1. Principles and procedures
State aid recovery
Principles and procedures

2. Introduction
Principles of recovery
Recovery procedure
Failure to implement
Conclusion

3. A brief history of recovery
Art. 108(3) TFEU Member States are not allowed to implement State aid before it has been notified to and approved by the Commission
Kohlegesetz judgment (1973) confirms that the Commission has the power to order recovery of aid
Procedural Regulation of 1999: basic rules on recovery
Recovery Notice in 2007: general description of recovery policy and best practice guidelines

4. Who is concerned by recovery? (1)

5. Who is concerned by recovery? (2)
Not all Member States / few cases compared to number of incoming notification or complaints
But: recovery is absolutely essential for a credible State aid policy
Recovery cases are resource/time consuming (often, coupled with Court action) for the Commission and for Member States

6. Introduction
Principles of recovery
Recovery procedure
Failure to implement
Conclusion

7. Main applicable texts and sources
Article 108(3) TFEU: Member States are not allowed to implement State aid before it has been notified to and approved by the Commission ('standstill obligation')
Procedural Regulation 659/1999: basic rules on recovery
Recovery Notice 2007: principles of recovery, including case-law and best practice guidelines

8. Aid illegal and incompatible
No aid without prior notification and approval
No prior notification = illegality
procedures before national courts (order recovery of the illegal aid and/or of the illegality interest AND award damages or interim relief)
Negative decision = incompatibility
Commission must order Member States to recover the aid (Boussac)

9. Purpose of recovery
Re-establish the situation that existed on the market prior to the granting of the aid
Not a penalty, but logical consequence of incompatibility
all financial benefits, i.e. must include recovery interests

10. Recovery: immediate and effective
Recovery is governed by national law, provided this allows for immediate and effective recovery
immediate: without delay
effective: must lead to actual recovery – not only best endeavours (Olympic)
national rules preventing effective and immediate execution should be left unapplied (Scott)

11. Limits to recovery
Violation of general principles of law (very strict approach of the Court)
legitimate expectations
legal certainty
Prescription period (10 years)
Absolute impossibility
only in case of exceptionnal circumstances

12. Role of EU courts / national courts
appeal against recovery decisions (Art. 263 TFEU)
application for interim relief (Art. 278 TFEU)
National courts:
beneficiary can generally not challenge the validity of recovery decisions
application for interim relief must respect Atlanta/Zuckerfabrik case-law

13. Introduction
Principles of recovery
Recovery procedure
Failure to implement
Conclusion

14. 2007 Recovery Notice Based on progress to date / jurisprudence
General description of recovery policy and best practice guideline for cooperation between the Commission and Member States
Consequences of failure to implement
Role of national courts also in the 2009 Enforcement Notice

15. Delay for implementing decisions
Since 2007, two deadlines are imposed:
2 months for sending information (amount of aid and interests, actions undertaken, proof of request for repayment)
4 months for actual implementation
Possibility of provisionnal implementation
blocked account, if the case is pending in Court
Principle of loyal cooperation

16. Example of a standard recovery decision

17. Main elements of the decision
The decision is binding on all organs of the State, including its national courts
The Commission and the Member States are bound by a duty of sincere cooperation (Art. 4 TEU)
The decision either indicates the incompatible aid element to be recovered, or includes information enabling the national authorities to determine that amount
The decision normally contains two deadlines (two months and four months)

18. Aid amount and recovery interests
Aid amount and aid beneficiary(ies) are generally mentioned in recovery decisions
if not, the decision sets out a particular methodology for calculating the aid
specificities of schemes
Recovery interests have to be added:
on a compound basis (reference rate b.p.)
from the date the aid was put at the disposal of the beneficiary to its actual repayment

19. Implementation deadline: 2 months
Appeals against recovery decisions do not suspend the execution of a recovery decision at national level
The following steps must be undertaken by the Member State within two months after notification of the decision:
determine the recovery method ;
draw-up the list of beneficiaries (for schemes);
determine the amount of aid and interests;
send the request for repayment ('recovery order');
provide to the Commission proof of all these actions.

20. Implementation deadline: 4 months
The Member State must provide proof of implementation
Recovery decisions are considered implemented:
full recovery of aid amounts and interests within time-limit: proof of payment must be provided
liquidation of beneficiary under market conditions

21. Provisional implementation
In duly justified cases, possibility of provisional implementation pending litigation in national/EU courts:
Acceptable:
Blocked accounts: specific provisions must be verified by the Commission
Not acceptable:
Bank guarantees, insurance certificates and similar: aid amount is still at the recipient’s disposal
Delayed payments or instalments: do not amount to immediate recovery

22. Recovery and insolvency (1)
Insolvency does not affect recovery obligation
liquidation and termination of economic activity can be a viable alternative to full recovery. It is an obligation if the beneficiary is not in a position to repay the aid (New Interline judgment)
national bankrupcy legislation applies, provided it takes Community interest into account (Aid and interests registered in bankruptcy represent 44% of the pending aid principal amount still to be recovered)

23. Recovery and insolvency (2)
Some practical steps must be undertaken:
immediate registration of the recovery claim (including interest (at least until the date of initiation of the insolvency procedure)
end of the economic activity
transfer of assets at market conditions

24. Recovery and insolvency (3)
Member States should appeal decisions of the insolvency administrators if they:
refuse to register recovery claims
register claims at an incorrect ranking
allow continuation of activity in absence of full recovery
authorise the transfer of assets below market terms
accept settlements between creditors which would reduce the recovery claim to the benefit of other, lower ranking claims (ex: Commission v. Slovakia C-507/08)

25. Introduction
Principles of recovery
Recovery procedure
Failure to implement
Conclusion

26. Failure to implement / Deggendorf
Recovery decisions considered implemented:
full recovery within time-limit
liquidation of beneficiary under market conditions
provisional (blocked account, proper resgistration of State aid claims)
Application of Deggendorf case law
suspension of new aid where earlier illegal and incompatible aid has not yet been repaid
possibility for conditional approval

27. Failure to implement / Infringement
Infringement action under Art. 108(2) TFEU
non-implementation by the Member State of the decision
rather frequent (slightly less than half of cases)
Infringement action under Art. 260 TFEU
non-implementation of the Court’s judgment
preceeded by letter of formal notice to the Member State
lump sum and/or daily penalty
less frequent (but increasing number of cases)

28. Introduction
Principles of recovery
Recovery procedure
Failure to implement
Conclusion

29. 'Modern' recovery practice
Since 2007, enforcement of recovery decisions has improved:
better/more precise drafting of recovery decisions
systematic follow-up
Court action in case of non-implementation
46 pending cases (stable), in 13 MS (decreasing)
€ 10,585 million of illegal and incompatible aid recovered since 2004 (82.7%), € 2076 million recovery interest

30. Trends and challenges Average age of cases increases (> 4 years):
stock of old unresolved pending cases (in Court)
but (most) new cases treated within reasonable delays (target 2 years)
Issues related to the quantification of the aid (consequence of the increasing economic approach in State Aid): tax issues, evaluation (e.g. brand value?)
Litigation under Art. 108(2) or 260 increases:
29 cases under Art. 108(2) / 10 cases under Art. 260
specific issue of national courts (despite case-law)
Member State behaviour vs. consequence of stricter enforcement?

31. Links and training Scoreboard, reports, studies
Cooperation with national courts
Requests for contribution to national training programs