Summary, Obstacles to Efficient Recovery and Proposed Remedies, Proposed Best Practice Guidelines
| Author | Th. Jestaedt; J. Derenne; T. Ottervanger |
| Profession | Jones Day; Lovells; Allen & Overy |
| Pages | 521-540 |
Page 521
This study is based on an analysis of the published case law of the Member States concerning the recovery of State aid pursuant to negative Commission decisions. It focuses on Belgium, France, Germany, Italy, and Spain, being the Member States with the largest number of recovery cases as at 1 July 2005 (the "Selected Member States"). With respect to the Selected Member States, this study contains a description of:
- the national authorities responsible for recovery;
- the substantive rules applying to recovery;
- the procedures for recovery; the extent to which the legitimate expectations of the beneficiary can prevent recovery;
- interim relief;
- recovery in insolvency proceedings; and
- obstacles to immediate and effective recovery.
This study also contains short general sections on the situation in the ten remaining old Member States, including relevant published court decisions.
The country rapporteurs of the Selected Member States described the law applicable to the recovery of aid in their respective Member States and have analysed relevant court cases. In addition, the rapporteur of each country has examined the list of recovery cases that were considered open as at 1 July 2005 provided by the Recovery Unit of the Directorate-General for Competition of the Commission. The rapporteurs have been informed in general about the difficulties encountered (if any) in each case.
A principle common to all countries reviewed is that recovery must be effected by the authority that granted the aid. This leads to the involvement of a variety of central, regional and local bodies, as well as public entities, in the recovery process.
Among the Selected Member States, France and Germany have a central body that controls and oversees the recovery process: in France, the Ministère de l'Économie et des Page 522 Finances ("Trésor"); in Germany, the Federal Ministry of Finance. In Belgium, Italy, and Spain, there is no central body that controls the recovery process.
Whereas the evidence obtained from the range of cases reviewed by the authors is statistically insufficient to draw conclusions, it appears that the existence of a central body in charge of implementing recovery decisions that has ongoing contact with the Commission is more likely to ensure efficient implementation of recovery decisions than a system where a variety of central, regional or local bodies are actively involved in the process.
In each of the Selected Member States, recovery is effected either on the basis of administrative law or civil law or, sometimes, on the basis of a combination of both.
The applicable substantive law is determined by reference to the measure underlying the grant of the aid. If the aid was granted by means of an act of public law, it must be recovered under administrative law. If the aid was part of a civil law transaction (granted by means of a loan, a capital injection or other civil law transaction), it must be recovered pursuant to civil law. The applicable law is therefore determined by the nature of the act on the basis of which the aid was granted. The authorities have no discretion in determining whether administrative or civil law rules should apply.
In France, Germany, Italy, and Spain, most of the recovery cases examined were based on administrative law. In Belgium, the basic recovery decision is based on administrative law (adopted by administrative bodies). However, if the beneficiary does not challenge this decision before the Council of State, then the actual recovery process is conducted under civil law (the administrative bodies sue the beneficiary in the civil courts).
- In France, the administrative act ordering recovery can be based directly on the negative Commission decision.
- In Belgium, the administrative act ordering recovery (which may simply be a letter to the beneficiary or proceedings) can also be based directly on the negative Commission decision.
- In Germany, the prevailing view of the courts is still that a negative Commission decision cannot provide a valid legal basis for a recovery order since the negative Commission decision is only addressed to the Member State. The courts in Germany therefore always require a domestic legal basis. In administrative law, this legal basis is section 48 of the Administrative Law Act, which provides that illegal administrative acts can be repealed. However, this does not apply where the aid was granted through a civil law transaction rather than by way of an administrative act. In principle, such aid must be recovered on the basis of civil law principles, based on the reasoning that the underlying transaction violates Article 88 (3) EC and is thereforePage 523 null and void (under section 138 of the German Civil Code). Under German civil law, the effect is that the aid may be reclaimed pursuant to the principle of unjust enrichment.
