On 5 March 2019, the Court of Justice (Grand Chamber) issued an interesting judgment in the Eesti Pagar case (C-349/14).
For the first time, the Court ruled that national authorities have the obligation to recover on their own initiative State aid which they have granted unlawfully. In addition, the Court provided interesting guidance on the limitation period that should apply to the recovery of unlawful aid and on the obligation to claim interest.
In the referring case, a national authority claimed the recovery of aid which it had granted to an undertaking because it constituted unlawful State aid. The national authority had granted the aid under the conditions of the former General Block Exemption Regulation (GBER) and argued (several years later) that one of these conditions had not been fulfilled and that the aid should therefore have been notified to the Commission.
Following a preliminary reference, the Court ruled that national authorities must recover on their own initiative aid which they have unlawfully granted. As the Advocate General in this case pointed out in its Opinion, there appears to be no earlier case law to the effect of the Court finding that such an obligation exists. Interestingly, this ruling goes further than the Court’s case law concerning the situation where a national court is faced with unlawful State aid pending a decision of the Commission on the compatibility of that State aid. In these cases, the Court decided that national courts may recover the unlawful State aid.
Moreover, the Court clarified that an aid beneficiary cannot argue that it held legitimate expectations that the aid was lawful merely because the national authority misapplied the GBER.
As regards the limitation period, the Court first pointed out that the limitation period (of ten years) applicable to the recovery of aid by the Commission does not apply by analogy to the recovery of unlawful aid by national authorities. Furthermore, since the aid in question was co-financed by a European structural fund, the Court found that the limitation period foreseen by the Regulation on the Protection of the European Communities Financial Interests may apply. In the alternative, national courts should apply the national limitation period.
Finally, the judgment also clarified that national authorities have the obligation to claim interest in order to restore the distortion of competition caused by the unlawful aid. As for the calculation of this interest, the Court stresses that, whereas national law in principle applies, interest should be claimed for the whole period of the aid and at the rate that would have been applicable if the amount of the aid had been borrowed at market conditions.
Please contact Pierre de Bandt, Jeroen Dewispelaere or Raluca Gherghinaru for further information on this case and/or for general advice on State aid matters.