1. Actions for failure to fulfil obligations – Failure to comply with the obligation to recover unlawful aid – Defences – Absolute impossibility of implementation – Criteria of assessment
(Arts 10 EC, 88(2) EC and 228(2) EC)
2. Actions for failure to fulfil obligations – Judgment of the Court establishing the failure of a Member State to fulfil its obligations – Breach of the obligation to comply with the judgment – Financial penalties – Purpose – Choice of appropriate penalty
(Art. 228(2) EC)
3. Actions for failure to fulfil obligations – Judgment of the Court establishing the failure of a Member State to fulfil its obligations – Breach of the obligation to comply with the judgment – Financial penalties – Penalty payment – Imposition of a penalty payment – Condition – Failure to comply continuing up to the time of the Court’s examination of the facts
(Art. 228(2) EC; Council Regulation No 659/1999, recital 13)
4. Actions for failure to fulfil obligations – Judgment of the Court establishing the failure of a Member State to fulfil its obligations – Breach of the obligation to comply with the judgment – Financial penalties – Penalty payment – Form of the penalty payment – Determination of the amount – Criteria
(Art. 228(2) EC)
5. Actions for failure to fulfil obligations – Judgment of the Court establishing the failure of a Member State to fulfil its obligations – Breach of the obligation to comply with the judgment – Financial penalties – Penalty payment – Determination of the amount – Evidence of the state of progress with compliance to be provided by the Member State concerned
(Art. 228(2) EC)
6. State aid – Commission decision finding aid incompatible with the common market and ordering its cessation – Determination of the obligations of the Member State – Obligation of recovery – Scope
(Art. 88(2) EC; Arts 3(3) EU and 51 EU; Protocol No 27 on the internal market and competition)
7. Actions for failure to fulfil obligations – Judgment of the Court establishing the failure of a Member State to fulfil its obligations – Breach of the obligation to comply with the judgment – State aid – Financial penalties – Penalty payment – Termination of the penalty payment – Recipients in difficulties or bankrupt – No effect
(Art. 228(2) EC)
8. Actions for failure to fulfil obligations – Judgment of the Court establishing the failure of a Member State to fulfil its obligations – Breach of the obligation to comply with the judgment – State aid – Financial penalties – Penalty payment – Termination of the penalty payment – Orders for recovery challenged in the national courts – Obligation of the national authorities to contest national decisions depriving the Commission’s decision of effect
(Art. 228(2) EC)
9. Actions for failure to fulfil obligations – Judgment of the Court establishing the failure of a Member State to fulfil its obligations – Breach of the obligation to comply with the judgment – Financial penalties – Penalty payment – Lump sum payment – Both penalties applied cumulatively – Lawfulness – Conditions
(Art. 228(2) EC)
10. State aid – Recovery of unlawful aid – Obligation – Duty actually and immediately to implement the Commission’s decision
(Art. 88(2) EC)
1. Where the Commission’s decision requiring the cessation of State aid that is incompatible with the common market has not been the subject of a direct action or where such an action has been dismissed, the only defence available to a Member State against an action for failure to fulfil obligations is that it was absolutely impossible for it to implement the decision properly. Neither the apprehension of even insuperable internal difficulties nor the fact that the Member State in question finds it necessary to examine the individual situation of each undertaking concerned can justify a failure by that Member State to comply with its obligations under European Union law.
Thus a delay, following a first judgment finding a failure to fulfil obligations, on the part of the Member State concerned in implementing the Commission’s decision, attributable essentially to the lateness with which the Member State acted to remedy the difficulties of identifying and recovering the unlawful aid, cannot constitute valid justification in terms of a temporary absolute impossibility of implementation. It is not relevant in this respect that the Member State concerned has informed the Commission of the difficulties encountered in recovering the aid and the solutions adopted for remedying them.