In the recent Kvaerner case (see below), the German government attempted to base an administrative law recovery action directly on the relevant negative Commission decision in order to avoid the usual problems associated with recovery under civil law. The Administrative Court of Berlin rejected this approach on the basis of principles of German constitutional law. The German government has appealed this decision.
- In Italy, there is little evidence of recovery through court actions.
- In Spain, a specific law (No. 38/2003) created a legal basis for the recovery of illegal subsidies (i.e. payments) granted by an administrative act, although the procedure for recovery must be carried out pursuant to general rules of administrative law. Spanish authorities have issued individual recovery orders based on general principles of administrative law. Whereas civil law recovery is an option in certain cases based on the nullity of the underlying transaction which violates EC State aid law, we have been unable to find (within the scope of our review) any cases on this point.
In the Selected Member States, the procedural rules follow the applicable substantive rules in principle, with the exception of Belgium. In Belgium, the basic decision ordering recovery is based on administrative law, whereas the procedure for collecting the amounts due is based on civil law.
Recovery pursuant to administrative law is more efficient and faster than recovery pursuant to civil law. This is because the State is generally able to obtain immediate enforcement of its payment claim on the basis of an administrative procedure. In civil law proceedings, obtaining the enforcement of a payment claim requires a court decision.
Thus, in France, recovery can be obtained by means of an immediately enforceable act ("acte exécutoire"), directly based on the Commission's negative decision.
In Spain the position is comparable to that in France. As a rule, administrative acts ("actos ejecutorios") are immediately enforceable.
Similarly, in Germany, the body seeking recovery can issue an administrative act ("Verwaltungsakt"), which can be declared immediately enforceable where "public interests" are at stake.
The same applies to a certain extent, to Italy.
Page 524
However, the administrative procedure aimed at ensuring that an enforceable decision is promptly made available in France is often frustrated. In fact, the administrative procedure in France follows the principle that every executory act is automatically suspended by an objection by the aid beneficiary. In France, this appears to be a major obstacle in securing the rapid implementation of a negative Commission decision.
In some cases, notably where there is a large number of recipients, recovery can be carried out through a legislative procedure (Maribel case in Belgium).
Under Article 14 of Regulation No. 659/99, a Member State must enforce a negative Commission decision by ordering recovery "without delay". This means that the Member State cannot await the outcome of court proceedings, either at Community or at national level. To comply fully with this obligation, authorities must, wherever possible, seek immediate enforcement of recovery claims under national law. At the same time, it must be ensured that aid beneficiaries cannot delay repayment of the aid through the misuse of national proceedings.
In the Selected Member States, immediate recovery of State aid is more likely to be effective in administrative proceedings than in civil law proceedings. In general, an administrative repayment order is, or can be made, immediately enforceable:
- in Germany, an administrative act ("Verwaltungsakt") can be made immediately enforceable where immediate execution is "in the public interest"; the beneficiary must apply for a court order to stop the enforcement process;
- in Italy, an administrative payment order is immediately enforceable. However, if the beneficiary seeks interim relief, a high threshold test, generally recognised in most Member States, must be met: (i) a prima facie case; and (ii) the risk of serious and imminent damage to the claimant's interests if interim relief is not granted;
- the same procedure applies in Spain, where the effects of an administrative act can be suspended if the conditions for interim relief are met; and
- a major obstacle to efficient recovery in this respect exists in France, where it is sufficient for a beneficiary to file an objection to an administrative recovery in order to frustrate the execution of the order (suspension).
