a letter of formal notice to the debtor (i.e. the beneficiary of the aid) requesting it to pay its debt (i.e. the aid).

In the event that the beneficiary of the aid refuses to comply with the letter of formal notice, the relevant Belgian authority can bring an action before the civil courts in order to obtain a judgment ordering the beneficiary to pay its debt (i.e. the unlawful aid).

The first instance judgment (in general, by a Commercial Court) can be appealed to the Court of Appeal and then appealed on points of law only to the Supreme Court.

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b) Provisional enforcement

If a judgment ordering the recovery of the aid has been appealed to the Court of Appeal, the first instance judge has the power to order the provisional enforcement of his own judgment by virtue of Article 1398 of the judicial code. In the event that a first instance judge authorises provisional enforcement of his judgment, the Belgian authority may then recover the aid from the beneficiary. However, the judge can require the Belgian authority to submit a guarantee. Moreover, enforcement of such judgment is subject to the risk that the Belgian authority may lose the appeal, and be required to return the sums recovered to the beneficiary. In addition, the Belgian authority may have to pay damages plus interest to the beneficiary if it loses the appeal.

On the other hand, if the first instance judge does not authorise the provisional enforcement of his judgment, the Belgian authority cannot recover the aid until final judgment of the relevant Court of Appeal.

It should be noted that an appeal, on points of law only, to the Supreme Court has no suspensory effect on the judgment of the Court of Appeal. The Belgian authority can therefore enforce a positive Court of Appeal judgment against the beneficiary of the aid. Again, such enforcement is at the Belgian authority's own risk (i.e. the risk that the Supreme Court reverses the findings of the Court of Appeal). A parallel can be drawn with the fact that actions for annulment against State aid decisions before the CFI also do not have suspensory effect.

In the Belgian State aid recovery cases examined, there is at least one example where a first instance court allowed for provisional enforcement of its judgment. In the Idealspun case, the first instance judge decided to allow for provisional enforcement of his ruling as it was in the interest of the Common Market that the unlawfully granted aid was recovered as soon as possible (see Idealspun judgment of the Commercial Court of Kortrijk). In Belgium, other forms of interim measures can be requested, such as the payment of the sum on a blocked account, or an order requiring the parent company of the beneficiary to warrant that the aid will be paid back at the end of the proceedings.

c) Interim measures

It is technically possible for the Belgian State to seek interim measures from the civil judge requiring the beneficiary of unlawful aid to pay a bank guarantee for the aid in question before final judgment.

The conditions for this type of interim measures are urgency, prima facie case and serious and immediate harm.

However, it is apparent from the sole recovery case in which such an interim measure action was brought that the "urgency" criterion is a very difficult one to satisfy.

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Indeed, in the Ter Lembeek case, described in more detail in Part I of the study, an action for interim measures brought by the Walloon Region was rejected by the Commercial Court for lack of urgency. Indeed, the court considered that there was no evidence that the beneficiary of the aid, Ter Lembeek, would become insolvent in the near future, and that the Walloon Region would therefore suffer any irreparable damage.

From this sole example, it would therefore appear that a Belgian court would only grant interim measures where there is a possibility that the beneficiary of the unlawful aid will be unable to reimburse the aid in question at the end of the main recovery proceedings.

4.2. 2 Adoption of a law ensuring the recovery of the aid -The Maribel Case

There is only one example of a case whereby the Belgian State adopted a law so as to ensure the recovery of unlawfully paid aid. This is the Maribel case. The facts can be summarised as follows.

The Belgian Government increased the reduction of the social security contributions due from companies which were active in some specifically designated business sectors (the so-called Maribel-bis and Maribel-ter schemes). All of these sectors were exposed to very high international competition.

The Commission found that these schemes were unlawful and constituted incompatible aid and ordered the Belgian State on 4 December 1996 to recover from all of the beneficiaries the total amount of the aid22.