(see paras 30-31)
2. In the context of the procedure provided for in Article 228(2) EC, it is for the Court, in each case, in the light of the circumstances of the case before it and the degree of persuasion and deterrence which appears to it to be required, to determine the financial penalties appropriate for making sure that the judgment which previously established the breach is complied with as swiftly as possible and preventing similar infringements of European Union law from recurring. The Commission’s suggestions cannot bind the Court and merely constitute a useful point of reference. Similarly, guidelines such as those in the communications of the Commission are not binding on the Court but contribute to ensuring that the action brought by the Commission is transparent, foreseeable and consistent with legal certainty.
Moreover, the legal and factual context of the infringement established may be an indication that effective prevention of future repetition of similar infringements of European Union law may require the adoption of a deterrent measure.
(see paras 35-37, 89)
3. The imposition of a penalty payment is in principle justified only in so far as the failure to comply with an earlier judgment of the Court continues up to the time of the Court’s examination of the facts.
That is the case where, in proceedings for the implementation of a Commission decision ordering the recovery of unlawful aid, on the date of the closure of the oral procedure, the Member State which granted the aid has not yet recovered a substantial part of the aid, thereby impeding the restoration of effective competition as envisaged by recital 13 in the preamble to Regulation No 659/1999 concerning the application of Article 88 EC.
An order imposing a penalty payment on that Member State is an appropriate financial means by which to encourage it to take the necessary measures to put an end to the infringement established and to ensure full compliance with the Commission’s decision and the preceding judgment establishing its failure to fulfil obligations.
(see paras 42, 44-45)
4. In exercising its discretion, it is for the Court to set the penalty payment so that it is both appropriate to the circumstances and proportionate to the infringement established and the ability to pay of the Member State concerned.
In the assessment carried out by the Court, the basic criteria which must be taken into account in order to ensure that a penalty payment has coercive force with a view to the uniform and effective application of European Union law are, in principle, the duration of the infringement, its degree of seriousness and the ability of the Member State concerned to pay. In applying those criteria, the Court is required to have regard in particular to the effects of non-compliance on public and private interests and to the urgency of compliance by the Member State concerned with its obligations.
In the case of a dispute relating to the failure to implement a Commission decision ordering recovery of aid paid under an unlawful aid scheme, in order to determine the form of the penalty payment, account must be taken of the special character of the operations for recovery of the aid, relied on by the Member State which granted the aid.
If it appears that it will be particularly difficult for that Member State in the short term to reach full compliance with the Commission’s decision and hence with the preceding judgment finding it to have failed to fulfil its obligations, in view of the fact that the operations involved relate to a large number of undertakings, the fixing of a penalty payment that is not invariable but takes account of the progress the Member State may have made in complying with its obligations appears appropriate to the circumstances of the particular case and hence proportionate to the infringement that has been found.
Consequently, the periodic payment of a sum calculated by multiplying a basic amount by the percentage of the unlawful aid that has not yet been recovered, or not shown to have been recovered, compared to the total amount not yet recovered on the date of delivery of the judgment must be considered appropriate.
(see paras 47-49, 52-53, 56-57, 93)
5. For calculating a penalty payment imposed on a Member State which has failed to comply with a judgment of the Court requiring it to recover aid unlawfully paid, recovery of the aid may be taken into account only on condition that the Commission has been informed of it and is able to assess the adequacy of the evidence communicated to it in this respect.
In the case of the recovery of unlawful aid, it is for the Member State concerned to demonstrate to the Commission that the aid has been recovered, as follows from the principle of sincere cooperation, in order to ensure that the provisions of the Treaty are fully observed.
Moreover, apart from cases in which the unlawful aid is repaid by the recipient undertaking, the nature of the evidence required should be adjusted to the particular features of the factual situations encountered by the Member State in question in the course of its recovery operations.
(see paras 50, 53, 71)
6. The Treaty rules on competition, in particular those on State aid, which are the expression of one of the essential tasks with which the European Union is entrusted, are of a vital nature, as is apparent from Article 3(3) TEU, namely the establishment of an internal market, and from Protocol No 27 on the internal market and competition, which forms an integral part of the Treaties in accordance with Article 51 TEU, and states that the internal market includes a system ensuring that competition is not distorted.
