Introduction
The date on which State aid is deemed to have been granted is a critical issue when aid is found to be incompatible with the internal market and has to be recovered. It is also critical when an approved aid scheme expires after the application for aid is submitted but before the aid is granted.
On 3 July 2025, the Court of Justice of the EU [CJEU], in case C-653/23, TOODE SIA, provided an answer to a Latvian court concerning the interpretation of Article 107(1) TFEU and Article 1(b)(ii) of Regulation 2015/1589 [the procedural regulation] clarifying whether aid applied for but not granted before the expiry of a scheme could still be granted.[1] Article 1(b)(ii) defines the concept of existing aid.
TOODE applied for aid from a scheme that had been approved by the Commission under the then Temporary Framework to combat covid-19. However, the Latvian tax authorities refused to grant the aid to support TOODE’s working capital during the pandemic. The referring Latvian court wanted to know when State aid is deemed to be granted. The decision of the Latvian tax authorities to reject the aid application was appealed by TOODE and a Latvian court annulled the decision. Then, when TOODE became eligible for the aid, the approved aid scheme had had already expired. That created a problem. Could the aid be granted even though the scheme had expired, given that the aid application had been lodged when the scheme was still valid? The problem was compounded by the fact that under Latvian law, annulment of an administrative decision does not return the situation to the date on which the annulled decision was taken. In order to resolve this conundrum, the referring Latvian court asked the CJEU when aid is deemed to be granted and whether if the requested aid amount is actually paid after the expiry of an aid scheme, as a result of annulment of an administrative decision, the aid can be regarded as existing.
The interplay between EU and national rules
The CJEU began its analysis by noting, first, that the Latvian court asked in essence whether “(17) Article 107(1) TFEU must be interpreted as meaning that State aid under a national aid scheme authorised by the Commission must be regarded as having been ‘granted’, within the meaning of that provision, on the date on which the competent national authority unduly refused to confer the right to receive the aid on an individual that applied for the aid within the period laid down for granting it, where a judicial decision finds that refusal to be unlawful after the expiry of that period.”
Then the CJEU recalled that “(18) aid must be regarded as being ‘granted’, within the meaning of Article 107(1) TFEU, on the date on which the right to receive it is conferred on the beneficiary under the applicable national legislation. The decisive factor for establishing the date on which the right to receive State aid was conferred on its beneficiaries by a particular measure is the acquisition by those beneficiaries of a definitive right to receive that aid and the corresponding commitment, by the State, to grant that aid. It is on that date that such a measure is liable to distort competition and affect trade between Member States, within the meaning of Article 107(1) TFEU”.
“(20) In particular, the referring court must determine whether national law permits the view, in a situation such as that in the main proceedings, that the definitive right to receive the aid concerned must be deemed to have been acquired ex tunc [i.e. retroactively] on the date on which the competent authority should have acted lawfully, that is to say, on the date of the undue refusal issued by that authority, or whether, on the contrary, national law may be interpreted only as meaning that the refusal decision by that authority, even if it were declared unlawful, could not have given the applicant a definitive right to receive the aid.”
The CJEU observed that “(21) it is apparent from the explanations provided by the referring court that national law appears to be capable of being interpreted only in the latter sense”.
“(22) In the present case, […], in essence, the aid scheme at issue in the main proceedings set the time limit for granting the aid on the basis of the time limit set in the communication on the Temporary Framework and that that scheme was declared compatible with the internal market by decision of the Commission in the light, inter alia, of the fact that that time limit made it temporary. It follows that the application of that scheme constitutes an implementation of EU law, for the purposes of Article 51(1) of the Charter of Fundamental Rights of the European Union (‘the Charter’).”
“(23) Furthermore, the Court has previously noted that the application of the EU rules on State aid is based on an obligation of sincere cooperation between the national courts, on the one hand, and the Commission and the Courts of the European Union, on the other, in the context of which each acts on the basis of the role assigned to it by the Treaty […] In that regard, when there are no EU rules governing the matter, although it is for the domestic legal system of every Member State to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from EU law, the Member States are, however, to ensure compliance in every case with the right to effective judicial protection of those rights as enshrined in the first paragraph of Article 47 of the Charter […] Under the first paragraph of that Article 47, everyone whose rights and freedoms guaranteed by EU law are violated has the right to an effective remedy before a tribunal.”
The date on which State aid is granted
In light of the above explanation, the CJEU re-phrased the first question of the Latvian court as follows. “(24) In those circumstances, it must be held that, by its first question, the referring court asks the Court, in essence, whether Article 107(1) TFEU and the first paragraph of Article 47 of the Charter must be interpreted as precluding an interpretation of national legislation whereby individual aid under a State aid scheme authorised by the Commission cannot be regarded as having been ‘granted’, within the meaning of that provision of the TFEU, on the date on which the competent national authority unduly refused to grant it to an individual that applied for the aid within the period laid down for granting it, where a judicial decision finds that refusal to be unlawful after the expiry of that period.”
“(25) Since the outcome of interpreting Latvian law seems, […], to be that the aid at issue in the main proceedings may be deemed to be ‘granted’, within the meaning of Article 107(1) TFEU, only on the date of adoption of a beneficial administrative act pursuant to a judicial decision, it would not be possible to adopt such an act and, accordingly, to enforce that decision where, as in the present case, the time limit for granting the aid has expired during the judicial proceedings.”
