State aid: Commission publishes study on national enforcement of state aid rules

Friday, April 7 2006

The European Commission has published the findings of a study reviewing the enforcement of EU state aid rules at national level.

On the one hand, the study confirms that companies increasingly rely on state aid law to defend themselves before national courts against financial burdens imposed on them by the state. On the other hand, companies rarely use state aid rules as an instrument to challenge the distortion of competition caused by unlawful subsidies granted to competitors.

The study also concludes that Member States should speed up the implementation of the Commission's recovery decisions. All too often, excessively long administrative and judicial procedures at national level result in unacceptable delays in the recovery of illegal aid.

Competition Commissioner Neelie Kroes i said: "National courts have an important role to play in protecting the rights of companies that suffer from the granting of illegal aid to their competitors. I very much welcome the sharp increase in the number of private actions before national courts in state aid cases."

In 2005, the Commission launched a study on the enforcement of EU state aid rules at national level. The study addressed two main questions: the role of national courts in protecting companies against the granting of illegal aid to their competitors and the execution of the Commission's recovery decisions by Member States. The study covers only the EU-15 Member States. The national courts in the EU-10 Member States apply EU state aid law only since accession on 1 May 2004. The study was carried out by an international consortium of leading legal experts from the EU-15 Member States.

The role of national courts

The study confirms that national courts play a key role in enforcing EU state aid rules. The number of published state aid judgements has more than tripled since 1999 (from 116 to 357). This demonstrates a growing awareness of state aid law at national level, both within the business community and in the legal professions. Germany, Italy and France are the Member States with the highest number of published state aid judgements.

In the vast majority of these cases, private parties used the state aid rules as a means of defence against charges imposed on them and not to attack a competitor or a Member State. More than 50% of the judgements concern cases in which taxpayers defended themselves against the allegedly discriminatory imposition of a tax burden. In 12% of the cases, the beneficiary disputed an obligation to reimburse unlawful state aid. Court actions of competitors against a Member State account for 19% of the judgements.

In only 6% of the cases, national courts had to decide on the granting of allegedly illegal state aid in actions filed by a competitor against a beneficiary However, by the end of 2005, there has not been a single judgement of a national court awarding damages to a competitor.

The study demonstrates that national enforcement of state aid rules has significantly increased over the last years, but is primarily invoked in a defensive way. Private actions remain very rare.

Implementation of recovery decisions

The study finds that the implementation of the Commission's recovery decisions by the Member States has improved in recent years but that there is considerable room for further improvement in this area. In particular, the duration of national recovery proceedings remains excessively long in far too many cases. Several shortcomings of the procedural framework at national level contribute to a delayed recovery of unlawful state aid. For instance, when the aid granting authority is also competent for the recovery it often lacks the motivation to claim back the aid it has unlawfully granted. Furthermore, there is still widespread uncertainty in many Member States about the legal basis for recovery under national law. National courts also tend to suspend national recovery proceedings when the recovery decision is challenged before the Community courts.

The findings of the study will be discussed at an international conference on 22nd June 2006 in Brussels. The conference is organised by the Academy of European Law (ERA). For more information on the conference: www.era.int/stateaidenforcement

The final report of the study can be found at:

http://europa.eu.int/comm/competition/state_aid/others/