By virtue of the Law of 24 December 1999, the Belgian State had laid down the arrangements for the recovery of the aid. [x3] In the Commission's view, this law still did not enable all of the aid in question to be recovered. In fact, it allowed firms which had repaid the aid to deduct the amount repaid once more for tax purposes, which was tantamount to granting them fresh unlawful aid. Moreover, the application by the Belgian authorities of the de minimis rule appeared to the Commission to be incorrect in that it permitted firms in the excluded sectors (transport, agriculture, coal and steel) to benefit from the rule.

Following this disagreement, the Belgian Government and the Commission concluded a Protocol Agreement which laid down the arrangements for repayment of the unlawful aid. Shortly afterwards, the agreement was implemented in Belgian law by the Law of 30 December 2001. The de minimis rule was abolished and the tax deduction was limited to amounts which had been reimbursed before 31 December 2001 and compensated by a new tax imposed on the sums paid.

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The Law of 30 December 2001 was subsequently modified by the Law of 2 August 2002, on the basis of which a Royal Decree was passed. This Royal Decree of 3 October 2002 provided that the sums would be recovered by the Ministry of Finance and indicated that in the case of non-payment within the required time frame, the sums owed would be increased by ten per cent.

The relevant Belgian law further prescribed that those companies which did not benefit financially from the decrease in the corporate tax rate because of the burden caused by the payment of the reimbursements made in implementing the provisions of the Law of 24 December 1999, were not required to pay the reimbursements. The main beneficiaries of this new regime were companies which at the time of the original reimbursement had suffered fiscal losses.

It should be noted that implementation of the recovery of the Maribel aid also gave rise to individual disputes between targeted companies and the Belgian State.

4.2. 3 Recovery of aid before foreign jurisdictions -the Ryanair Case

On 12 February 2004, the Commission decided to order recovery of the unlawful and incompatible aid granted by the Walloon Region and Brussels South Charleroi Airport to the airline Ryanair in connection with its establishment at Charleroi23. Ryanair has challenged this decision before the CFI (Case T-196/04, pending at the time of writing this report).

Ryanair has been requested by the Walloon Region to repay all unlawful State aid. Ryanair has apparently written to the Walloon authorities and agreed to repay euros 4million to an escrow account until Ryanair's action is heard and the CFI (or the ECJ in case of appeal) renders a definitive decision on this matter.

The Walloon Region has also initiated proceedings before the Irish courts in order to seek the recovery of the aid in question. This is the first example of a case where a public authority has gone before another Member State jurisdiction in order to recover State aid24.

4.2. 4 Recovery from a bankrupt company -insolvency proceedings

Under Belgian law, once a bankruptcy judgment is made, the company which is declared bankrupt loses control of its current and future assets. The bankruptcy judgment is immediately enforceable even if there is an appeal or opposition against it.

A bankruptcy trustee is appointed to manage the assets of the bankrupt company. A creditor must file its claim for the debt at the registry of the Commercial Court within the time fixed byPage 547 the court in the bankruptcy judgment (which cannot exceed 30 days from the date of the bankruptcy judgment).

A creditor who misses the deadline can still file a claim by delivering a writ of summons to the company represented by the bankruptcy trustee up until the earlier of:

* the last creditors' meeting before the final distribution of the bankrupt's estate; or

* three years after the bankruptcy judgment.

This is what happened in the Verlipack case described below.

However, a creditor is disadvantaged if it files its claim late because:

* it must pay the legal costs for filing its claim and having the claim verified and admitted (or dismissed); and

* it cannot claim a share of earlier distributions.

The Belgian Bankruptcy Act does not impose a time limit on bankruptcy proceedings. A bankruptcy judgment (bankruptcy order) is usually rendered by the court within one or two days (especially in the event of petition by the insolvent debtor) or weeks (especially in the event of petition by the creditors). But the bankruptcy operations (i.e liquidation/recovery of the assets and distribution of the proceeds to the creditors) often last several years.

In the Verlipack case, it may still take a number of years before the Belgian authorities will be able to recover the aid in question.

Under Belgian law, there also exists a procedure that aims to give a company in temporary difficulties (the "Debtor") the possibility of restructuring by temporarily suspending the rights of its creditors. This procedure is known as judicial composition ("concordat judiciaire"/"gerechtelijk akkoord") and is described in the Belgian Statute on Judicial Composition (the "SJC").

