In a judgment of 30 April 2020, in case C-627/18, the Court of Justice clarifies the scope of the 10-year period of limitation applicable in relation to the recovery of State aid pursuant to Article 17 of Regulation 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the TFEU. On this occasion, the Court also lays down some general principles applicable to the limitation period for State aid recovery as foreseen under national law.
The judgment follows a request for preliminary ruling introduced by a Portuguese administrative court. In the case at hand before the national court, the national judge was called upon to rule on the applicability of the limitation period provided under Portuguese legislation for the recovery of State aid granted through a scheme that had been considered incompatible with the internal market by the Commission.
The aid in question had been granted from 1994 through a non-notified scheme. The scheme had therefore been deemed incompatible with the internal market in a decision of the Commission in 1999. Following that decision, the Portuguese State was under the obligation to recover the aid.
In the case at hand, the Portuguese administration only started the actual recovery proceedings in 2013. The recovery claimed by the authorities concerned both the principal sum and the interest (which, due to the passage of time, had become almost equal to the initial amount of the aid).
Under Portuguese law, the general limitation period is 20 years, but as regards interest, it is limited to five years. The beneficiary of the aid assigned before the administrative court therefore claimed that the period of limitation applicable to the interest had expired and that only the principal sum of the aid could be recovered.
Following a first question of the national court, regarding the applicability of the 10-year limitation period provided in Article 17(1) of Regulation 2015/1589, the Court of Justice clarifies that the limitation period contained in this provision only applies to the powers of the Commission in relation to State aid recovery and does not apply to national proceedings. National authorities and courts are therefore not bound by this provision.
In another question, the national Court asks whether the principles of equivalence and effectiveness prevent the application of the five-year limitation period to the interest to be recovered from the beneficiary, as provided under Portuguese law. The Court replies that the application of national provisions which create a five-year limitation period for the recovery of interest is an obstacle to the recovery of the full amount of the aid, which is required for the proper functioning of the internal market. The Court of Justice underlines that the recovery of the aid following a decision of the Commission must be immediate and effective, and that the action (or lack of action) of the national administration cannot prevent the recovery of the aid.
The Court also rules that the principle of legal certainty is not violated by the inapplicability of the limitation period in this case, as the beneficiary of the aid is aware that the aid granted was illegal, following the decision of the Commission in 1999.
Following this judgment, the principle of effectiveness can now be considered to be preventing the application of a period of limitation under national law that would limit the recovery of the full amount of the aid (including interest), if the limitation period expired before the adoption of the decision of incompatibility or if the limitation period expired because of the action (or lack of action) of the national administrative authorities. The principle of effectiveness therefore implies that certain limitation periods applicable under national law should be set aside by national jurisdictions in order to ensure the recovery of the full amount of the State aid.
It is still for the national judge to establish the balance between effectiveness and legal certainty in each case, although this judgment does appear to provide some interpretative guidelines.
Please contact Pierre de Bandt, Jeroen Dewispelaere or Raluca Gherghinaru for further information on this case and/or for general advice relating to State aid.