The situation for interim relief is different where recovery is sought pursuant to civil law. In civil law proceedings, the Member States authority seeking repayment will normally be the claimant that must apply for interim relief and support the application by evidence. In particular, this requires establishing urgency. It could be argued that Article 14 of Regulation No. 659/99 presupposes immediate repayment of the amount of aid. This could bePage 525 interpreted as imposing an obligation on the Member States to create procedures whereby immediate recovery can be ensured. Thus, it could be considered that establishing the condition of urgency may not always be necessary for a Member States' authority to apply for interim relief. However, it is not clear to what extent this would require a more fundamental reshaping of Member States' laws on civil procedure. In fact, by virtue of the principle of supremacy of EC law, an adequate remedy should be provided by giving full effect to the provisions of Article 14 of Regulation No. 659/1999 (and to the phrase "provided that"), which emphasise that national procedures should not prevent immediate and effective recovery. National courts should be encouraged to set aside any national procedural rules which render an efficient recovery procedure ineffective. The authors of the study have not found any evidence of interim relief being obtained by a Member State in civil law recovery proceedings.
- Legitimate expectations, as a means of preventing recovery, have been an issue particularly in Germany. The German Administrative Law Act specifically provides that an act whereby a sum of money is granted cannot be revoked, even if the aid granted was illegal and if the recipient of the money has relied on the validity of the act. This provision of the German Administrative Law Act served as part of the argument relied on by the beneficiary in the Alcan case21. The ECJ ruled that domestic law must be applied in such a manner as to preserve the effet utile of the Commission's recovery decision. Domestic follow-up litigation in the Alcan case in Germany resulted in a final decision by the Federal Constitutional Court which, in February 2000, rejected the constitutional claim raised by the aid recipient and paved the way for recovery of the aid. Since 2000, there have been no further cases in which the principle of the protection of the legitimate expectations of the beneficiary has been relied on successfully. To apply this principle, the beneficiary of State aid will always be required to ascertain whether the aid has been properly notified to, and approved by, the Commission.
The situation in the other Selected Member States is similar:
- in France, the principle of legitimate expectations is not one of domestic law, but can be applied only in an EC law context; there is no evidence of cases in which beneficiaries have successfully relied on this principle before the French courts;
- in Belgium, the national courts will expect beneficiaries to verify whether the aid has been notified and approved; and
- in Italy and Spain, legitimate expectations are either (i) not a ground for refusing to repay aid or (ii) not recognised as a domestic legal principle.
Page 526
The Commission has dealt with a number of cases in which recovery had to be sought in the context of insolvency. In this regard, one particularly large category of cases is represented by certain unsuccessful privatisation projects in Germany's New Federal States ("Neue Länder").
Typically, the issues arising in insolvency proceedings relate to (i) preferential treatment of recovery claims and (ii) participation in a restructuring plan.
- In Italy and Spain, claims for repayment by the government are usually treated as preferential claims in insolvency proceedings. In these countries, it appears that, where the claim is based on administrative law, preferential treatment may also be available to State aid recovery claims.
- In Germany, the distinction between preferential and non-preferential claims has been abolished. The law distinguishes only between ordinary and subordinate claims. Some court decisions have clarified that State aid recovery claims are not subordinate, even in situations where a claim by a private party would have been subordinate (capital injections or the grant of a loan by a shareholder).
Restructuring plans in insolvency proceedings are a relatively new phenomenon in Europe. The question is to what extent the State can waive, as part of such a restructuring plan, part of a claim for repayment of aid in order to secure the continued existence of the insolvent business. The study (in particular, the section on Germany) suggests that there are a number of legal issues that need to be clarified between the Commission and the Member States.