The judicial composition may be granted to the Debtor if three conditions are met:

* The Debtor is experiencing temporary cash-flow problems or some other problem threatening its existence. This condition will be met, for example, when, due to losses, a company's net assets have been reduced to less than half of the value of the capital (being the subscribed capital mentioned in the company's articles of association). However, the Debtor may not have stopped paying its debts.

* The Debtor can resolve its difficulties. In the request for judicial composition the Debtor must show that it is possible to restructure the company.

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* There is no manifest bad faith on the Debtor's part. The request for judicial composition may still be granted if the directors who have acted in bad faith are removed from the company's management.

There have been two cases25 where the ONSS (the Belgian Social Security office) challenged a decision of a court authorising judicial composition which included the writing-off of the debtors' social security debts. The ONSS argued that such writing-off of the social security debts constituted State aid. In those cases the Supreme Court and the Commercial Court, dismissing the actions of the ONSS, held that as long as the partial write-off of social security debts is of the same nature as the write-off of debts to private creditors granted under the same restructuring and payment plan, the write-off does not constitute State aid.

4. 3 Actions for recovery (or opposing recovery) before national courts
4.3. 1 Actions by the State enforcing recovery
(1) Commercial Court of Kortrijk, Case No 3176/02 R.K, 7 October 2003, Walloon Region v NV Ter Lembeek International (A) (see also Part I of the study)

Facts and legal issues: on 24 April 2002, the Commission issued a decision (Decision 2002/825) declaring that the State aid which Belgium had implemented for the Beaulieu Group (Ter Lembeek International) in the form of the waiver of a debt of BEF 113,712,000 (i.e. euros 2,818,846) was incompatible with the Common Market (OJ (2002) L 296/60). The Commission ordered Belgium to take all necessary steps to recover from the beneficiary the unlawful aid concerned.

Following Commission Decision 2002/825 ordering the recovery of the aid, the legal counsel of the Walloon Region sent a letter of formal notice to Ter Lembeek International requesting for the reimbursement of the aid, plus interest, amounting to euros 457,540.09.

After Ter Lembeek's failure to comply with the formal notice, the Walloon Region brought an action against Ter Lembeek before the Commercial Court of Kortrijk seeking the recovery of the aid in question.

Decision: the Commercial Court suspended the proceedings pending the outcome of an action for annulment brought by Ter Lembeek before the CFI against the Commission decision (Case T-217/02)26. The Commercial Court ordered Ter Lembeek to set up a bank guarantee for the sum owed which would become payable if the CFI upheld the validity of the Commission decision. No condition / time limit was imposed for the setting up of the bank guarantee. Accordingly, Ter Lembeek did not set up the bank guarantee.

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Ter Lembeek has appealed to the Court of Appeal of Ghent against the Commercial Court's judgment ordering it to set up a bank guarantee.

The Walloon Region has cross-appealed against the fact that the Commercial Court ordered a suspension of the proceedings.

This case is still pending. As mentioned above, the Walloon Region also brought an action for interim measures in order to force Ter Lembeek to set up the bank guarantee. This action was dismissed on the grounds of lack of urgency.

Comments: the Commercial Court's judgment suspending the proceedings does not appear to be in line with the ECJ's case law concerning the jurisdiction of national courts to suspend enforcement of a national measure based on Community legislation27. Indeed, according to the ECJ, in order for a national court to be entitled to grant such a suspension, it must:

* entertain serious doubts as to the validity of the Community measure;

* refer the question of the validity of the Community measure to the ECJ (if this has not yet been done);

* find that there is urgency in the sense that the claimant is threatened with serious and irreparable damage;

* take due account of the interests of the Community.

The Commercial Court does not appear to have complied with the first, third and fourth of the conditions mentioned above, i.e. it neither assessed the validity of the Commission decision in question nor addressed the question of whether there was urgency for the claimant while duly taking into account the Community interest (here, the restoration of the distorted competition by virtue of the obligation of Belgium to order recovery of the unlawful aid -or, more simply, the effectiveness of Article 88 (3) EC in order to allow EC State aid control to be carried out as provided for by Articles 87 and 88 EC).

