The Impossibility of Proving the Absolute Impossibility to Recover Incompatible State Aid

It is not sufficient to claim that is it absolutely impossible to recover incompatible State aid. It must be shown that alternative methods have been actually tried without success.

Introduction

It is rather impossible for Member States to prove that it is absolutely impossible to recover State aid that has been found by the Commission, and confirmed by EU courts, to be incompatible with the internal market. Yet, they try.

This article reviews two recent judgments rendered on 29 April and 12 May 2021, respectively, that rejected a variety of arguments put forth by the Member States concerned to prove that it was absolutely impossible to recover immediately the whole amount of the incompatible aid.

Case I: C-704/19, European Commission v Spain[1]

The Commission asked the Court of Justice to declare that Spain failed to comply with its decision 2016/1385 that ordered the recovery of incompatible State aid from, among others, Telecom Castilla-La Mancha [Telecom CLM]. The aid had been granted by the autonomous region of Castilla-La Mancha to support the deployment of digital television in rural areas.

Spain and two operators, Cellnex Telecom and Telecom CLM, had appealed against decision 2016/1385. In December 2016, the General Court dismissed the appeals [see cases T-808/14, Spain v Commission; T-37/15, Cellnex v Commission and T-38/15; Telecom CLM v Commission]. Cellnex Telecom and Telecom CLM appealed again but in April 2018, the Court of Justice rejected their action [see cases C-91/17 P and C-92/17 P, respectively]. A different appeal lodged by Spain was also rejected in September 2018 [see case C-114/17 P].

The Commission contended that Spain failed to recover within the prescribed time limits the incompatible aid from Telecom CLM. By contrast, the aid from Cellnex was fully recovered.

It is well established in the case law that the recovery of incompatible aid must be carried out without delay and in accordance with the procedures in national law, provided that the recovery is effected immediately and effectively. Normally, the Commission requires Member States to take all necessary action within four months.

The Court noted, in paragraph 58 of the judgment, that Spain launched recovery measures only after it lost its appeal the case C-114/17 P in September 2018. The Court also noted that five years after the Commission adopted its decision the recovery had not been completed and held that that was irreconcilable with Spain’s obligation to recover the aid immediately and effectively.

The Court reiterated that the only defence allowed by EU law for not recovering aid is absolute impossibility [and legitimate expectations according to unconditional assurances given by an EU institution].

But absolute impossibility cannot be successfully invoked by a Member State that does not more than claim legal, political or practical difficulties without actually trying to recover the aid and without proposing to the Commission alternative methods of implementing its recovery decision. [para 62]

A Member State which, when executing a Commission recovery decision, encounters unforeseen difficulties must submit these problems to the Commission and propose appropriate modifications to the decision in question. [para 63]

The Court rejected Spain’s argument that its appeals and the uncertainty concerning their outcome could suspend the execution of the Commission decision. [para 68]

The Court also rejected Spain’s claim that the precise amount to be recovered was not clear. The Court held that Spain was responsible to determine the precise amount.

Therefore, none of Spain’s arguments concerning absolutely impossibility succeeded.

Next Spain invoked the principle of protection of legitimate expectations to justify its failure to recover the aid.

The Court responded that reliance on the principle of protection of legitimate expectations presupposes that precise, unconditional and consistent assurances have been given by an EU institution. Spain could not entertain any legitimate expectations because no assurance was given to it by decision 2016/1385. [paras 86-87]

As a result, the Court of Justice found that Spain failed to fulfil its obligations.

Case II: C-11/20, European Commission v Greece[2]

Greece was requested by the Commission at the end of 2011 to recover incompatible State aid [Commission decision 2012/157]. Now almost ten years later, it has not yet recovered the aid and the Court of Justice declared on 12 May 2021, in case C-11/20, European Commission v Greece, that Greece failed to fulfil its obligations under the EU Treaty. If recovery is not effected immediately, the next step will be for the Commission to petition the Court to impose penalties.

The aid in question concerned compensation granted to farmers by ELGA, the Greek Agricultural Insurance Organisation, for damage they had suffered in 2008 as a result of adverse weather conditions. The problem was that only part of the aid was compatible with the internal market because the compensation was not proportional to the actual damage.