The recovery of aid that is incompatible with the common market aims to remove the distortion of competition caused by the competitive advantage the recipient of the aid has enjoyed in the market compared with its competitors, thereby restoring the situation prior to the payment of the aid.
Moreover, recovery penalises not only the incompatibility of the aid but also the Member State’s failure to fulfil the twofold obligation set out in Article 108(3) TFEU, under which that State must, first, inform the Commission of its plans to grant or alter aid and, secondly, must not put the proposed measures into effect until the procedure has resulted in a final decision.
(see paras 60-62)
7. For calculation of the penalty payment in cases of the recovery of unlawful aid, the nature of the evidence required should be adjusted to the particular features of the factual situations encountered by the Member State in question in the course of its recovery operations.
In cases in which the aid has to be recovered from undertakings which are bankrupt or subject to bankruptcy proceedings whose purpose is to realise the assets and clear the liabilities, the fact that undertakings are in difficulties or bankrupt does not affect the obligation of recovery. The restoration of the previous situation and the elimination of the distortion of competition resulting from the unlawfully paid aid may, in principle, be achieved by registration of the liability relating to the repayment of the aid in question in the schedule of liabilities.
The Member State concerned is therefore required to provide the Commission with evidence of the registration of the liabilities in question in the bankruptcy proceedings. If it is not possible to do this, the Member State must report everything capable of showing that it has made every effort to that end. In particular, should the application to register a liability be refused, it must provide proof that it has initiated all procedures under national law capable of challenging that refusal.
In cases in which the unlawful aid in question has to be recovered from undertakings against which individual protective or enforcement measures have been adopted without success, it is for the Member State concerned to take and then communicate to the Commission all measures enabling repayment of the unlawful aid to be obtained and, if need be, measures aimed at the judicial liquidation of those undertakings, so that that State can enforce its claims against their assets. Consequently, it is for the Member State to demonstrate, first, that bankruptcy proceedings have been taken against the undertakings concerned and, secondly, that the claims against them have been registered.
In cases in which the unlawful aid in question has to be recovered from undertakings which have ceased to exist, proof that they have been removed from the registers suffices to show that they do not exist and consequently that it is impossible to recover the aid.
(see paras 71-74, 76-77)
8. For the purpose of calculating the penalty payment in cases of the recovery of unlawful aid, where orders for recovery of aid unlawfully paid by a Member State are challenged in the national courts, it is for the Member State concerned, in accordance with the requirement actually to recover aid that is incompatible with the common market, to contest any national decision depriving the Commission’s decision of effect, in particular on grounds relating to the application of limitation rules or rules of evidence.
(see para. 78)
9. Having regard to the objectives of the procedure provided for in Article 228(2) EC, the Court is empowered, in the exercise of the discretion conferred on it in connection with that article, to impose a penalty payment and a lump sum payment cumulatively.
The decision whether or not to order a lump sum payment must depend in each individual case on all the relevant factors relating both to the characteristics of the infringement established and to the conduct of the Member State involved in the procedure initiated under Article 228 EC. That provision confers a wide discretion on the Court in deciding whether or not to impose such a penalty.
If the Court decides to order a lump sum payment, it must, in the exercise of its discretion, set the payment in such a way that it is, first, appropriate to the circumstances and, secondly, proportionate both to the infringement that has been established and to the ability to pay of the Member State concerned. The relevant factors in this respect include matters such as the length of time for which the breach of obligations has persisted since the judgment establishing it was delivered and the seriousness of the infringement. Moreover, the effective prevention of future repetition of similar infringements of European Union law may require the adoption of a deterrent measure.
(see paras 82-83, 89, 93-94)
10. In the context of the recovery of unlawful aid, the Member State must actually recover the sums owed, belated recovery after the prescribed time-limits have expired not satisfying the requirements of the Treaty. In this connection, a Member State cannot plead provisions, practices or situations prevailing in its domestic legal order to justify failure to observe obligations arising under European Union law.
Justifications put forward by that Member State, based on internal difficulties connected with the complexity of the measures to be taken to identify the recipients of the unlawful aid in question and recover the aid from them, cannot be accepted.
(see paras 86-87)