“(26) Aid granted when the Commission’s authorisation for that aid is no longer in force must, on account of it being new aid, be notified to the Commission under Article 108(3) TFEU and may not be put into effect until the Commission has found it to be compatible with the internal market”.
“(27) It follows that the effectiveness of the right to a remedy guaranteed in the first paragraph of Article 47 of the Charter for an individual such as TOODE could not, […], be ensured, even if it were recognised by a judicial decision, following a full review of legality, that the applicant, which applied for the aid at issue, initially satisfied all the conditions for entitlement to that aid within the time limit set by the aid scheme concerned.”
As a result, the CJEU held that “(28) the enforcement of a judicial decision is an integral part of the right to an effective remedy, within the meaning of Article 47 of the Charter. That right would be illusory if the domestic legal system of a Member State were to allow a final, binding judicial decision to remain inoperative to the detriment of one party”.
“(29) Consequently, […], the first paragraph of Article 47 of the Charter, as a provision of EU law having direct effect, requires the national court to disapply national law that prevents the individual aid from being regarded as having been granted on the date of the refusal decision by the competent authority […] In those circumstances, the date on which that aid is deemed to have been ‘granted’, within the meaning of Article 107(1) TFEU, must correspond to the date on which the competent authority unduly refused to grant the aid to TOODE.”
Therefore, the CJEU concluded that “(30) Article 107(1) TFEU and the first paragraph of Article 47 of the Charter must be interpreted as precluding an interpretation of national legislation whereby individual aid under a national aid scheme authorised by the Commission cannot be regarded as having been ‘granted’, within the meaning of that provision of the TFEU, on the date on which the competent national authority unduly refused to grant it to an individual that applied for the aid within the period laid down for granting it, where a judicial decision finds that refusal to be unlawful after the expiry of that period.”
In other words, national rules cannot deprive undertakings from the rights that are protected by EU law.
Existing aid
The CJEU also re-phrased the second question of the referring court. “(32) That question must be understood as seeking to ascertain, in essence, whether Article 1(b)(ii) of Regulation 2015/1589 must be interpreted as meaning that individual aid deemed to have been granted on the date on which the competent authority unduly refused to grant the aid to an individual that applied for it within the period laid down for granting it, but paid to that individual pursuant to a beneficial administrative act adopted on the basis of an order in a judicial decision finding that refusal to be unlawful after the expiry of that period, must be classified as ‘existing aid’ within the meaning of that provision.”
“(33) In that regard, it should be recalled that Article 1(b)(ii) of that regulation provides that ‘existing aid’ is authorised aid, which includes aid schemes and individual aid which have been authorised by the Commission or by the Council. For its part, Article 1(c) of that regulation provides that ‘new aid’ means all aid schemes and individual aid, which is not existing aid, including alterations to existing aid.”
The CJEU further clarified that “(34) from the moment at which the definitive right to receive State aid is conferred on the beneficiary under the applicable national law, the aid must be deemed to be granted, with the result that the actual transfer of the resources in question is not decisive”.
“(35) It follows […] that, since State aid such as that at issue in the main proceedings is deemed to have been granted at a time when the Commission’s authorisation for that aid was in force, it must be classified as ‘authorised aid’ and, accordingly, as ‘existing aid’ within the meaning of Article 1(b)(ii) of Regulation 2015/1589, irrespective of the fact that it is paid after the aid scheme approved by the Commission ceases to be valid.”
“(36) It should be noted that, […], such an interpretation is not capable of distorting competition on the market. Since, […], it is on the date on which the definitive right to receive State aid was conferred that a measure is likely to distort competition in a way that could affect trade between Member States, within the meaning of Article 107(1) TFEU, the payment of aid such as that at issue in the main proceedings after the expiry of the aid scheme concerned places the applicant for the aid in the situation in which it should have found itself if the competent authority had acted lawfully, and thus makes it possible precisely to restore the competitive balance on the market.”
The CJEU concluded that “(37) Article 1(b)(ii) of Regulation 2015/1589 must be interpreted as meaning that individual aid deemed to have been granted on the date on which the competent authority unduly refused to grant the aid to an individual that applied for it within the period laid down for granting it, but paid to that individual pursuant to a beneficial administrative act adopted on the basis of an order in a judicial decision finding that refusal to be unlawful after the expiry of that period, must be classified as ‘existing aid’ within the meaning of that provision.”
A comment
Both conclusions of the CJEU are clear and well-reasoned. An aid applicant should not be deprived of its rights because the judicial resolution of a dispute takes time and, as a consequence, the adjudicating court’s decision is rendered after the expiry of the aid measure in question.
But I wonder whether the CJEU is right to state in paragraph 36 that the granting of the aid restores competitive balance. State aid always causes some distortion. It is just that the benefits of compatible aid outweigh the costs of its distortion. When an undertaking receives aid that had been previously refused to it, what happens is that the expected distortion actually occurs. But it does not restore any balance apart from the fact that the recipient receives the same advantage as other recipients of aid from the same scheme. Call this this “primary” effect. At the same time it receives an advantage over the undertakings that did not receive aid [as a result of the inherent selectivity of State aid]. Call this the “secondary” effect. So in reality, we have two effects. The granting of State aid that was previously refused eliminates the distortion of the primary effect, but actually causes the distortion of the secondary effect. It still does not “restore the competitive balance on the market”. It only causes the expected distortion as a result of state intervention. Perhaps this is what the CJEU actually wanted to say.
[1] The full text of the judgment can be accessed at:
