Luxembourg

AuthorTh. Jestaedt; J. Derenne; T. Ottervanger
ProfessionJones Day; Lovells; Allen & Overy
Pages351-358

Page 351

2. Outline on the availability of judicial relief under the legal system of Luxembourg
2. 1 Procedures concerning the direct effect of Article 88 (3) EC

Articles 87 to 89 EC governing State aid are not recognised as having direct effect. The exception is the last sentence of Article 88 (3) EC, which forbids Member States from implementing aid before the preliminary examination procedure has resulted in a final ruling309.

Whilst the Commission has exclusive jurisdiction in determining whether State aid is compatible with the Common Market, national courts are required, due to the direct effect of Article 88 (3) EC, to declare unlawful State aid which has been granted prematurely, without following the procedure of Article 88 (3) EC.

A final decision of the Commission stating that a particular State aid is compatible with the Common Market does not a posteriori regularise acts where aid was granted in infringement of Article 88 (3) EC. Such acts remain invalid and unlawful310.

To the best of our knowledge, no Luxembourg case law exists dealing with the direct effect of Article 88 (3) EC. The following comments are therefore based upon Luxembourg experience in other areas of litigation.

Actions concerning infringements of Article 88 (3) EC are available before both administrative and civil courts.

2. 2 Procedure before administrative courts

The Luxembourg administrative courts ("Tribunal administratif" and "Cour administrative") have jurisdiction to rule on administrative actions in relation to State aid.

The implementation of State aid by public authorities without complying with the procedure foreseen by Article 88 (3) EC is open to challenge before these courts.

If the aid has been granted by an individual administrative act, a competitor or any other interested party may initiate proceedings before the Administrative Court ("Tribunal administratif") to seek the annulment of the contested decision. An application for annulment should be introduced within a period of three months from the notification of the decision to the claimant or from the date on which the claimant was considered to have knowledge of this decision (Act dated 7 November 1996 relating to the organisation of the administrativePage 352 courts ("1996 Act") and Act of 21 June 1999 setting out the rules of procedure before the administrative courts ("1999 Act")).

Annulment proceedings against administrative regulations (i.e. with a general scope of application) must be initiated before the Administrative Court within a period of three months from the day of publication or, where the regulation is not published, from the day of notification or the day on which the claimant has knowledge of the regulation. Annulment proceedings against administrative regulations are open only to those parties that have sustained personal, direct, actual and certain damage, as well as to certain legally recognised associations.

The Administrative Court may only judge a public authority's decision or regulation in the event of incompetence, excess or abuse of power, infringement of the law or of formalities established to protect private interests. The only available remedy is the annulment of the decision or regulation. No damages can be obtained before the administrative courts311.

Appeals against rulings of the Administrative Court can be lodged before the Higher Administrative Court ("Cour Administrative"). The judgment of the Higher Administrative Court is final.

The administrative actions described above do not have a suspensory effect unless expressly ordered by the President of the Administrative Court. A stay of enforcement may only be granted if enforcement of the contested decision risks causing serious and irreparable harm to the claimant and if the grounds invoked for the action appear serious.

Notwithstanding certain exceptions, summary proceedings are, in general, not available in administrative matters.

2. 3 Procedure before civil courts
2.3. 1 Proceedings against the public authority which granted the aid

a) Liability in tort

As mentioned above, administrative courts have no jurisdiction to award damages to the claimant. Thus, the victim of an illegal administrative decision or regulation (i.e. one which has granted State aid in breach of Article 88 (3) EC) who wishes to obtain damages has to sue the public authority in tort before the civil courts.

According to the general rules laid down in Articles 1382 et seq. of the Luxembourg Civil Code, the claimant must establish the fault of the public authority, the existence of the damage and the causal link between the fault and the damage. A specific law was adopted dated 1 September 1988 relating to the civil liability of the State and other public bodies,Page 353 largely based upon the general principles of civil liability mentioned above. To a certain extent, general rules of civil liability have also been amended or completed312, including relating to the possibility of invoking, under certain circumstances, the State's liability, even if the latter has not committed a fault.

The majority of cases state that the annulment by the administrative courts of a decision rendered by a public authority (i.e. an individual administrative act) is a sufficient condition to establish a fault in the conduct of the public authority, which may entail its civil liability313.

It nevertheless remains unclear whether the annulment of an administrative act is also a necessary condition to establish a fault on behalf of the public authority concerned. The Luxembourg Court of Appeal ruled in various cases that civil courts are not competent to examine the lawfulness of an individual administrative act314. The right to determine whether public authorities have committed a fault by adopting an administrative act is thus, in general, denied to civil courts. However, this principle is not unanimously followed by the lower courts315, or even by the Court of Appeal itself316. It has been criticised because it does not take into account the fundamental differences between an action for annulment before the administrative courts and an action for tortious liability aiming to obtain damages317 before the civil courts.