Page 527
| . | | | | | |
| | * Federal or regional government that granted the aid * Other public entities that granted the aid * No central Monitoring | * Ministry of finance or other ministries * Local autorithies where ais granted by local entities * Recovery monitored centrally by Ministry of finance | * Federal government, Federal State's government municipality, or other public body depending on who granted de aid * Central monitoring and control by Federal Ministry of finance | * Central government, local governments and other public bodies depending on who granted the aid * No central monitoring | * Central government, local authorities or other public entities depending on who granted the aid * Ministry of Foreing Affairs as channel to the Commission |
| | * Recovery decision under administratives law * Followed by recovery based on civil law only * Recovery of aid granted by estatute by amending statute | * Administrative law where aid granted by public law act * Civil law where aid granted through civil law transaction | * Administrative law where aid granted by public law act; recovery generally pursuant to a negative administrative act * Civil law where aid granted through civil law transaction; underlying transaction null and void (section 138 Civil Code); recovery pursuant to | * Administrative law where aid granted by public law act or other public law measure * Civil law where aid granted through civil law transaction (no published case law); underlying contract null and void | * Repayment of State aid pursuant to Law No. 38/2003 * Recovery orders based on supremacy of EC law * In appropriate cases recovery by means of individual administrative acts ('orden foral') * Civil law where aid granted through prívate law transaction: nullity of prívate act based |
Page 528
| . | | | | | |
| . | . | . | provisions on unjust enrichment | * Recovery of aid granted by statute by amending statute | on Article 6 (3) of Civil Code; recovery pursuant to rules on unjust enrichment |
| | * Civil law recovery procedure before civil courts: Debt recovery procedure, i.e. letter of formal notice to the debtor and action before civil courts if failure to comply with formal request | * Administrative procedure: Recovery by means of an executory act which beneficiary can challenge before administrative court to avoid execution * In rare civil law cases, court action before ordinary civil courts | * Negative administrative act must be challenged by beneficiary before administrative court in order to avoid immediate execution * In civil law cases, payment action against beneficiary before ordinary courts | * Administrative procedure: Recovery generally by means of an administrative act which must be challenged by the aid beneficiary before the administrative courts to avoid execution. Ordinary court action against beneficiary, if does not fulfill repayment obligation * In civil law cases, ordinary court action against beneficiary | * Administrative procedure: Recovery by means of an administrative act in the form of a claim for payment addressed to the beneficiary; other administrative means to enforce payment of debts * In civil law cases, payment action against beneficiary before ordinary courts |
Page 529
| . | | | | | |
| | * Civil law procedure: Conditions to be met by State to be granted interim relief (high standard): - (i) urgency; - (ii) prima facie case; and - (iii) serious and imminent damage | * Administrative procedure: In principle, action against administrative act has no suspensory effect; however suspensory effect where order for recovery challenged by means of an opposition to execution ('opposition a execution') * Civil law procedure: Conditions to be met by State to be granted interim relief (high standard): - (i) urgency; - (ii) prima facie case; and (iii) difficulties that could hinder the recovery process. | * Administrative procedure: No suspensory effect of action where immediate execution in the 'public interest': immediate recovery of aid generally enforceable * Civil law procedure: Conditions to be met by State to be granted interim relief (high standard): - (i) urgency; - (ii) prima facie case; and - (iii) serious and imminent harm. | * Administrative procedure: In principle, high standards to be met for interim relief where administrative acts are challenged: - (i) prima facie case; and - (ii) danger of serious and imminent damage to the claimant's interests * Civil law procedure (no case law): Conditions to be met for interim relief are the same as those applicable to administrative procedure. | * Administrative procedure: Administrative act may be suspended; courts reluctant to grant interim relief on the grounds that negative Commission decision is challenged before Community courts; conditions to be met by State to be granted interim relief: - (i) prima facie case; and - (ii) danger of serious and imminent damage * Civil law procedure: Conditions to be met for interim relief are the same as those applicable to administrative procedure |
Page 530
| . |
|
|
|
|
|
|
| * Generally not: beneficiary must verify compliance with Article 88 EC procedure | * Not a principle of French public law; only applicable in a European context | * Generally not: beneficiary must verify compliance with Article 88 EC procedure * Exceptional circumstances may be established | * Generally not (no case law) | * Generally not * Exceptional circumstances, within the meaning of Community courts' case law may be established |