(2) Commercial Court of Mons, RG 03630/01, 21 January 2002, SRIW (Walloon Region) v Mrs BLONDIAU (Curator of the bankrupt estate of Verlipak) (A)

Facts and legal issues: on 4 October 2000, the Commission issued Decision 2001/856 (OJ (2000) L 320/28) finding that the BEF 350 million capital injected into Verlipack, the largest Belgian producer of hollow container glass, by the Walloon Region in April 1997 and the two loans of BEF 250 million granted by the region's investment company SRIW ("société régionale d'investissement de Wallonie") in March 1997 to Heye to finance Heye's capital contribution to Verlipack constituted unlawful and incompatible aid. Belgium was ordered to recover the aid.

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The Commission's decision was upheld by the ECJ on 3 July 200328.

Since the normal term open to creditors under Belgian law to lodge their claims with the bankrupt's trustee had already passed, the Walloon Region had to seek an order from the Commercial Court allowing it to lodge its claim regarding the loans with the bankrupt's estate. The government therefore brought proceedings against three companies which were part of the Verlipack group in two different proceedings.

Decision: the Commercial Court issued two orders admitting the claim by the Walloon Region concerning the loans to the bankrupt's estate. Consequently, the Walloon Region was registered as a creditor.

Comments: without expressly saying so, the Commercial Court has accepted the Commission's decision in which recovery of aid was ordered as an autonomous cause of action, justifying admitting the State as a creditor of the bankrupt's estate. The approach of the Supreme Court in Tubemeuse (see below) does not seem to be contested any more.

(3) Idealspun case

Facts and legal issues: the Belgian Government subscribed to a capital increase of Idealspun N.V., a subsidiary of Beaulieu, the biggest Belgian textile group. The Commission decided on 27 June 1984 (Decision 84/508) that the participation by the State constituted aid which was incompatible with the Common Market. On 9 April 1987, the ECJ found that Belgium had failed to comply with the Commission decision for not having recovered the aid29. On 19 February 1991, the ECJ found that Belgium had failed to comply with its 1987 judgment30.

After these judgments, the Flemish Government (successor in title to the Belgian Government in the area of economic expansion policy) sued Idealspun and its other shareholders to recover the aid on the basis that the subscription was void.

The obligation to repay the aid was not contested as such by the recipient. The issue at stake was the legal basis of that obligation. The government was of the opinion that the contract under which it had subscribed to the capital increase was contrary to EC law and was therefore void ab initio (see Tubemeuse case of 1992 below). This gave rise to an obligation on Idealspun to repay the amount paid under the void contract. According to the recipient, the contract was not void and if any repayment was due, it was under the contract itself. The recipient also asserted that it could still challenge the negative Commission decision in court since it had not been a party to the procedure before the Commission and the ECJ (violation of Article 6 ECHR).

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Decision: The case is interesting with regard to the defences raised by Idealspun, which were one by one rejected by the Commercial Court in its judgment of 20 September 1994.

First, Idealspun argued that the validity of the Commission decision could still be challenged. The Commercial Court rejected this argument, explaining that Idealspun had failed to bring an action for annulment against the decision before the CFI within the required time limits, and that, in all circumstances, the Commercial Court no longer had any competence to question the validity of the decision (TWD principles).

Secondly, Idealspun argued that there was a breach of the principle of the protection of legitimate expectations as it was not the addressee of the Commission decision. The Commercial Court simply noted that a beneficiary of aid is under a duty to act as a "careful entrepreneur" and should have checked whether the aid had been approved by the Commission.

The Commercial Court further ruled that its decision could be provisionally enforced pending any appeal on the grounds that it was in the Community's interest that the aid be recovered as soon as possible.

Idealspun appealed the Commercial Court's judgment to the Court of Appeal of Ghent. On 16 November 2000, the Court of Appeal upheld the Commercial Court's judgment on all grounds (for more details, see the summary in Part I).

Comments: It is interesting to note that it took more than four years for the Commercial Court to come to a ruling on the matter after the State introduced its action for recovery, and that it took another six years for the Court of Appeal to handle the appeal. All in all, the Belgian State's action for recovery took more than ten years. This is obviously not in line with the principles provided by Article 14 (3) of Regulation 659/1999. On the other hand, the Commercial Court did allow for the provisional enforcement of its decision. It is unclear whether the Belgian authorities decided to actually recover the aid on the basis of that first instance judgment.

(4) Beaulieu case

Facts and legal issues: Socobesom granted aid amounting to BEF 725 million to NV Fabelta, an insolvent synthetic fibre producer. The aid would take the form of a majority holding by Socobesom in a newly formed enterprise (NV Beaulieu Kunststoffen), in which a large private textile group, mainly engaged in carpet production, would take a minority holding of BEF 200 million and would use part of the aid to manage a rescue operation by undertaking certain investments in order to maintain the nylon production of the insolvent firm. This aid was notified to the Commission.

In its Decision 84/111 of 30 November 1983, the Commission decided that the aid was unlawful (implementation before the decision) and ordered the Belgian Government toPage 552 recover the aid. On 24 February 1989, the ECJ ruled that the Belgian Government had failed to implement the decision31.

Socobescom and the Belgian Government started proceedings to recover the aid. Due to the refusal of Beaulieu to return the aid, Socobescom and the Belgian Government filed an action for recovery before the Commercial Court. The defendants argued that the Commission decision was unlawful.

Decision: the arguments raised by Beaulieu are identical to those described in the Idealspun case and the Commercial Court, in a judgment of 25 February 1994, ordered Beaulieu to reimburse the aid.

The case was appealed to the Ghent Court of Appeal, and on 5 October 2000, the Court of Appeal came to a judgment upholding the Commercial Court's judgment.

Comment: this is again an example of a case where the national court proceedings took excessively long and delayed a rapid recovery of the aid.

(5) Tubemeuse (see Part I of the study)

Tubemeuse, the beneficiary of unlawful and incompatible aid, was subject to insolvency proceedings. The Belgian State requested that it should be registered as a creditor in order to recover the unlawful aid in accordance with a Commission decision.

The judge at first instance and the Court of Appeal rejected this request on the grounds that the Commission decision did not transform the Belgian State's participation in the capital of Tubemeuse into a simple debt for the receiver.

In an exemplary decision, the Supreme Court set aside the Court of Appeal's ruling and thus the application of national law, in order to ensure the full effectiveness of EC law. The Supreme Court considered that the Court of Appeal's refusal to register the Belgian State as a creditor did not recognise the effect of the absolute nullity of the capital injection (as a consequence of the violation of Article 88 (3) EC) and violated EC law.

4.3. 2 Actions by competitors to enforce recovery

We are not aware of any case where a competitor has sought to obtain the recovery of unlawful aid (in one unfair competition case -Breda, see Part I-a cease and desist order was sought, not a recovery order).

4.3. 3 Issues related to actions by the beneficiary to oppose a recovery order

There have been few actions brought by beneficiaries opposing a recovery order. This can be explained by the fact that a recovery order only becomes enforceable after a judgment ofPage 553 the relevant court. However, the arguments raised by beneficiaries in order to oppose recovery in those cases are also interesting. In point (c) below, a short description is provided of those arguments.

(6) Dufrasne (see also Part I of the study)

In the Dufrasne case, described in more detail in Part I of the study, Dufrasne brought an action for annulment before the Council of State of a decision of the Walloon Region requesting the reimbursement of aid which the Walloon Region had granted to Dufrasne (the reason why Dufrasne brought an action was because it was still hoping to receive further aid from the Walloon Region).

The Walloon Region's decision ordering the recovery of the aid in question was not based on any Commission decision finding this aid incompatible. The national recovery decision was, in fact, based on the Walloon Region's interpretation of Commission Decision 3855/91/ECSC and on the fact that it had granted the aid without seeking the Commission's approval.

