Recalling the extensive EU case law, the CJEU reformulated these questions in order to provide the referring court with a useful answer to consider ‘whether the State guarantee may be classified as ‘State aid’ within the meaning of Article 107(1) TFEU and, if so, whether it was subject to the obligation of notification laid down in Article 108(3) TFEU and, if appropriate, what are the consequences arising from the failure to fulfil that obligation.’
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Existence of Aid and Selectivity
The Court first ascertained that the State guarantee could constitute State aid within the meaning of Article 107(1) (paras 41-42) and that, because the 2001 Decree provides that it is for the credit insituttions to implement that decree and benefit from the State guarantees, there appears to be exclusivity ‘favouring certain undertakings or the production of certain goods’ (para 48) even if it covers the whole economic sector and also favours recipients who are not credit instiutions (ie those benefiting from the housing aid) (paras 49-50). Reggards the extension of the decree in 2008 to allow other economic operators to implement it, it is for the referring court to determine if this calls into question the selective nature of the aid (para 52).
Effect on Trade between MS
Recalling Case C-148/04 Unicredito Italiano, the CJEU noted that that the State guarantee ‘enables the credit institutions to conclude loan agreements without having to assume the financial risk’ meaning they do not have to assess the solvency of borrowers or provide a guarantee fee. Borrowers will also usually request additional banking services from such institutions, which confers an advantage as it increases the number of clients and consequently their revenue (para 57). As to the effect on inter-State trade, the Court underlined that this strengthening through the State guarantee ‘makes it more difficult for operators established in other Member States to penetrate the Hungarian market’. Prima facie there is therefore State aid within the meaning of Article 107(1), although ‘it is for the referring court to ascertain more specifically the selective nature of such a guarantee by determining, in particular, whether, following the amendment of the Decree of 2001 which is supposed to have taken place in 2008, that guarantee may be granted to economic operators other than credit institutions and, in the affirmative, whether that fact may call into question the selective nature of that guarantee’ (para 59).
Categorisation as New/Existing Aid and the Need for Prior Notification
In order to determine the lawfulness of this (presumed) aid, the Court then turns to the question of whether the guarantee was subject to the notification procedure laid down in Article 108(3) TFEU, ie whether it constitutes new or existing aid. The Decree of 2001 was not notified to the Commission as existing aid at the time of accession and must therefore be considered as new aid and subject to the obligation of prior notification. ‘It is for the referring court to verify whether the Member State concerned has complied with that obligation and, if that is not the case, to declare that guarantee unlawful’ (para 68).
If there is indeed an infringement of Article 108(3) TFEU, ‘it is for the national courts to draw the necessary conclusions […]with regard to both the validity of the acts giving effect to the aid and the recovery of financial support granted in disregard of that provision’ (para 69). Except in exceptional circumstances, unlawful aid will be removed by a recovery order to eliminate the distortion of competition and the competitive advantage; in this case the CJEU can see no such exceptional circumstances and so in this situation the MS is bound to order the repayment as per the national law (paras 72-73).
The Court noted that the Commission alone can determine if the State guarantee is compatible with the Treaty and if it can benefit from the exemption on aid having a social character laid down in Article 107(2)(a) TFEU. Nonetheless if a future decision of the Commission in this respect did find the guarantee compatible, the national court must still order the recovery of that State aid: ‘If the direct effect of the last sentence of Article 108(3) TFEU is not to be compromised or the interests of individuals, which are to be protected by national courts, are not to be disregarded, the Commission’s final decision does not have the effect of regularising ex post facto the implementing measures which were unlawful by reason of their having been adopted in continuation of the prohibition laid down by that article. Any other interpretation would encourage the Member States to disregard the prohibition laid down in the last sentence of Article 108(3) TFEU and would deprive it of its effectiveness’ (para76).
No Remedies for Beneficiaries under EU Law
Lastly, the Court underlined that the beneficiaries of the State guarantee ‘may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure laid down in that article and, second, a diligent economic operator should normally be able to determine whether that procedure has been followed. In particular, where aid is implemented without prior notification to the Commission, so that it is unlawful under Article 108(3) TFEU, the recipient of the aid cannot have at that time a legitimate expectation that its grant is lawful’ (para 77)
The CJEU responded to the preliminary ruling questions that (1) the State guarantee granted exclusively to credit institutions prima facie constitute ‘State aid’. It is for the referring court to ascertain more specifically the selective nature of such a guarantee by determining, in particular, whether, following the amendment of the Decree of 2001 which is supposed to have taken place in 2008, that guarantee may be granted to economic operators other than credit institutions and, in the affirmative, whether that fact may call into question the selective nature of that guarantee; (2) if the referring court classifies the State guarantee at issue in the main proceedings as ‘State aid’ within the meaning of Article 107(1) TFEU, such a guarantee must be regarded as new aid and is, on that ground, subject to the obligation of prior notification. It is for the referring court to verify whether the MS concerned has complied with that obligation; (3) the beneficiaries of an State guarantee granted without regard for Article 108(3) TFEU do not have any remedies available in accordance with EU law.
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