ECJ ruling on the consequences of a formal EU state aid investigation for member states

If the EU Commission has opened a formal investigation into an EU state aid measure that is being implemented and has not been notified, a national court must issue orders to remedy a possible state aid infringement while the Commission proceedings are still ongoing. This applies when the national court is dealing with a competitor’s application for an injunction against this measure and for the recovery of payments already made.

In a legal dispute between an airline and the operator of an airport before the German civil courts, the European Court of Justice ruled on November 21, 2013, following a corresponding referral by the Higher Regional Court of Koblenz, that the courts of the Member States cannot simply suspend proceedings under EU state aid law until the European Commission has ruled on the aid in parallel proceedings.

Possible suspension of the aid measure

On the contrary, according to the ECJ’s legal opinion, national courts are obliged to take “all necessary measures to draw the consequences from a possible breach of the obligation to suspend the implementation of this measure” despite an ongoing investigation before the EU Commission in the same matter.

In concrete terms, this means: The national court which has been seized by a competitor of the potential aid recipient with the application for injunctive relief and/or recovery and damages must decide in the individual case that the parties to the aid measure must suspend the implementation of the measure at issue. Accordingly, for example, aid in the form of state grants must be provisionally discontinued and state guarantees may not be issued.

Recovery of aid granted in individual cases

In serious cases of (potential) damage to competition, the national court would even have to order the recovery of state funds already disbursed. In addition, the national courts are also required to issue interim measures if necessary. On the one hand, to safeguard the interests of the parties involved in the state aid measure and, on the other hand, to ensure the practical effectiveness of the opening of the formal state aid investigation procedure by the EU Commission.

In case of doubt as to the classification of the measure at issue as state aid, the national court may ask the EU Commission for further explanations. The same applies if the national court has doubts about the validity or interpretation of the decision to open the formal investigation procedure by the EU Commission. In such cases, the national court must refer the relevant question to the Court of Justice for a preliminary ruling.

Consequences for the aid practice

For the practice of EU state aid law, the new case law of the ECJ means a further tightening of EU state aid control: In the event of improper implementation of state aid, there is now a threat that the national courts will order suspension and recovery measures at the same time as formal investigation proceedings before the EU Commission. Until now, the latter had regularly waited for the outcome of the Commission’s investigation in state aid proceedings. Now they are required to already during the commission procedure – if necessary. to order drastic – measures. The parties involved in an improper granting of aid must therefore be prepared to be confronted with the corresponding consequences at a much earlier stage.