State Aid Approval

EU Commission & State Aid

The EU Commission, in cooperation with States, keeps the ystems of state aid under constant review. The Commission may investigate apparent breaches of State aid rules and has special investigatory powers. States are obliged to submit reports annually to the EU Commission on existing aid schemes.

If having given the state opportunity to submit comments, the Commission finds that the State aid is not compatible with the internal market or is being misused, it must require the State to abolish or alter the aid within a period specified.  If the State does not comply with the decision, the Commission or any other interested state may refer the matter to the European Court of Justice.

The Commission shall be informed of proposed aid and changes to aid by states in sufficient time to enable it to submit comments on such proposed grant or alteration of aid.  If it considers that they are not compatible with the internal market, the Commission shall, without delay, initiate proceedings before the Court of Justice.  The state shall not put its measures into effect until the procedure has resulted in a final decision.

The Commission may adopt regulations relating to categories of State aid that it decides to exempt from the requirement for specific Commission approval.

Consideration of State Aid

In considering state aid issues, the Commission balances the negative and positive effects of the proposed measures. It must be proportionate in relation to the relevant objective or exception. On initial application, the Commission may determine that the measure does not comprise State aid.

If there is State aid, but it is not clear whether it is compatible with the common market, the Commission makes a decision may initiate a formal investigation. Where an investigation is ongoing, the state should suspend the aid until the matter is concluded.

The Commission has two months in which to make a decision following the preliminary assessment.  This may be extended with the consent of the State.

If a formal investigation is initiated, the state’s views are requested within certain time limits.  Comments may be received from third parties on foot of published notices.  The state concerned r,ay eply to the comments.

Decision

The Commission endeavours to take its decision within 18 months. The period may be extended.  The ultimate decision may be that there is no aid or that there is  aid, but that it is compatible with the common market.

The Commission may make a decision that state aid is incompatible with the common market or that the aid is being abused in practice. If it so decides, the state is required to abolish, remove or vary the aid.

Where the Commission is of the view that a decision is not being complied with, it may refer the matter to the Court of Justice directly or initiate an examination. Certain other interested parties may also refer the matter to the European Court of Justice if the state fails to comply with the decision.

The Commission may require suspension of aid that has been found unlawful until the final decision is made.  It may require the state to recover the aid which has been given unlawfully. It may provisionally suspend and recover state aid, if in accordance with the established practice, there are no doubts about its character as aid, there is an urgency to act and there is a serious risk of substantial and irreparable damage to a competitor.

Council Approval

The Treaty allows for applications to the Council for approval of aid.  On an application by a state, the Council, acting unanimously may decide that aid that the state is granting or intends to grant is compatible with the internal market in accordance with the relevant provisions and exemptions.

If the Commission has commenced procedures regarding the matter, the fact that the state has made an application to the Council shall suspend the procedure until the Council decision is made.  If the Council has not made its decision within three months, the Commission shall give its decision on the case.

If the Council rejects the application plea, the Commission procedure recommences.

Complaint to Commission or Court

State aid matters may originate with a complaint from a business or private person in a State.  The Commission must undertake an impartial examination of the matters alleged.

The investigation must be undertaken within a reasonable timeframe.   The Commission need not involve the complainant further in the investigation of the complaint, although it may choose to do so.

An application may be made to the Court of Justice to invalidate a Commission’s State aid decision.  The initial application is made to the Court of First Instance, or now known as the General Court, with a further appeal on a point of law to the Court of Justice.

Member States and third parties who are directly and individually concerned in the matter may apply to the Court.

A court challenge will be made in respect of the substantive decision or in respect of procedural matters in relation to the decision.  It may be based on manifest error,  procedural failures or errors of law. Generally, the challenge must be commenced within two months.

National Courts

Breach of the State aid rules may be invoked in national courts, where aid has been given in breach of the obligation to notify the Commission, where the Commission has decided that the aid is incompatible with the Treaty or where conditions have been breached. Proceedings may be taken in respect of un-notified aid, notwithstanding that the aid is later approved.

Parties affected may recover damages in a national court. An action for damages may be taken by parties who have suffered loss in consequence.   The action may be against the state and/or the entity that has received the aid.  Recovery may be allowed in respect of loss and damage incurred.

If State aid has been granted in breach of the Treaty, then national law must secure its repayment.   The national law must provide for the repayment of unlawful aid, recovery of interest, damages for the benefit of competitors and the grant of interim measures against unlawful aid.

The application may be brought in judicial review proceedings, which may incorporate a claim for damages. The applicant may also seek an injunction to prevent unlawful payment of aid which is about to be made or continued.

Proceedings can be taken in the national courts on the basis that state aid does not comply with the block exemption regulation.  They may be taken on the basis that the aid does not fall within the scope of a Commission decision approving the aid.  The aid may be challenged as not being in accordance with the scheme or in breach of its terms.

Legality EU Decisions

Decisions in relation to the legality of the Commission decision in itself may not be taken in the domestic Court.  They may be taken only in the European Courts. The national courts do not have jurisdiction to decide whether the aid is compatible with the Treaty.

The national court may refer issues to the European Court of Justice.  A preliminary reference may be made in relation to the validity of a Commission decision in a competition matter.

In this context, the national court may request the Commission for an opinion as to whether the particular act constitutes State aid.  This must not be used as an indirect method of challenging a decision that has not been challenged within the requisite time frame.

The national court may request the Commission to send information and may request documents. The Commission’s decision is not binding but would be expected to be given significant weight.