The Council of State annulled the recovery order on the grounds that there was in fact no Commission decision declaring the aid in question incompatible and ordering its recovery.

As explained in Part I of the study, the Council of State failed to draw all the normal consequences of the direct effect of Article 88 (3) EC, which provides that all non-notified aid is unlawful and should therefore be recovered.

(7) Ford v ONSS-RSZ (Maribel) -see Part I of the study

Ford brought an action against the Belgian State before the Employement Court of Tongeren, reclaiming part of the aid which it had reimbursed to the State by virtue of the law of 24 December 1999 implementing Commission Decision 97/239/EC of 4 December 1996 ordering the recovery of the aid.

Ford basically argued that the claim of the Belgian State to part of the aid was time-barred because the limitation for recovery should be five years rather than eight years, as provided by the law.

As described in more detail in Part I of the study, the Employment Court dismissed this argument, stating that the eight year period was appropriate, otherwise it would compromise the effet utile of the Commission's decision ordering recovery of the aid.

Ford also raised the principle of protection of legitimate expectations. The Employment Court simply held that the beneficiary of aid had a duty of care to determine whether the Belgian State had followed the proper procedure for granting the aid in question.

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4.3. 4 Arguments raised by beneficiary acting as a defendant
a) Legitimate expectations (Beaulieu and Idealspun cases)

In a number of cases in which the relevant Belgian authorities have sought to recover aid from the beneficiaries of the aid, the beneficiaries have argued that the Commission decision was unlawful.

Thus, in the Idealspun and Beaulieu cases (described in more detail above), the beneficiaries of the aid considered that the national court should refer questions to the ECJ in order to ascertain the validity of the Commission decisions in question and relied upon the principle of protection of legitimate expectations.

In the Beaulieu case, the beneficiaries of the aid measure in question argued that the principle of the protection of legitimate expectations prevented the national authorities from recovering the aid in question. The Commercial Court dismissed this argument. Indeed, the court considered that the relevant provisions of EC law on State aid should have been sufficiently known to the beneficiaries of the aid measure in question for the reasons set out below.

First, there was no doubt that the aid measure in question constituted State aid within the meaning of Articles 87 and 88 EC.

Secondly, the beneficiaries, before receiving the State aid, should each, as a "careful undertaking", have examined whether the State aid measure had been notified to and approved by the Commission.

Thirdly, the aid beneficiaries were undoubtedly familiar with transactions containing elements of State aid, given that they had also benefited from aid in the Verlipack and Idealspun cases.

Fourthly, the beneficiaries were surrounded by proficient advisors on Community law.

b) Legality of the Commission decision -Appeal to the CFI (Ter Lembeek case)

In the recent decision of the Commercial Court in the Ter Lembeek case (also summarised above), the court suspended proceedings pending the CFI's judgment on the action for annulment brought by Ter Lembeek against the Commission decision ordering the recovery of the unlawful aid.

Although the Commercial Court did require the beneficiary to set up a bank guarantee, the court's failure to impose any penalty payment on the beneficiary for failing to set up such a bank guarantee basically prevented the Walloon region from immediately recovering the unlawful aid.

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4. 4 Summary of the main difficulties in Belgian recovery proceedings

There are apparently still four Belgian recovery cases pending. Generally, the cooperation between the Commission and the national authorities is good. The Belgian authorities appear to do their best to recover the aid in question and keep the Commission up to date.

However, it is apparent from these pending cases and also the completed recovery cases that there are a number of difficulties in recovering aid in Belgium. For example, in one case, there was a disagreement between the relevant Belgian authority and the Commission on the amount of interest owed on top of the aid.

As described in more detail below, the difficulties in recovering aid are due to the behaviour of the national authorities, the behaviour of the beneficiaries of the aid, and the fact that legal proceedings need to be taken.

4.4. 1 Belgian State / National authorities

The main problem encountered by the Commission is that in the past it has been required to bring actions against the Belgian State before the ECJ for failing to comply with its decision ordering the recovery of aid, or has had to defend itself in actions for annulment from the Belgian State.