| | * State is not a preferential creditor * Participation in a programme of judicial composition ('concordat judiciaire'/ ' gerechtelijk akkoord') possible. This permits debtor to restructure by temporarily suspending rights of creditors. | * Participation in restructuring plan possible | * State is a normal creditor (category of preferential creditors abolished by 1999 Insolvency Act) * Repayment of capital injections and shareholder loans by State treated as ordinary claims (not subordinate) * Participation of State in insolvency plan ('Insolvenzplan') possible under domestic law; details for purpose of State aid recovery unclear | * State may be a preferential creditor depending on the source of its claim (tax claims are in general privileged) | * State may be a preferential creditor |
Page 531
| . |
|
|
|
|
|
|
| * Federal or regional government that granted the aid * Other public entities that granted the aid * No central monitoring | * Ministry of Economics and Finance or other Ministries * Local authorities where aid granted by local entities * Recovery monitored centrally by Ministry of Finance | * Federal government, government of a Land, municipality, or other public body depending on who granted the aid * Central monitoring and control by Federal Ministry of Finance | * Central government, local governments and other public bodies depending on who granted the aid * No central monitoring | * Central government, local authorities or other public entities depending on who granted the aid * Ministry of Foreign Affairs as channel to the Commission |
|
| * Recovery decision under administrative law * Followed by recovery based on civil law only * Recovery of aid granted by statute through amending statute | * Administrative law where aid granted through public law act * Civil law where aid granted through civil law transaction * Recovery of aid granted by statute through amending statute | * Administrative law where aid granted through public law act: annulment of the initial act; recovery generally pursuant to a negative administrative act * Civil law where aid granted through civil law transaction: underlying transaction null and void (Section 138 Civil Code); recovery pursuant to provisions on unjust | * Administrative law where aid granted through public law act: annulment of the initial act or other public law measures * Civil law where aid granted through civil law transaction (no published case-law): underlying contract null and void; recovery also pursuant to provisions on unjust enrichment * Recovery of aid | * Repayment of subsidies pursuant to Law 38/2003 * Recovery orders based on primacy of EC law * In appropriate cases recovery by means of individual administrative acts (orden for at) * Civil law where aid granted through private law transactions: nullity of private acts based on Art. 6.3 of Civil Code; recovery |
Page 532
| . |
|
|
|
|
|
| . | . | . | enrichment | granted by statute through amending statute | pursuant to rules on unjust enrichment |
| | * Civil law recovery procedure before civil courts: Debt recovery procedure, i.e. letter of formal notice to the debtor and action before civil courts if failure to comply with formal request | * Administrative procedure: Recovery by means of an executory act which beneficiary must challenge before administrative court to avoid execution * In rare civil law cases, court action before ordinary civil courts | * Negative administrative act must be challenged by beneficiary before administrative court in order to avoid immediate execution * In civil law cases, payment action against beneficiary before ordinary courts | * Administrative procedure: Recovery generally by means of an administrative act which the aid beneficiary must challenge before administrative courts in order to avoid execution of the administrative act. It may be necessary to resort to ordinary action against beneficiary, should it not fulfill its repayment obligation. * In civil law cases, ordinary action against beneficiary | * Administrative procedure: Recovery by means of an administrative act in the form of a claim for payment addressed to the beneficiary; any other administrative means to enforce payment of debts * In civil law cases, payment action against beneficiary before ordinary courts |
Page 533
| . |
|
|
|
|
|
|
