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CJEU: An extension to state aid counts as new aid

An extension to the validity of existing state aid must be seen as alteration of that aid and hence new aid subject to the obligation of prior notification to the European Commission, the Court of Justice of the European Union (CJEU) has said.31 Oct 2016

This is the case even where the alteration was decided by a national court, the CJEU said.

The CJEU, Europe's highest court, had been asked to rule on whether alterations by a national court to state aid given to a Greek aluminium producer, Alouminion, amounted to a new aid, in which case it should have been notified to the European Commission before being implemented.

Greek public electricity company DEI entered into a contract with Alouminoin in 1960, giving the company a preferential tariff. That contract was due to end on 31 March 2006. However, when DEI finished the contract on that date, Alouminoin challenged the termination before the Greek courts. The Single-member Court of First Instance in Athens suspended the effect of the termination in 2007 as an interim measure, but on appeal to that decision the Multi-Member Court of First Instance then ruled in favour of DEI and terminated the contract from 6 March 2008.

In July 2011 the European Commission decided that Greece had unlawfully granted €17.4 million in state aid to Alouminoin in the period between the two Greek court decisions because Alouminion continued to benefit from the preferential tariff during that period, and Greece should therefore recover the money. The aid was new and incompatible with the internal market as it had been granted without prior notification to the Commission, it said.

In 2014, the General Court overturned the Commission's decision, holding that the aid was not 'new' but rather 'existing'. DEI, supported by the Commission, appealed that ruling to the CJEU.

The CJEU has now annulled the ruling of the General Court and referred the case back to it for a new judgment. The General Court has misinterpreted the case law, it said. The finding of the first Greek court in this case, which altered the time limits on the aid, constituted an alteration of the aid. 

National courts are responsible for ensuring compliance with EU law on state aid, including the obligation of prior notification, the CJEU said, and must cooperate with the institutions of the EU even when they order interim measures against unlawful aid pending final judgment.

State aid expert Caroline Janssens of Pinsent Masons, the law firm behind Out-Law.com said: "This ruling implies that a member state has an obligation to notify to the European Commission an aid measure of which the time limit has been extended by a national court, even provisionally while waiting for a final judgment on its validity. This may seem peculiar, especially if the national court eventually confirms the validity of the aid."  

"However, this ruling is in line with the EU state aid rules and the case law. In particular, the CJEU restates a ruling in a case which involved Deutsche Lufthansa in saying that national courts are required to remedy the unlawfulness of the aid without first having to question whether it constitutes state aid and whether the suspension obligation actually applies to it," Janssens said.

"Under EU state aid rules, countries must seek prior clearance from the Commission for any plans to grant or alter state aid. In particular, they may not implement the proposed state aid before it has been approved," she said. "If the aid is implemented in breach of this suspension obligation, it is automatically deemed to be unlawful and countries can be ordered to recover it from the recipient."

"This suspension obligation has 'direct effect' which means that national courts may also take all necessary measures to remedy the breach of the suspension obligation, including ordering the full recovery of payments already made for example," said Janssens.

"This ruling will have an impact on the assessment of risk associated with granting state aid without seeking prior approval as the alteration of an aid measure by a national court will be yet another circumstance to assess very carefully and thoroughly. This ruling is likely to lead to a greater number of notifications for clearance in order to obtain legal certainty," Janssens said.