EU State Aid Law: New Draft Communication on State Aid

On January 28, 2014, the EU Commission published a draft of a new communication. This primarily serves to clarify and concretize terminology and funding instruments in the various EU communications, including the EU Framework for Research, Development and Innovation (R&D&I). The new EU framework is scheduled to enter into force on July 01, 2014.

Current EU framework partially unclear

The EU framework for state aid already contains, in its current version, provisions on the assessment by Member States of the financing of important projects of common European interest. When this will be the case, however, currently depends on the respective individual decision of the EU Commission and can therefore not be reliably determined in advance by the funding agencies at the level of the individual EU member states.

The new Communication aims to remedy this situation by first extending the scope to all sectors of the economy. It also explains the criteria that the Commission will apply in its EU state aid assessment of these projects. Finally, the communication contains provisions for the procedural treatment of such projects. Exceptions to eligibility relate, among other things, to aid measures that restrict the possibility of exploiting research results in other EU member states.

Examples of the new compatibility criteria

In order to reduce the administrative burden and to facilitate the assessment of the financing of such projects by the Member States, the draft Communication provides for the possibility that the Member States concerned jointly notify the project to the Commission for approval. With the adoption of the new Communication, the provisions contained in the EU Framework on State aid for the above projects will be replaced. The draft notice is currently in the consultation process. Comments can be submitted to the EU Commission until February 28, 2014.

EU State Aid Law: No Binding of National Courts on Subsequent Statements by the EU Commission

In its ruling of February 13, 2014, the European Court of Justice ruled that national courts are not bound by subsequent Commission opinions when implementing decisions of the EU Commission. However, national courts are required to take into account these subsequent opinions on the unlawfulness of measures in accordance with the principle of loyal cooperation.

The case to be decided concerned a grant of state subsidies by the member state Italy to users of digital television. Users who bought or rented equipment due to the switchover to digital transmission of television signals were to receive subsidies. Following complaints from two competitors, the EU Commission declared the Italian subsidy scheme in the budget laws to be incompatible with the internal market and demanded that Italy recover the aid, including accrued interest, from the beneficiaries.

Subsequent correction of the amount to be repaid by the beneficiary of the aid

The method used by Italy to determine the beneficiary users and the specific amount to be recovered in each case has been approved by the EU Commission. In response to a payment order issued by the Italian authorities in 2009, the company concerned paid the repayment amount originally set, including interest, but appealed to the Tribunale civile di Roma as the competent national court, claiming that the assessment criteria set out in the EU Commission’s decision and the calculations carried out to determine the additional profits generated by the aid were incorrect.

The Italian court therefore addressed the ECJ with the question of whether it is bound by opinions issued by the EU Commission at a later date on the exact amount to be recovered from a specific beneficiary.

According to the ECJ, the implementation of state aid control methods is the responsibility of the EU Commission on the one hand and the national courts on the other, with the former having exclusive jurisdiction to assess the compatibility of aid with the internal market. Such a decision is therefore also binding on national courts. On the other hand, the EU Commission is not obliged to determine the exact amount of the reimbursement when ordering the repayment of unlawfully granted aid. Accordingly, the national court in the underlying case is also not bound by a subsequent opinion of the EU Commission on the amount of the refund.

Obligation of national courts to take Commission opinions into account

However, the ECJ emphasizes in its judgment that national courts must take all appropriate measures to fulfill the obligations under Union law. In case of doubt or significant difficulties in connection with the assessment of the amount of aid, the national court is obliged to turn to the EU Commission.

As far as the calculation of the actual recovery is concerned, the national court may also come to the conclusion that no repayments have to be made – provided that the EU Commission has neither commented on the group of beneficiaries nor on the aid to be reimbursed. However, this is only permissible if the national court, on the one hand, does not question the validity of the decision or the obligation to reimburse the aid as such. On the other hand, the calculations made specifically on the basis of all the facts come to the conclusion that the amount of repayment is equal to zero.