| * Civil law procedure: Conditions to be met for State to be granted interim relief (high standards): - (i) urgency; - (ii) prima facie case; and - (iii) serious and imminent harm | * Administrative procedure: In principle, action against administrative act has no suspensory effect; however suspensory effect where order of recovery challenged by means of an opposition to execution ('opposition a execution') * Civil law procedure: Conditions to be met for State to be granted interim relief (high standards): - (i) urgency; - (ii) prima facie case; and (iii) difficulties that could hinder the recovery process. | * Administrative procedure: No suspensory effect of action where immediate execution in the 'public interest': immediate recovery of aid generally enforceable * Civil law procedure: Conditions to be met for State to be granted Interim relief (high standards): - (i) urgency; - (ii) prima facie case; and - (iii) serious and imminent harm | * Administrative procedure: In principle, high standards to be met for interim relief where administrative acts are challenged: - (i) prima facie case; and - (ii) danger of serious and imminent damages to the plaintiffs interests * Civil law procedure (no case-law): Conditions to be met for interim relief are the same as in the administrative procedure | * Administrative procedure: Administrative act may be suspended; courts however reluctant to grant interim relief on the grounds that negative Commission decision has been challenged before the European courts; conditions to be met for State to be granted interim relief: - (i) prima facie case; and - (ii) danger of serious and imminent damages * Civil law procedure: Conditions to be met for interim relief are the same as in the administrative procedure |
Page 534
| . |
|
|
|
|
|
|
| * Generally not: beneficiary must ascertain compliance with Article 88 EC procedure | * Not a principle of French public law; only applicable in a European context | * Generally not: beneficiary must ascertain compliance with Article 88 EC procedure * Exceptional circumstances may be established | * Generally not (no case-law) | * Generally not * Exceptional circumstances, within the meaning of European courts' case-law may be established |
|
| * State is not a preferential creditor * Participation in a programme of judicial composition (concordat judiciaire/ gerechtelijk akkoord) possible. This permits debtor to restructure by temporarily suspending the rights of creditors. | * State may be a preferential creditor * Participation in restructuring plan possible | * State is a normal creditor (category of preferential creditors abolished by 1999 Insolvency Act) * Repayment of capital injections and shareholder loans by State treated as ordinary claims (not subordinated) * Participation of State in insolvency plan (Insolvenzplan) possible under domestic law; details for purposes of state aid recovery unclear | * State may be a preferential creditor depending on the source of its claim (tax claims are in general privileged) | * State may be a preferential creditor |
Page 535
Based on the information available to us, we have been unable to assess whether Member States' discipline in recovery cases has improved or deteriorated over the past few years. In general, it seems fair to say that Member States appear to be paying more attention to recovery than some ten years ago. There is evidence of swift and efficient recovery in some of the largest and most complex State aid cases in recent years (EDF case, Landesbanken case). The perceived excessive length of recovery proceedings is a recurring theme in all country reports. There are various factors that must be considered when assessing the length of proceedings, not all of which are in the control of the Member States:
Basic questions regarding the body responsible for recovering the aid, identification of the aid beneficiary, and the exact amount of the aid often lead to delays in the implementation of negative Commission decisions. It is the body originally granting the aid that must seek its recovery. Thus, depending on the circumstances, a number of different governmental entities may be involved in the process of recovery. A particularly telling example of how the involvement of different administrative players can delay recovery is the Beaulieu case in Belgium, where recovery took more than fifteen years from the date of the Commission decision.
We would suggest that:
* delays due to questions concerning the identity of the appropriate body for recovering the aid can be avoided by nominating the body in charge of recovery proceedings at the outset. The Member State should be invited to inform the Commission of the various governmental and administrative bodies involved in the recovery process within the two-month time limit granted for implementing a negative Commission decision. This recommendation has been included in our suggested best practice guidelines (section 3.3).
Similarly, in some recovery cases both (i) the identity of the party from whom recovery must be sought under national law; and (ii) the exact amount of the aid to be recovered have been a controversial issue. Difficulties relating to the identity of the beneficiary often arise where all of the assets of the beneficiary have been transferred to a third party. Difficulties relating to the amount of the aid most often arise in cases where the Commission fails to specify the exact amount of the aid to be recovered, including interest, in its negative decision.
* Again, both difficulties could be avoided if the relevant issues were clarified from the outset (although established case law allows the Commission not to address these issues). We have inserted a corresponding item in our proposed list of best practices.
Page 536
Most country reports have identified the question of the determination of the applicable national laws as a problem area. This applies, in particular, to cases where it is not clear whether recovery should be effected pursuant to administrative or civil law.
Where the purpose is to secure immediate enforcement of a negative Commission decision, it is preferable to resort to administrative law proceedings, in which the State can order immediate repayment. However, Article 14 of Regulation No. 659/99 clearly provides that recovery must be effected pursuant to the laws of the Member States, and the distinction between administrative and civil law, in most Member States, is embedded in legal tradition. Thus, it will not be possible to provide that recovery must, in each and every case, be effected pursuant to the Member States' rules of administrative law.
* At the very least, the Member State should be invited to clarify on or before the commencement of every recovery procedure (i.e. within the two-month time limit for implementing the decision) whether recovery will be governed by administrative or civil law. If civil law is chosen, the Commission may inquire about the underlying reasons for this choice.
We have inserted a corresponding item in our suggested list of best practices.
In the country reports and section 3.1, we describe to what extent national authorities dispose of the means to seek immediate enforcement of an order for repayment of illegal aid. Generally, where aid is recovered pursuant to administrative law, it is easier to secure immediate enforcement, as opposed to when civil law procedures must be followed.
There may be questions as to whether the French practice of providing for suspensory effect where an administrative appeal (opposition) has been filed by the beneficiary is compatible with EC law. Similarly, it could be considered whether Member States should have a general obligation to provide for immediate enforcement, even where civil law rules apply.
Based on our review, we believe that the law in this area is in flux and that it may be worthwhile to await further court decisions both at the national and at the Community level.
* In order to avoid misunderstandings, however, the Commission, as a rule, should consider asking the Member State, at the outset of the recovery procedure, how the Member State will ensure immediate enforcement of the recovery decision that it will have to obtain under its national law.
We have inserted an item to this effect in the best practice list.
Page 537
Another group of cases in which recovery appears to take a very long time is where the substance of the negative Commission decision has been challenged in court. There is evidence that these delays are caused both by litigation before the European courts in Luxembourg and before the national courts. Whereas we have not found any published decisions of national courts actually setting aside or willfully ignoring a Commission decision, the length of proceedings involving national court actions suggests that some acceleration may be achieved by clarifying the rules (possibly in a notice):
(i) where the underlying Commission decision has been challenged before the European courts, the national court should be allowed to stay its proceedings only if immediate implementation of the Commission decision threatens the financial survival of the aid recipient (i.e. in practice, where the claimant has requested and obtained suspension of execution of this decision before the President of the CFI). The authors find that alternative approaches are incompatible with the principle of supremacy of EC law; in addition, one could argue that, where the Commission decision is challenged only as to its compatibility assessment (and not as to the existence of an aid, by definition unlawful), there should be no logical reason for a judge to stay the proceedings; and
(ii) where there is no such immediate risk, the national court must fully enforce the Commission decision without a stay, even if an action for annulment of such decision is still pending before the European courts.
In particular, it is necessary to clarify the rules on when the national judge can stay its proceedings pending an action for annulment against the underlying Commission decision in Luxembourg. The Oberlandesgericht Dresden in Saxonia and the Italian courts in a number of cases granted stays of their proceedings and thereby deprived the Commission decision of its immediate effect. Arguably, a suspension without appropriate interim measures to secure the ultimate enforcement of the recovery claim violates Article 242 EC. In any event, national courts will benefit from a clarification of the rules on the stay of their proceedings.
Finally, there is a last group of cases where the decision challenged is the national recovery order only, but without contesting the legality/validity of the negative Commission decision. In this case, where the Commission decision has not been challenged, any challenge of the national recovery order has the effect of delaying the implementation of the negative Commission decision. This delay may be contrary to the principle of supremacy of EC law if the argument on which the challenge is based should have been raised against the Commission decision.
There is some evidence that, in systems where aid recovery at national level is not effected through a single agency, there will be some delays and inefficiencies.
Page 538
This is, of course, particularly true in systems where aid has been granted by the regional government and the central government, the Commission's counterpart, which have no power to enforce a negative decision concerning aid granted at regional or local level. This appears to be the case particularly in Spain. Obviously, under EC law, the absence of national provisions to secure enforcement at regional or local level does not relieve the Member State of its recovery obligation.
* As a procedural point, however, consideration should be given to providing the Commission with direct access to regional and local authorities that must act in order to secure recovery. This might even be extended to the aid recipient.
More direct contact between the Commission and those who must take action to recover aid will limit both misunderstandings and the repetition of questions asked by the Commission to the Member States.
Based on our review, we have not found any cases where a national authority has openly acted in bad faith in seeking to recover aid pursuant to a negative Commission decision (despite significant delays in certain cases). Nevertheless, there are a number of factors indicating that there does exist an inherent conflict of interest for a Member State that is asked to recover aid that it previously granted: the length of recovery proceedings, the protracted procedures that are often used, and the extensive efforts required by the Commission to secure recovery, and particularly in those cases where the Member State has challenged a negative Commission decision in court.
An example of the inherent conflict of interest surfacing in court proceedings is reflected in the first instance judgment involving Hamburger Stahlwerke (Germany). In this case, the Landgericht Hamburg clearly stated that both the claimant and the defendant took the view that the underlying Commission decision was illegal. It is clear that this did not fail to make an impression on the court. A similar situation occurred in the Scott Paper case (France), in which both the beneficiary and the local authorities granting aid -although issuing recovery orders immediately suspended by objections -challenged the decision before the CFI. Conversely, also in France, the EDF case is an example: aid was fully reimbursed a few days following the national recovery order, before the beneficiary challenged (supported by the State) the Commission's decision before the CFI.
(i) This issue and other delays in recovery proceedings could be avoided if the Commission was given an active role in national recovery procedures. This could be achieved by making the Commission an amicus curiae in a similar way as under Regulation No. 1/2003. Since the number of contentious State aid recovery cases is limited, it would be possible for the Commission to take an active role in each recovery case. To be efficient, this amicus curiae status should allow the Commission to take the position of an "intervening party" in the national procedure.
Page 539
(ii) Another means of overcoming the inherent conflict of interest of a Member State, in particular in cases where the Commission's negative decision has been challenged, would be to entrust the recovery measures to independent agencies at Member State level. This would ensure that recovery progressed, regardless of whether the Member State itself still had (sometimes legitimate) doubts about the legality of the underlying Commission decision.
One possibility would be to allocate this task to the national competition authorities of the Member States ("NCA"), provided that they have the required degree of independence.
An alternative would be to place the recovery process in the hands of those government agencies that must supervise the budget. The attractiveness of this alternative is that it would result in, to a certain extent, a reversal of the conflict of interest: the government agencies responsible for supervising the budget are most likely to vigorously pursue claims for the repayment of amounts from aid recipients.
-
Identify the administrative body that must recover the aid. Give Commission access to that body.
-
Identify the beneficiary, taking into account the transfer of assets pursuant to Seleco/Banks case law.
-
Calculate and communicate immediately to Commission the exact amount of aid to be repaid, including interest, based on Commission decision.
-
Identify whether recovery should be effected pursuant to an administrative or civil law procedure. Where the underlying transaction is not clearly a civil law transaction, then use administrative procedure.
-
Administrative procedure
5.1 Issue executory administrative act.
5.2 Declare an administrative act immediately enforceable.
-
Civil law procedure
6.1 Set a time limit of one month for payment by the aid beneficiary. If no payment within time limit, seek immediate court action for payment before competent court of Member State.
6.2 Seek interlocutory relief where grant and/or use of aid would lead to serious distortion of competition (i.e. provisional recovery).
Page 540
-
Insolvency
7.1 Apply for registration of recovery claim with trustee.
7.2 Where trustee in bankruptcy does not recognise recovery claim, seek immediate action for declaratory judgment by the government.
-
No stay of any national proceedings at any stage merely based on challenge of underlying negative Commission decision before Community courts.
-
Provide copies of all briefs filed by parties in national proceedings to the Commission.
---------------------------------------
[21] Case 94/89, Commission v Germany [1989] ECR 175.