Greece appealed against that decision unsuccessfully both before the General Court [T-52/12, Greece v Commission] in 2014 and the Court of Justice [C-431/14 P, Greece v Commission] in 2016.

The judgment of the General Court was reviewed here on 2 September 2014

https://www.lexxion.eu/en/stateaidpost/compensatory-payments-can-be-state-aid/

while the judgment of the Court of Justice was reviewed here on 23 March 2016

https://www.lexxion.eu/en/stateaidpost/compensatory-payments-can-still-confer-an-advantage/

The Court of Justice, first, reiterated the established principle that a Member State which is ordered to recover aid has to take all appropriate measures to ensure the immediate execution of the recovery decision of the Commission and must claim the whole amount of the incompatible aid. [paragraphs 33-34 of the judgment]

After noting that several years had passed since the Commission decision without Greece complying with the recovery decision, the Court recalled that the only defence which a Member State may invoke in these circumstances is absolute impossibility to recover the aid in question. [para 40]

Greece argued that it was completely unable to implement the recovery decision because it would have caused it irreparable damage.

The Court rejected all difficulties put forth by Greece and stressed that the defence of absolute impossibility is not applicable where the Member State concerned merely alleges legal or political difficulties without proposing to the Commission alternative ways of implementing that decision and which could make it possible to overcome those difficulties. [para 43]

Alleged administrative or technical difficulties were linked to the large number of beneficiaries. However, the Court clarified that administrative and practical difficulties posed by the large number of aid recipients do not prove that recovery is technically impossible. [para 44]

Difficulties linked to the need for technical analysis were also found to be irrelevant. [para 45]

Weaknesses and gaps in the domestic legal instruments and procedure for recovery were rejected as invalid arguments. [para 46]

In response to the argument that there could be social unrest as a result of the recovery of the aid in question, the Court noted that a Member State may be relieved of the obligation to take all appropriate measures only if it proves concretely that its action would have consequences for public policy which it could not address with its own means. [para 49]

According to the Court, the Greek authorities merely assumed that the recovery of the aid would provoke a strong reaction from the farmers and submitted a letter from a representative organisation which claimed that its members would suffer. However, such evidence did not sufficiently prove the existence of the risk alleged by Greece. [para 50]

The Court also agreed with the Commission that Greece had not inform it promptly and sufficiently of the measures it had taken to implement the recovery decision.

Consequently, it declared that Greece failed to fulfil its obligations.


[1] The full text of the judgment, in languages other than English, can be accessed at:

https://curia.europa.eu/juris/fiche.jsf?id=C%3B704%3B19%3BRD%3B1%3BP%3B1%3BC2019%2F0704%2FJ&oqp=&for=&mat=or&lgrec=en&jge=&td=%3BALL&jur=C%2CT%2CF&etat=clot&dates=%2524type%253Dpro%2524mode%253D8D%2524from%253D2021.04.22%2524to%253D2021.04.30&pcs=Oor&lg=&parties=Spain&pro=&nat=or&cit=none%252CC%252CCJ%252CR%252C2008E%252C%252C%252C%252C%252C%252C%252C%252C%252C%252Ctrue%252Cfalse%252Cfalse&language=en&avg=&cid=12711623

[2] The full text of the judgment, in languages other than English, can be accessed at:

https://curia.europa.eu/juris/fiche.jsf?id=C%3B11%3B20%3BRD%3B1%3BP%3B1%3BC2020%2F0011%2FJ&oqp=&for=&mat=or&lgrec=en&jge=&td=%3BALL&jur=C%2CT%2CF&num=c-11%252F20&dates=&pcs=Oor&lg=&pro=&nat=or&cit=none%252CC%252CCJ%252CR%252C2008E%252C%252C%252C%252C%252C%252C%252C%252C%252C%252Ctrue%252Cfalse%252Cfalse&language=en&avg=&cid=2479788

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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 presently holds positions at the College of Europe and the University of Maastricht. 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.

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