Where State aid has been granted in infringement of Article 88 (3) EC by way of a regulation, civil courts have the constitutional duty not to apply these (illegal) regulations (Article 95 of the Constitution). Prior to the administrative reform of 1996318, this rule was justified by the fact that the State Council had no jurisdiction to declare regulations void. Hence, Luxembourg civil courts tended to declare public authorities liable for their (illegal) regulatory activities319.

Nowadays, regulations can be declared void by the Administrative Court. Future case law will have to determine whether regulations which have not been contested in time before the Administrative Court may still be declared illegal by the civil courts, entailing the civil liability of the public authority320 responsible.

Page 354

Strong arguments have nevertheless always been raised to render it possible to sue public authorities in a tort action for the infringement of Community law321.

Also, the case law of the ECJ requires Member States to indemnify private individuals for damage caused by an infringement of Community law322. National substantive and procedural requirements must not render the obtaining of damages impossible or excessively difficult323. In our view, there are grounds for applying this case law should civil courts refuse to declare a decision or regulation illegal and to award damages because the decision/regulation has not been previously declared void by the administrative courts.

This case law, and particularly the Brasserie du Pêcheur case, should also incite the Luxembourg courts to accept the State's liability for an infringement of Community law by the legislator324. In the same manner (although, to our knowledge, no case law exists on this issue), it should be possible to invoke the State's liability for damages sustained as a result of the fact that the State has granted aid in breach of Article 88 (3) EC through means of a contract. In accordance with the general rules of Luxembourg civil law, such contract (in which the parties' obligations are based on an illegal cause) could furthermore be declared null and void (Articles 1131 and 1133 Luxembourg Civil Code).

2.3. 2 Summary proceedings

In the case of urgency, the President of the District Court can order any measure not subject to serious dispute or which may be justified by the existence of a disagreement (Article 932, first paragraph, of the New Luxembourg Code of Civil Proceedings).

Two main conditions (i.e. the absence of a serious dispute and the existence of urgency) must be fulfilled.

A serious dispute exists when the judge cannot reject an argument without hesitation, i.e. when a means of defence to a claim is not manifestly unfounded, so that the outcome of the case in a procedure on the merits is uncertain325.

The case is considered urgent if the slowness of the legal system would not allow the claimant to obtain the requested measures in due time before the ordinary courts326. The adoption of a provisional measure must be required urgently in order to prevent certain damage.

Page 355

The President of the District Court may also order any kind of conservatory measure, or a measure tending to restore a situation to its former state, either to prevent imminent damage, or to stop any obviously illegal disturbance (Article 933, first paragraph, of the Luxembourg Code of Civil Proceedings).

To file such proceedings, the claimant has to prove that the defendant has committed or is committing an obviously illegal act. Such an act is generally defined by Luxembourg case law as a clear, illegal and intolerable infringement of a person's rights327.

The judge, sitting in summary proceedings, may exclusively order provisional measures which affect neither the basic rights of the parties nor the outcome of the proceedings on the merits328. The judge sitting in summary proceedings may not sentence the defendant to the payment of damages. He may neither settle a dispute nor definitively rule on the parties' respective rights and obligations.

2.3. 3 Proceedings against the recipient of State aid

a) Liability in tort

Where a competitor of a recipient of State aid infringing Article 88 (3) EC successfully proves the recipient's fault, as well as the existence of damage and a causal link between this fault and the damage, the recipient can be sued for damages before the civil courts. However, proof of such fault (consisting of an infringement of either a legal provision or of the general duty of care) seems rather difficult to establish.

b) Action for discontinuance

Another ground possibly exists for legal action by the competitors of a recipient of State aid. Pursuant to Article 14 of the Act dated 30 July 2002, regulating certain commercial practices and sanctioning unfair competition, any merchant, industrialist, craftsman or person exercising a liberal profession is deemed to commit an act of unfair competition if, by an action contrary to honest commercial and industrial practices or to contractual commitments, he diverts or attempts to divert from his competitors part of their customers or attempts to cause prejudice to their competitive power. A recipient of State aid could be accused of infringing this act if it could be demonstrated that he has knowingly accepted State aid which infringes Article 88 (3) EC.

The Act provides a specific action for discontinuance as well as, under certain circumstances, criminal sanctions. An action for discontinuance of the act of unfair competition may be introduced by anyone having an interest, although case law requiresPage 356 evidence of a competitive situation. The action is introduced by an application filed with the President of the District Court, sitting in commercial matters. It will be judged in the same way as summary proceedings. If the conditions for an act of unfair competition are satisfied, the President will order the discontinuance of such act. The order may be accompanied, at the request of the claimant, by a penalty ("astreinte") imposed on a daily basis for non-compliance with the presidential order. Additional sanctions, such as the advertisement of the order or its publication in one or more newspapers at the expense of the offender, may also be ordered.