In the Idealspun case referred to above, the Commission needed to go to the ECJ for a second time in order to obtain a ruling that Belgium had failed to comply with an earlier ECJ judgment. Only after the proceedings before the ECJ had ended in favour of the Commission (all the Belgian recovery cases brought before the ECJ were won by the Commission), did the relevant Belgian authorities commence seeking recovery of the aid in question.

It should however be noted that in a more recent case, although the Belgian Government disputed the validity of a Commission recovery decision, the relevant Belgian authorities did try to recover the aid in question, well before the proceedings before the ECJ had ended (this constructive attitude echoes the French approach in the recent EDF case, where the aid was fully reimbursed before the Commission decision was challenged -see French report).

Moreover, in the Ter Lembeek case described above, the Walloon Region attempted to secure from the Commercial Court an order that the beneficiary of the unlawful aid provide a bank guarantee for the State aid to be recovered, in spite of the fact that an action for annulment was pending before the CFI. The same can be said regarding the Ryanair case, where the Walloon Region has endeavoured to recover aid whilst the Commission decision is being challenged by Ryanair before the CFI.

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4.4. 2 The beneficiary of the aid

In the cases studied, beneficiaries of the aid have usually resisted returning the aid after the initial request from the Member State. The beneficiary has usually appealed against the court orders for payment of the unlawful aid. Such actions by the beneficiary, albeit logical, delay the date by which the aid can be fully recovered.

4.4. 3 National courts

As described above, the Belgian authorities generally need to bring a debt action against an aid beneficiary before the Commercial Court in order to recover the aid paid out to the beneficiary if the beneficiary does not comply with the letter of formal notice requesting repayment of the aid.

Overall, the Belgian courts appear to have a good grasp of the EC State aid rules and the direct effect of Article 88 (3) EC. However, in one recent example (the Ter Lembeek case), the national court suspended recovery proceedings, pending judgment of the CFI. Such an order goes against the obligation of the Member State to seek immediate recovery of the aid (and against the principle that an action for annulment does not have suspensory effect).

Another problem is that the recovery proceedings can be lengthy, and if an appeal is made by the beneficiary of unlawful aid against the first instance judgment, the State has a right to recover the aid in question only after the ruling of the court of appeal (unless the first instance court allows for the provisional enforcement of its order).

This does not appear to be in line with Article 14 of Regulation 659/1999, which provides that "recovery shall take place without delay and in conformity with the procedures foreseen by the national law of the Member Stare in question provided that they allow for the immediate and effective execution of the Commission decision" (emphasis added).

4. 5 Identification of best practices and remedies for immediate and effective recovery
4.5. 1 Best practices for immediate recovery of aid

Ideal recovery cases are those where the beneficiary reimburses the aid to the State as soon as the Commission has adopted a negative decision and the beneficiary has been informed of this decision.

This type of recovery by the State takes place exclusively through the administrative channels, without any court intervention.

The Commission should encourage the practice (seen in an exceptional case in France, the EDF case) of having the beneficiary reimburse the aid before challenging the Commission's decision before the CFI. This solution is in compliance with EC law: the beneficiary is using the legal means at its disposal while avoiding a pending recovery situation. The risk of thePage 557 aid finally being compatible or there not being any aid is therefore transferred to the Commission.

Best practices by the State would therefore include the following:

* identification of the beneficiary, of the method of calculating the aid and the amount of aid and of the authority having to recover the aid (for example, in the case of a region or local authority having granted the aid);

* information from the State to the beneficiary regarding:

- the obligation to recover the aid immediately;

- applicable interest rates in case of late recovery;

- the possible administrative and legal actions open to the beneficiary wishing to contest the recovery act or the Commission's decision, preferably stressing the importance of (i) introducing these actions after the aid has been recovered and (ii) the fact that if the beneficiary does not contest the Commission's decision, certain grounds of appeal against the recovery order (i.e. arguing that the Commission decision is invalid) will no longer be open to the beneficiary after the time for introducing an EC action has lapsed. As in the Ter Lembeek case, the national court should systematically request the beneficiary to repay the aid to a blocked account (unless the conditions of Zuckerfabrik have been met) when the latter challenges the national recovery order or the Commission's decision;

