General context
Member States are in principle under an obligation to notify every aid measure to the European Commission. Notification of an aid measure obliges the European Commission to assess the compatibility of the aid measure with the internal market. As long as the European Commission has not declared the aid measure compatible with the internal market, Member States cannot put the aid into effect. Aid granted before the European Commission has issued a positive compatibility decision constitutes illegal aid. Only in two situations are Member States freed from their obligation to notify. This is where the aid is of an insignificant amount (the so-called de minimis rule) or has been exempted from notification under specific rules established by the Council or the European Commission.
The illegal nature of unnotified aid cannot be remedied by a subsequent decision of compatibility by the European Commission. That being said, the Court of Justice has held in its CELF judgment that EU law does not require the reimbursement of illegal aid where it has subsequently been declared compatible with the internal market. In such a situation, EU law only requires the undertaking concerned to pay interest at market rates for the period prior to the decision of the European Commission. Although the Court of Justice does not exclude or prohibit the possibility that reimbursement of illegal State aid may still be required on the basis of national law - or the imposition of other sanctions, the CELF judgment implies that undertakings benefiting from illegal State aid may have an interest in obtaining a positive compatibility decision from the European Commission.
Facts
A number of French undertakings sought to obtain a decision from the European Commission declaring an aid measure compatible with the internal market. It thus appears that the French State had not notified the measure and had apparently no intention of doing so.
Since the formal notification procedure is only open to Member States, the undertakings filed complaints against the aid measure they were benefiting from. This was with the aim of triggering an investigation of the measure by the European Commission and ultimately a positive compatibility decision. The European Commission rejected their complaints on the ground that such a procedural route does not exist within the procedural framework for State aid control. In its judgments of 10 November 2021 and 8 December 2021, the General Court upheld these decisions.
Judgments
The General Court underscores that only Member States are competent to notify aid measures to the European Commission; undertakings cannot take the place of the Member State concerned by using the complaint procedure. It also takes issue with the fact that self-notification done by beneficiaries of illegal State aid would allow them to benefit from the CELF judgment and thereby avoiding the penalty for non-notified aid, namely repayment of the aid received. This would undermine the effectiveness of the mandatory nature of the obligation to notify aid measures and the prohibition of their implementation.
Further to this, the General Court clarifies that beneficiaries of illegal State aid cannot be considered as interested parties whose complaint the European Commission is obliged to act upon. The aim of the State aid complaint mechanism provided by Regulation 2015/1589 is to identify aid that is incompatible with the internal market and is designed to protect the interests of undertakings negatively impacted by the granting of aid to certain undertakings. Self-notification by beneficiaries of illegal State aid is not compatible with these aims.
Also, the fact that the European Commission has been informed of the existence of an aid measure through the complaint by the recipient undertakings does not oblige it to investigate the measure either. Apart from when a Member State notifies an aid measure or a competitor affected by the aid measure issues a complaint, the European Commission retains a broad discretion in assessing the compatibility of aid measures.
Finally, the argument is rejected that the absence of a compatibility decision of the European Commission violates the principle of legal certainty. The General Court states that it follows clearly from the legal framework that aid granted without prior approval of the European Commission is illegal. Moreover, since a subsequent compatibility decision does not regularise the violation of the obligation to notify, such a decision has no impact on the illegal nature of the aid.
Observations
These judgments demonstrate once again that undertakings cannot simply receive State aid without asking questions. Undertakings should thoroughly evaluate whether a measure confers an advantage upon them and whether that measure should be notified to the European Commission. They cannot rely solely on the assessment of the Member State or hide behind the failure of the Member State to notify a measure.
The issue is all the more important since State aid analysis is now permeating all sectors and all levels of the economy. It is no longer an issue of big undertakings or large government investment programmes. Also, local authorities or small and medium enterprises are impacted by State aid rules nowadays. Given the potential of far-reaching consequences of receiving illegal State aid, it is important to think twice and carefully evaluate an advantageous measure before taking advantage of it.
Please contact Pierre de Bandt, Jeroen Dewispelaere or Raluca Gherghinaru for further information about this case and/or for general legal advice relating to State aid.