Introduction
Member States can, in theory, escape from the obligation to recover state aid that the Commission has found to be incompatible with the internal market if they can demonstrate that it is absolutely impossible. When they appear before the Court of Justice of the EU [CJEU] for failing to recover incompatible aid, they always claim but rarely succeed to prove absolute impossibility. The standard set by the CJEU is very high.
Similar claims of absolute impossibility were rejected on 13 November 2025 by the CJEU in its judgment in case C-632/23, Commission v Bulgaria.[1] The Commission had asked the CJEU to confirm that Bulgaria failed to recover incompatible state aid following Commission decision 2015/456. The Commission had concluded that swaps of forest land involved valuation at artificial prices that constituted state aid.
Sometime after the fall of communism in Bulgaria, the government decided to return confiscated forest land to the original owners. To facilitate this process, it also decided to swap state forest land for privatised forest land of equivalent value. The problem was that the value of the land was determined on the basis of a method laid down by the relevant law. Administrative prices did not correspond to market prices.
In order to comply with Commission decision 2015/456, the Bulgarian authorities engaged an independent expert – Agrolesproekt – to calculate the market price of the swapped plots of forest land. Initially the Commission consented to the use of Agrolesproekt’s services. However, when afterwards the Commission was informed by the Bulgarian authorities that Agrolesproekt was a public undertaking under the control of the Ministry of Agriculture, Food and Forestry, which was the state aid granting authority, it considered that Agrolesproekt was not independent and asked the Bulgarian authorities to re-examine all individual valuation reports prepared by Agrolesproekt and to calculate the correct amounts of state aid to be recovered. Later, Bulgaria claimed before the CJEU that that caused delay to the recovery process which was not its fault.
Recovery was also halted by numerous legal actions before national courts against the recovery orders of the authorities. Bulgaria also informed the Commission that there was no procedural or legislative mechanism for reopening or closing ongoing court proceedings. In fact, in one of those actions, the adjudicating local court submitted a request for a preliminary ruling, in case C‑325/22, Ministar na zemedelieto, hranite i gorite. The CJEU provided guidance on the identification of landowners that constituted undertakings and on the calculation of the amount to be recovered. That judgment was reviewed here on 4 December 2023. It can be accessed at: https://www.lexxion.eu/en/stateaidpost/the-concept-of-undertaking-and-land-valuation/
Regardless of those legal obstacles, the Commission considered that Bulgaria failed to recover the aid within the prescribed time period which ended on 5 September 2015.
The principle of effective recovery of incompatible state aid
The CJEU began its analysis by recalling that “(31) the Member State to which a decision requiring recovery of unlawful aid declared incompatible with the internal market is addressed is obliged, …, to take all measures necessary to ensure implementation of that decision. It must succeed in actually recovering the sums owed in order to eliminate the distortion of competition caused by the anticompetitive advantage procured by that aid”.
“(32) Under Article 16(3) of Regulation 2015/1589, the recovery of aid declared unlawful and incompatible with the internal market by a decision of the Commission must, …, be effected without delay and in accordance with the procedures under the national law of the Member State concerned, provided that they allow the immediate and effective execution of that decision, a condition which reflects the requirements of the principle of effectiveness laid down by the case-law of the Court … To that end, the Member States concerned are to take all necessary steps which are available in their respective legal systems, including provisional measures, without prejudice to EU law”.
“(33) Consequently, late recovery, after the periods have expired, cannot satisfy the requirements of the FEU Treaty. In that regard, it is clear from settled case-law that the reference date for the application of the second subparagraph of Article 108(2) TFEU is that provided for in the decision failure to implement which is denied or, where appropriate, that subsequently fixed by the Commission”.
As is well-known, the only defence for Member States is when it is “absolutely impossible” for them to recover the aid. In this respect, the CJEU pointed out that “(35) the condition relating to the existence of absolute impossibility is not satisfied where the defendant Member State merely invokes legal, political or practical difficulties which it encountered in implementing the decision concerned, without taking any real steps to recover the aid from the undertakings concerned, and without proposing to the Commission any alternative arrangements for implementing the decision which could have enabled those difficulties to be overcome”.
In other words, Member States must actually try to recover the aid, show what steps they have taken, and even when they exhaust all possible options, they must suggest alternatives to the Commission that enable them to recover at least part of the incompatible aid.
In this case, because the appointment of Agrolesproekt was made after the expiry of the prescribed period, the CJEU decided not to adjudicate on whether Agrolesproekt could act independently of the Ministry of Agriculture, Food and Forestry.
With the exception of transactions for which the aid involved was considered to be de minimis, the CJEU concluded that, “(58) as of 5 September 2015, as the Commission maintains, the Republic of Bulgaria had not, even partially, effectively recovered the State aid in accordance with Articles 4 and 5 of Decision 2015/456.”
Absolute impossibility?
Then the CJEU went on the examine and reject the arguments put forth by Bulgaria in its defence.
“(60) First, in so far as the Republic of Bulgaria argues that the period prescribed in Decision 2015/456 for its implementation was unreasonable, in so far as that argument amounts to an implicit plea that that decision is unlawful in the context of the present action, that argument must be rejected.”
“(61) A Member State cannot rely on the illegality of a decision as a defence against an action for failure to fulfil obligations based on the non-implementation of that decision, except where the decision must be regarded as non-existent. It is in the context of different proceedings, namely an action for annulment under Article 263 TFEU, that any challenge to the legality of such an act of EU law must be made … The Republic of Bulgaria has not brought an action for annulment of Decision 2015/456 and its arguments do not contain any evidence capable of calling into question the very existence of that decision.”