The Act does not provide for damages to be granted by the President of the District Court. To obtain damages, the claimant will have to bring a separate civil action (based on Articles 1382 et seq. of the Civil Code).

To the best of our knowledge, no action for discontinuance has been filed with the Luxembourg courts by a competitor of a recipient of State aid.

2.3. 4 Summary proceedings

Theoretically, a competitor of a recipient of State aid could also file for summary proceedings as described above. This possibility nevertheless seems difficult to put into practice.

2. 4 The enforcement of negative Commission decisions

When ordering the discontinuance of incompatible State aid, the Commission also orders the public authority to recover the funds from the recipient329.

In such cases, the public authorities first have to withdraw the administrative act which previously granted the aid.

Pursuant to Article 8 of the grand-ducal decree dated 8 June 1979 on the procedure to be followed by the local or state administrations, the retroactive withdrawal of a decision which has created or recognised rights is - unless otherwise provided - only possible during the period in which contentious proceedings may be introduced against the decision, as well as during the contentious proceedings themselves. The withdrawal of such a decision is only permitted for the same reasons as those that would have justified its annulment330.

This provision has to be viewed in the context of European case law, according to which the recovery of aid is ordered in accordance with national procedures, including the national provisions relating to legal certainty and legitimate expectations on the withdrawal of an administrative act. On the other hand, the recipient of State aid may only legitimately have confidence in the regularity of this State aid if it has been granted to him in accordance withPage 357 Article 88 EC331. In relation to national provisions regarding the period of time during which a withdrawal of administrative acts is possible, the ECJ has stated that these provisions are, like any other national provisions, to be applied in a way which does not render the recovery practically impossible332.

Although, to our knowledge, no case law exists on this issue, it should also be possible to declare a contract which has granted State aid in breach of Article 88 EC null and void333.

In the event that the recipient refuses to refund the aid, the public authority will have to initiate ordinary proceedings before the civil courts in accordance with the general rules of civil law.

2. 5 The implementation of position Commission decisions

As mentioned above, a positive Commission decision does not a posteriori regularise the infringement of Article 88 (3) EC. This means that the rulings and judgments rendered or to be rendered on the basis of the direct effect of Article 88 (3) EC are valid and can be enforced.

If, prior to the approval of the Commission, State aid has not been granted, public authorities may legally start to implement the aid to the beneficiaries upon such approval.

Such implementation decisions can be challenged by the recipient's competitors in the administrative courts by arguing that the Commission wrongfully came to the conclusion that the aid was compatible with the Common Market. Such procedure will, of course, tend to obtain a court ruling referring the relevant question to the ECJ under Article 234 EC.

One should nevertheless note that the instigation of such a procedure may not have the effect of circumventing the delay of two months foreseen by Article 230 EC to challenge the Commission decision before the ECJ.334

3. List of cases with summaries
3. 1 Decision of the State Council dated 11 April 1989 (A)

The commercial company Moulins de Kleinbettingen filed for a subsidy with the Ministry of Agriculture, in accordance with the act dated 18 December 1986 promoting agricultural development. The application was refused by the Ministry on the grounds that the claimant did not fall under the scope of application of Article 39, paragraph 1 of the Act, which lists the potential beneficiaries of such a subsidy, stating that such beneficiaries may, inter alia, be those undertakings whose main purpose is to increase the income of farmers in general.

Page 358

The claimant instituted an administrative action against this decision before the Sate Council by arguing, first that the Act had not been correctly applied by the Ministry and, secondly, that, by such incorrect application of the Act, Article 87 EC had been infringed in the sense that anti-competitive structures had been created.

As far as the first argument is concerned, the State Council held that the aim of the act was to enable the Ministry of Agriculture to promote the agricultural sector. Hence, the potential beneficiaries of the subsidies were to be found amongst the agricultural population and the rural establishments. The subsidies foreseen by the act were paid by the budget of the Ministry of Agriculture. As public expenditures must not be diverted from the purpose given to them by the legislator, it was held that the Minister of Agriculture must restrict the granting of subsidies to those entities for which his Ministry is in charge. This was not the case of the company Moulins de Kleinbettingen, a private company which fell under the competence of the Department of Industry and Middle Class affairs. Accordingly, the decision of the Minister of Agriculture was upheld by the State Council.

As far as the claimant's second argument is concerned, the State Council simply considered, without any further comments or explanations, that the aid granted under the Act, just like the aid benefiting to the industrial sector as provided by an act dated 14 May 1986, was compatible with the exceptions set out under Articles 87 (2) and (3) EC. The State Council also stated that the claimant could not reasonably assert that there was a risk of disturbing the balance of the Common Market by the mere fact that Luxembourg had granted structural aid to the agricultural sector by means of the Act.

----------------------------

[309] Case C-120/73, Gebrüder Lorenz GmbH v Federal Republic of Germany and Land Rheinland/Pfalz [1973] ECR-I-1483, para. 8; Case C-354/90, Fédération Nationale du Commerce Extérieur des Produits Alimentaires and Syndicat National des Négociants et Transformateurs de Saumon v French Republic [1991] ECR I-5505, para. 11.

[310] Case C-354/90, Fédération Nationale du Commerce Extérieur des Produits Alimentaires and Syndicat National des Négociants et Transformateurs de Saumon v French Republic [1991] ECR I-5505, para. 16.

[311] G. RAVARANI, "La responsabilité civile de l'Etat", Pas. 28, p. 144.

[312] G. RAVARANI, "La responsabilité civile des personnes privées et publiques", Pas., 2000, Saint-Paul, Luxembourg, p. 192.

[313] Luxembourg Court of Appeal, 13 December 1983, Etat v Nilles; Luxembourg Court of Appeal, 30 October 1986, Pas. 27, p. 266; Luxembourg Court of Appeal, 20 April 1989, n°10271; Luxembourg Court of Appeal, 10 July 1991, n°12508; Luxembourg District Court, 3 July 1986, n°408/86; Luxembourg District Court, 19 December 1984, Pas. 26, p. 285.

[314] Luxembourg Court of Appeal, 13 December 1983, Etat v Nilles; Luxembourg Court of Appeal, 21 November 1985, Editpress Lux. v Etat; Court of Appeal, 22 May 1996, n°17096.

[315] Luxembourg District Court, 19 December 1984, Pas., 1986, p. 285; Luxembourg District Court, 15 December 1999, n°1164/99; Luxembourg District Court, 5 April 2000, n° 119/2000.

[316] Luxembourg Court of Appeal, 17 March 1998, n°19151.

[317] G. RAVARANI, "La responsabilité civile des personnes privées et publiques", Pas., 2000, Saint-Paul, Luxembourg, p. 113.

[318] In 1996, jurisdiction formerly held by the State Council was transferred to the newly created administrative courts.

[319] Luxembourg District Court, 16 November 1994, n°924/94, confirmed by Luxembourg Court of Appeal, 9 July 1996, n°17751; Luxembourg Court of Appeal, 22 November 1995, n°16525.

[320] G. RAVARANI, "La responsabilité civile des personnes privées et publiques", Pas., 2000, Saint-Paul, Luxembourg, p. 91.

[321] F. SCHOCKWEILER, "Le dommage causé par suite d'une violation du droit communautaire par l'autorité publique et sa réparation en droit Luxembourgeois", Pas. 28, p. 38.

[322] Cases C-6/90 and C-9/90, Andrea Francovich and Danila Bonifaci and others v Italian Republic [1991] ECRI-5357, para. 37.

[323] Cases C-6/90 and C-9/90, Andrea Francovich and Danila Bonifaci and others v Italian Republic [1991] ECRI-5357, para. 43; Cases C-46/93 and C-48/93, Brasserie du Pêcheur S.A. and Factortame Ltd v Bundesrepublik Deutschland and United Kingdom [1996] ECR 1-1029, para. 99.

[324] In the past, Luxembourg courts have consistently refused to recognise the State's liability in such circumstances.

[325] Luxembourg Court of Appeal, 20 January 1986, Micheley et Bidasio v Englaro, n°8349; Luxembourg Court of Appeal, 30 January 1989, Keipes v Sicolus, n°11069.

[326] Luxembourg Court of Appeal, 1 July 1970, Pas.21, p. 378; Luxembourg Court of Appeal, 13 March 1989, Krancher v Bodson et consorts, n°11106

[327] Luxembourg Court of Appeal, 21 January 1997, Pas. 30, p. 247; Luxembourg Court of Appeal, 9 November 1983, n°6768; Summary proceedings Luxembourg, 31 October 1985, n°1105/85.

[328] Luxembourg Court of Appeal, 18 February 1992, Anciens Etablissements Cloos et Kraus v BatiConcept, n°13564.

[329] Unless such recovery would be contrary to a general principle of Community law.

[330] I.e. in the event that the public authority is guilty of incompetence, excess or abuse of power, infringement of the law or of the formalities established to protect private interests.

[331] Case C-5/89, Commission v Federal Republic of Germany [1990] ECR I-3437, para. 14 and 17.

[332] Case C-5/89, Commission v Federal Republic of Germany [1990] ECR I-3437, para. 12 and 19.

[333] Due to the fact that the parties' obligations are based on an illegal cause: Articles 1131 and 1133 Luxembourg Civil Code.

[334] If legal action is possible under Article 230 EC, priority should thus be given to this possibility.

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