- legal action in the event that the enforcement of the executory act is insufficient to obtain full recovery of the aid;

- registration of a claim with the creditors' representative in the case of insolvency proceedings involving the beneficiary being opened; information of the administrator appointed by the Commercial Court and of the President of the Commercial Court regarding the mandatory recovery of the illegal aid;

- information to the judges concerned that suspension of the proceedings should not be allowed in the case of a negative Commission decision ordering recovery (although the absence of suspensory effect is problematic if the Commission decision is being challenged by the State or by the beneficiary, or even by a competitor).

4.5. 2 System of surveillance of State aid in Belgium

A general proposal for improving recovery procedures would be to create a national, independent authority in charge of controlling the granting and recovery of State aid in Belgium.

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The surveillance authority could, at a preliminary stage, be in charge of advising beneficiaries of public subsidies in order to determine what constitutes State aid and question the Belgian (federal and regional) authorities on notification to the Commission.

This independent authority could also review notifications in order to ensure that all the necessary information has been provided. It could also monitor all actions of the six governments and the six Parliaments in Belgium, including lower local authorities, which are likely to contain elements of aid, and alert them against this situation while informing the Commission and the public, thereby discouraging the executive powers or the federal, regional and local legislators from engaging in actions contrary to the EC Treaty or at least encouraging strict compliance with EC procedure, avoiding any unlawful State aid.

Beyond this role of prevention of recovery issues, one could also imagine that this surveillance authority could compile a State aid database that judges could consult when faced with State aid decisions. Once the aid has been declared illegal, the national surveillance authority could advise on the most suitable way for recovery and could help monitor the process.

The difficulty with this type of surveillance authority would be its ties with the authorities granting the aid and the State with regard to guaranteeing its independence vis-à-vis the State. In order to be credible for all parties concerned (beneficiaries, competitors, national judges, national authorities and the Commission) the surveillance authority would have to have the status of an independent regulatory authority with all the privileges and organisational characteristics that correspond to such an authority.

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[22] Decision 97/239/EC of 4 December 1996 (OJ (1997) L 97/25). On 19 February 1997, the Belgian State lodged an action for annulment against that decision (Case C-75/97). This action was dismissed by the ECJ on 17 June 1999. In parallel, the Commission brought, on 21 October 1998, an action against the Belgian State for failing to comply with its decision (Case C-378/98). The ECJ held on 3 July 2001 that Belgium had failed to comply with the decision.

[23] Decision 2004/393/EC ordering recovery of the unlawful and incompatible aid granted by the Walloon Region and Brussels South Charleroi Airport to the airline Ryanair in connection with its establishment at Charleroi (OJ (2004) L 137/1).

[24] It should be noted that, in the Verlipack case, a debt recovery action was brought by the Walloon region against Heye in Germany before the Court of Bückelburg on 25 April 2000 in order to recover aid paid out to this company. This action was brought on the grounds that Heye had not met its contractual obligations. This was technically not an action seeking to enforce a negative Commission decision. Indeed, in the Verlipack case, a Commission decision was only issued in October 2000.

[25] Judgment of the Supreme Court, 18 February 2005, ONSS/RSZ v Champagne Holding and others (acquittal of social security debt) and judgment of the Commercial Court of Liège, 16 April 2002, Office National de Sécurité Sociale v L. and Schroeder and Props.

[26] It can be noted that the claimant contests the qualification as State aid of the State measure in question.

[27] Joined Cases C-143/88 and C-92/89, Zuckerfabrik Süderdithmarschen [1991] ECRI 540, para. 25 et seq.

[28] Case C-457/00, Belgium v Commission [2003] ECR I-6931.

[29] Case 5/86, Commission v Belgium [1987] ECR I-1773.

[30] Case C-375/89, Commission v Belgium [1991] ECR I-383.

[31] Case C-74/89, Commission v Belgium [1990] ECR I-491.

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