“(62) Furthermore, …, it is common ground that the Republic of Bulgaria did not request an extension of the period laid down in Decision 2015/456 for its implementation.”
“(64) Secondly, in so far as the Republic of Bulgaria maintains that it took numerous measures within the prescribed period, namely, in essence, the drafting of tender specifications for the selection of an expert to assess the market price of the swapped plots of forest land and the launch of tender procedures, the fact that, for the tender procedures organised in 2016 and 2017, it required 132 swap transactions to be examined and the market value of the swapped plots of forest land to be determined, the fact that it calculated the exact amount of aid received and that it issued recovery orders for that aid, it should be noted that, regardless of the actual date on which those measures were taken, none of them constitutes effective recovery of the amounts of State aid in accordance with Articles 4 and 5 of Decision 2015/456, since that decision implies an obligation to achieve a specific result”.
The CJEU also referred to an unusual feature of the Bulgarian policy of land swaps. After land was exchanged, Bulgaria prohibited construction on forest land. Some owners of forest land then claimed before local courts that because they could not build on their land, the value of the land declined and, at any rate, the aid did not support an economic activity. The CJEU rejected the latter claim in its judgment in case C-325/22, cited above.
The CJEU rejected the relevance of the claim that land had declined in value in the present judgment. The CJEU noted that the law prohibiting construction “(67) predate[d] the adoption of Decision 2015/456, since, after the Bulgarian authorities implemented a moratorium on changes in the use of swapped land in 2009, it was by means of a law adopted in 2011 that those authorities prohibited construction on that land.”
The CJEU added that “(68) since the decision by the public authorities to approve a change in the use of land received from the State was considered not to constitute State aid within the meaning of Article 107(1) TFEU in Decision 2015/456, no aid is to be recovered in that regard. Furthermore, the fact that it is not possible to build on land received from the State as a result of a forest land swap does not allow the conclusion to be drawn that the economic advantage which, according to Decision 2015/456, is derived from such a swap no longer exists.”
Therefore, what is relevant is the amount of aid received when land was swapped, not what happened to the value of the land afterwards when the construction prohibition was introduced.
Methods for calculating the amount of aid to be recovered
In decision 2015/456, the Commission indicated three methods that Bulgaria could use to determine the amount of aid to be recovered. The first method was simply the cancellation of the forest land swap transaction. The second method described how market prices could be identified. The third method allowed for the amount to be set by an independent expert.
The CJEU, first, noted that the Commission had given guidance to Bulgaria and then reiterated a well-established principle that “(92) the Commission, which was not required to quantify the aid to be recovered, was not, contrary to the Republic of Bulgaria’s contention, required to define, in Decision 2015/456 or at a later stage, either more specific criteria for assessing the market prices of the swapped forest land or a precise or approximate numerical value for the ‘real market price’.”
“(93) Since the Republic of Bulgaria argues that Agrolesproekt faced an objective impossibility, namely that of finding comparable transactions on the market in order to assess the market prices of the land swapped, it should be emphasised, first, that the possibility of using an expert to assess those prices, …, was not the only possible method of assessing the amount of State aid to be recovered, …, and, secondly, that, in so far as the assessment carried out by that expert was in accordance with that decision, that assessment did not have to be based on the other method … the decision to use an expert to assess those prices was … a decision by the Bulgarian authorities.”
Then the CJEU made an interesting statement. “(94) In that regard, it should be noted that, …, the expert could be a public undertaking and, as EU law and the Commission’s decision-making practice stand, the Republic of Bulgaria had no reason to disclose to the Commission the information that Agrolesproekt was a public undertaking controlled, in particular, by the Ministry of Agriculture, Food and Forestry.”
The CJEU reiterated that “(95) the difficulties cited by the Republic of Bulgaria in finding comparable transactions on the market in order to assess the market prices of the land swapped are of a practical nature and were known to that Member State, since it had informed the Commission of them during the administrative procedure, as stated in Decision 2015/456. … such difficulties do not allow the condition relating to the existence of an absolute impossibility of implementing Decision 2015/456 to be considered to be fulfilled in the present case.”
“(96) In so far as the Republic of Bulgaria relies on the existence of appeals before the national courts against the recovery orders issued, it should be noted that that Member State does not claim that measures have been taken, in the context of those proceedings, to ensure that the beneficiaries do not enjoy the aid in question, even on a provisional basis. Furthermore, the Republic of Bulgaria does not argue that the validity of Decision 2015/256 has been challenged in the context of such appeals.”
In other words, at minimum, the beneficiaries should have been ordered to put money in escrow accounts.
“(97) Therefore, …, those legal difficulties do not allow the conclusion to be drawn that, in the present case, the condition relating to the existence of an absolute impossibility of implementing Decision 2015/456 is satisfied.”
In response to the legal disputes concerning the calculation of the amount of aid, the CJEU referred to its previous judgment in case C-325/22 and pointed out that “(102) if a valuation method produces a result that deviates from the market value, the national court is required to disregard it by virtue of the obligation incumbent on all State bodies, including national courts, to set aside any rule of national law that is contrary to EU law.” And that “(103) it is for the Commission to demonstrate, by means of concrete and specific evidence, that the market price established by the Bulgarian authorities does not allow for the recovery of State aid in the context of the implementation of Decision 2015/456.”
Having rejected all the pleas of Bulgaria, the CJEU declared that Bulgaria failed to fulfil its obligation to recover the incompatible state aid.
[1] The full text of the judgment can be accessed at:
