Compensatory Payments Can still Confer an Advantage

Membership of a compulsory insurance scheme can still confer an advantage to participating undertakings. Private contributions can still become state resources if they are paid into a fund that is managed by the state. Member States always have the option to ask for a measure to be assessed directly on the basis of the Treaty but they have to justify such a request.



On 8 March 2016, the Court of Justice ruled an appeal brought by Greece against the judgment of the General Court in case T‑52/12, Greece v Commission. Greece had requested annulment of the Commission decision 2012/157 concerning compensation payments made by the Greek Agricultural Insurance Organisation (ELGA) in 2008 and 2009. The Commission had found that ELGA made payments to farmers that were incompatible with the internal market and therefore, had to be recovered. The General Court agreed with the Commission. The Court of Justice confirmed the judgment of the General Court. The two judgments and the Commission decision deal with important issues concerning the nature of economic activities and the extent to which compensation can constitute an advantage in the meaning of Article 107(1) TFEU. The Court of Justice, in case C-431/14 P, Greece v Commission, also provided clarification on the extent of the discretion of the Commission and the rules that the Commission is obliged to enforce.[1]

The main elements of the judgment of the General Court

The General Court concurred with the Commission that ELGA was not an undertaking on the grounds that it carried out public policy despite the fact that it offered insurance cover. The insurance that was provided to farmers was compulsory while both the amount of compensation and the premium paid by farmers were determined by the state, rather than calculated according to risk, as a market operator would have done.

Nevertheless, farmers did derive an advantage even though they paid a premium because the premium did not correspond to the insured risk or the amounts of compensation. The fact that an insurance system is based on the principle of solidarity does not mean that there is an advantage provided to those who are insured.

The judgment of the Court of Justice

State resources and advantage

Greece raised several pleas. It first argued that the farmers’ contributions to the insurance fund of ELGA were private and disputed their classification as state resources. The Court of Justice, in paragraph 33 of the judgment, referred to the relevant part of the General Court’s ruling which found that the contribution was collected by the tax authorities, entered in the state budget as state revenue and then paid to ELGA from the budget of the Ministry of Agriculture. It agreed with the General Court that since the contributions were considered as state revenue it was sufficient to regard the payments made by ELGA as being financed by state resources.

It also agreed with the General Court that neither did the compensatory nature of the measures, nor the fact that they were justified by social policy objectives, preclude ELGA payments from being classified as an advantage. This finding was reinforced by the fact that Greece conceded that the contributions paid by farmers were not proportionate to risk and that it was possible that certain farmers paid a contribution without receiving compensatory payments from ELGA. The payments were independent of the contributions paid by the farmers and constituted an advantage that the beneficiary undertakings could not have obtained under normal market conditions.

The Court of Justice also agreed with the finding of the General Court that the fact that the payments made by ELGA were intended to compensate for damage caused to agricultural production from adverse weather conditions did not preclude the existence of an advantage. This is because competition is distorted where a measure mitigates the burdens borne by beneficiary undertakings and thereby strengthens their position in relation to competing undertakings.

Adverse market conditions

Greece also argued that both the Commission and the General Court failed to account correctly of the economic context in which the insurance and compensation to farmers were provided. According to Greece, the country was in a dire economic situation at the time. The Court of Justice did not examine this plea because it considered it to be inadmissible as it had not been raised before the General Court.

But in response to the complaint that the General Court [and the Commission] ignored the (alleged) minor impact of the Greek measure on competition and on trade, the Court of Justice fully agreed with the General Court that “(59) […] the economic crisis in the European Union from 2008 does not constitute a circumstance that is capable of calling in question the fact that the agricultural sector is exposed to strong competition within the European Union’ and that ‘the Commission has moreover adopted specific rules aimed at authorising certain State aid during the economic crisis, in particular, the [Temporary Framework], which precluded aid granted in the primary agricultural sector being declared compatible with the internal market”.

Do you know we also publish a journal on State aid?

EStAL banner
The European State Aid Law Quarterly is available online and in print, and our subscribers benefit from a reduced price for our events.


The Commission is obliged to apply the rules in force at the time of the measure

The Greece then contented that the Commission misused its discretion and misinterpreted and misapplied Article 107(3)(b) TFEU. However, the Court of Justice took the view that the General Court concluded that the Commission had to base its decision on the Temporary Framework and could not directly apply Article 107(3)(b) TFEU in order to assess the compatibility of the payments made by ELGA on account of the economic crisis experienced in Greece. The Court reiterated that “in adopting rules of conduct and announcing by publishing them that they will henceforth apply to the cases to which they relate, the Commission imposes a limit on the exercise of its aforementioned discretion and cannot depart from those rules without being found, where appropriate, to be in breach of general principles of law, such as equal treatment or the protection of legitimate expectations”. “Accordingly, in the specific area of State aid, the Commission is bound by the guidelines and notices that it issues, to the extent that they do not depart from the rules in the Treaty”.

Then the Court of Justice explained that “(73) […] the adoption of such guidelines does not relieve the Commission of its obligation to examine the specific exceptional circumstances relied on by a Member State, in a particular case, for the purpose of requesting the direct application of Article 107(3)(b) TFEU, and to provide reasons for its refusal to grant such a request, should the case arise. In the present case, it is not in dispute that, precisely because of the effect of the economic crisis experienced by the Member States, and in particular, the Hellenic Republic, on the primary agricultural sector of the European Union, the Commission exercised the discretion conferred on it by Article 107(3)(b) TFEU by adopting the Temporary Framework.”

“(74) However, the fact remains that although the Hellenic Republic claimed before the General Court that Article 107(3)(b) TFEU ought to be applied directly to the facts of the case, notwithstanding the existence of the rules of conduct set out in the Temporary Framework, it did not argue, in support of that claim, that there were, in the present case, specific exceptional circumstances in the primary agricultural sector concerned”. Greece did not “(75) […] prove to the requisite legal standard that that economy was faced with specific exceptional circumstances that ought, in this case, to have led the Commission to assess the aid at issue directly in the light of Article 107(3)(b) TFEU.”


Two substantive and one procedural lessons can be drawn from this case. First, membership of a compulsory insurance scheme can still confer an advantage to the participating undertakings. Second, private contributions can still become state resources if they are paid into a fund that is managed by the state. Third, Member States always have the option to ask for a measure to be assessed directly on the basis of the Treaty but they have to justify such a request.


[1] The full text of the judgment can be accessed at:



Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He is professor at the University of Maastricht and the University of Nicosia. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

Hinterlasse eine Antwort

Zusammenhängende Posts

19. Apr 2022
State Aid Uncovered von Phedon Nicolaides

Injection of Capital in a Postal Operator

The resources of a public undertaking necessarily count as “state resources”, regardless of the degree of autonomy of the public undertaking. However, not every decision of a public undertaking can necessarily be “imputed” to the state. A prudent investor may take into account authorised State aid. A prudent investor may tolerate short-term losses if it can realise sufficient profits in […]
12. Apr 2022
State Aid Uncovered von Phedon Nicolaides

A First Commission Decision on Natural Gas Storage

Compensation that guarantees a normal or fair rate of return eliminates risk that is inherent in market transactions and therefore confers an advantage in the meaning of Article 107(1) TFEU. Introduction On 23 March 2022, the European Commission announced plans to mitigate the spike in energy prices caused by the war in Ukraine. Chief among those plans were proposals for […]
22. Mrz 2022
State Aid Uncovered von Phedon Nicolaides

I. Vouchers for SMEs II. Funding of Aid with Revenue from Levies Imposed on the Aid Beneficiaries

State aid rules apply both to direct and indirect beneficiaries of aid. Introduction This week’s article reviews a Commission decision and a judgment of the Court of Justice. The Commission decision concerns Italian vouchers for SMEs to pay for the use of fast broadband services. The judgment deals with a German measure supporting milk quality tests. In both cases an […]
01. Mrz 2022
State Aid Uncovered von Phedon Nicolaides

Security of Energy Supply

Guaranteed supply of electricity at fixed prices to a state-owned network operator involves a transfer of state resources to the supplier. Guaranteed supply of electricity at fixed prices confers an advantage to the supplier. Introduction Member States are allowed to take measures to ensure the security of energy supplies. There is a variety of such measures: imposition of obligations on […]
22. Feb 2022
State Aid Uncovered von Phedon Nicolaides

Compensation for Damage and De Minimis Aid

Compensation for damage caused by protected animals is State aid. Member States may categorise compensatory payments as de minimis aid and refuse to make payments in excess of the de minimis threshold. Introduction Advantage in the meaning of Article 107(1) TFEU is any benefit granted by the state that is not available under normal market conditions. Normal market conditions are […]
11. Jan 2022
State Aid Uncovered von Phedon Nicolaides

Private Creditor and the Ability of the Debtor to Repay

There are no rules as to the promptness with which a private creditor must act in order to enforce its claims. However, a hypothetical private creditor need not demand that a debtor be declared insolvent as soon as it fails, without taking any account of its longer-term potential. Introduction When the state accepts to restructure debt owed to it or […]
02. Nov 2021
State Aid Uncovered von Phedon Nicolaides

Market Economy Operator

Comparing prices charged by different airports is not a suitable method for detecting the existence of selective advantages. Introduction Airports enter into complex agreements with airlines. When airports are in public ownership or operate under a mandate by the state, their agreements with airlines may contain State aid. It is, however, very difficult to detect State aid in these agreements […]
24. Aug 2021
State Aid Uncovered von Phedon Nicolaides

It is Difficult to Challenge a Commission Decision Opening the Formal Investigation Procedure

The assessment of the Commission in an “opening decision” is only provisional. The Commission is not required to prioritise its investigations or to extend them to anyone who may be in a similar situation. The right of non-discrimination is not violated when the Commission chooses to investigate some instead of all possible cases of State aid. An individual measure that […]
03. Aug 2021
State Aid Uncovered von Phedon Nicolaides

Methods for Determining Property Value

Member States may use different methods for determining the value of property as long as they produce similar results. Introduction The base for property taxation is normally the value of the property, not size or location. The difficulty in determining the value of property is that land or buildings have no intrinsic value. It all depends on the purpose for […]
29. Jun 2021
State Aid Uncovered von Phedon Nicolaides

Amazon and the Difficulty of Finding a Comparable Tax Payer

To apply the Arm’s Length Principle to transactions between two related companies, the Commission must identify the less complex company of the two and compare it to a similar independent company. Methodological errors in the application of the Arm’s Length Principle by national authorities does not necessarily prove the existence of advantage. Introduction On 12 May 2021 the Commission suffered […]