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The Court of Justice Allows Member States to Compensate the Undertaking of their Choice: a Critique journal article

Phedon Nicolaides

European State Aid Law Quarterly, Volume 22 (2023), Issue 4, Page 371 - 380

State aid that compensates for damage caused by natural disasters or exceptional occurrences can run into many millions. It has the potential to cause a serious distortion to competition in the internal EU market. Yet, Article 107(2)(b) declares that aid compatible with the internal market without any prior assessment of its positive and negative effects by the Commission. This immediately raises the question - why is that aid considered by the TFEU to be compatible with the internal market? A corollary question is whether compensatory aid can be granted only to some of the undertakings harmed by a natural disaster or exceptional occurrence. The Court of Justice has recently answered the latter question by ruling that compensatory aid for a limited number of beneficiaries is not excluded by Article 107(2)(b). This paper argues that the latter question cannot be answered without deriving a plausible answer to the former question. Given the structure and overall objective of Article 107, a plausible answer is that compensatory aid tends to restore rather than distort competition. Therefore, compensatory aid that is granted to a limited number of beneficiaries is likely to be discriminatory beyond the extent that is inherent in any State aid measure and to cause excessive distortion of competition. Keywords: Article 107(2)(b) TFEU, compensation for damage, selectivity, discrimination.

News from Micula: The Court of Justice Clarifies the Temporal Application of EU State Aid Rules and Confirms the Relevance of Achmea · Case C-638/19 P European Commission v European Food SA and Others (Micula) · Annotation by Vasiliki Dolka journal article

Annotation of the Judgment of the Court of Justice (Grand Chamber) of 25 January 2022 in Case C-638/19 P European Commission v European Food SA and Others ('Micula')

Vasiliki Dolka

European State Aid Law Quarterly, Volume 21 (2022), Issue 1, Page 87 - 92

On 25 January 2022, the Court of Justice (CJ) overturned the judgment of the General Court (GC) that had annulled a 2015 European Commission (Commission) State aid decision declaring the payment of compensation granted by an arbitral award for violation of the 2003 Romania-Sweden Bilateral Investment Treaty, as unlawful and incompatible State aid. The GC annulled the Commission Decision for lack of competence ratione temporis to assess the measure as it considered the aid to have been granted before Romania’s accession to the EU. To the contrary, the CJ considers that the critical date at which the right to receive the aid is conferred to the beneficiary coincides with the granting of the right to compensation. On this ground, the CJ reinstates the Commission’s competence to review the aid. It also confirms the relevance of the Achmea ruling, by concluding that any consent that may have been given by an EU Member State to participate in international investment arbitration proceedings before its accession to the EU lacks any legal force post accession. The CJ has remanded the case back to the GC to decide on the merits.

The Commission Adopts the New Notice on the Enforcement of State Aid Rules Before National Courts: journal article

An Overview of the State of Play of Private Enforcement of State Aid Law

Leonardo Armati, Federico Macchi

European State Aid Law Quarterly, Volume 21 (2022), Issue 1, Page 3 - 19

The European Commission has adopted a new notice on the enforcement of State aid rules by national courts. The New Enforcement Notice replaces the 2009 Enforcement Notice, providing updated practical guidance for national judges facing private claims to remedy the unlawful granting of State aid, ie without a prior Commission approval or an exemption from notification. This article illustrates the main aspects of the New Enforcement Notice, from the general principles to certain topics, such as the interplay between the Commission and national courts’ proceedings, the role of national courts regarding aid covered by the GBER and damages actions, that appear particularly relevant in the light of the innovation they bring compared to the 2009 Notice. The article, in line with the spirit of the Enforcement Notice, stresses the importance of private enforcement before national courts for an effective development and application of EU State aid rules. Keywords: private enforcement; enforcement notice; national courts; standstill obligation; damages actions

State Aid Tools to Tackle the Impact of COVID-19: journal article

What Is the Role of Economic and Financial Analysis?

Nicole Robins, Laura Puglisi, Ling Yang

European State Aid Law Quarterly, Volume 19 (2020), Issue 2, Page 137 - 149

In response to the COVID-19 pandemic, the European Commission quickly provided guidance on how Member States can support companies during the crisis in a manner that is in line with State aid rules. With the Commission having approved €2.6 trillion of aid notified by Member States since the start of the pandemic, State aid rules have come under the spotlight more than ever before. Some argue that the different approaches adopted by Member States to deal with the crisis create significant competitive distortions between Member States, while others argue that State aid rules should be made more lenient. This article discusses the State aid tools that Member States can use to deal with the effects of the pandemic, focusing on the role of economic and financial analysis to support the application of these tools. The article examines how Member States can provide liquidity support to companies in compliance with State aid rules, before looking at how Member States could provide more longer-term funding solutions to companies to deal with the effects of the pandemic without breaching State aid rules. Keywords: COVID-19, liquidity support, compensation for damages, rescue aid, restructuring aid, economic and financial analysis, recapitalisations

How to Estimate the COVID-19 Damages? journal article

Economic Considerations for State Aid During a Time of Crisis

Victor Ahlqvist, Adina Claici, Stephanie Tizik

European State Aid Law Quarterly, Volume 19 (2020), Issue 2, Page 150 - 160

The unprecedented volume of State aid applications during the COVID-19 crisis presents new economic challenges and policy considerations related to the need for aid and the extent of the damages suffered by undertakings. In light of the current situation, this article presents the foundation for State aid during the outbreak of COVID-19, discusses the methodology for determining the damages using a counterfactual analysis and addresses some of the important factors that policy makers must balance in order to ensure that firms receive the necessary support while minimising the distortions on competition. Keywords: damage estimation, counterfactual analysis, COVID-19

Taxation, State Aid Rules and Arbitral Courts: journal article

A BIT of a Mess in the Micula Saga

Begoña Pérez Bernabeu

European State Aid Law Quarterly, Volume 19 (2020), Issue 3, Page 329 - 338

In its long-awaited ruling on 18 June 2019, the General Court (GC) annulled the Commission's State aid Decision in the Micula case where the Commission considered that the damages payment by Romania of an ICSID award constituted State aid. In the GC's opinion, the payment of the adverse arbitration award by a Romania does not constitute illegal State aid. Unfortunately, the GC's reasoning is tied to the timing of the measure taken by Romania, which took place before Romania acceded to the EU, and the rest of the compelling substantive pleas were not assessed. Moreover, the GC did not rule on whether the compensation of the withdrawal of the tax incentives for the post-accession period constitutes State aid given that the Commission failed to distinguish between compensation for the period predating accession and post-accession. For this reason, this judgment does not put an end to the Micula saga as long as the Commission has lodged an appeal before the Court of Justice. Keywords: arbitral award, Bilateral Investment Treaty (BIT), repeal of tax incentives, damages compensation, enforcement

The Never Ending ‘Saga’ of the Fallimento Traghetti del Mediterraneo · Case C-387/17 Traghetti del Mediterraneo · Annotation by Alessandra Franchi journal article

Annotation of the judgment of the Court of Justice (First Chamber) of 23 January 2019 in Case C-387/17 Presidenza del Consiglio dei Ministri v Fallimento Traghetti del Mediterraneo

Alessandra Franchi

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 391 - 397

This judgment continues the ‘saga’ related to the litigation between Fallimento Traghetti del Mediterraneo and the Italian State concerning the unlawful State aid granted to Tirrenia di Navigazione SpA as compensation for public service obligations from 1976 to 1980 and shows the complexity of the assessments by national courts on damages related to the granting of unlawful State aid. The CJ provides guidance on the notion of existing aid, clarifying that State aid measures which were granted in a period when the maritime cabotage market was not yet liberalized at Union level cannot be classified as existing aid because of the merely formal absence of liberalisation of that market, to the extent that those subsidies were liable to affect trade between Member States and distorted or threatened to distort competition. The CJ also emphasises the cooperation obligation of the national courts and their role in awarding damages related to the distortion of competition created by unlawful State aid. Member State cannot invoke the principle of legitimate expectation in case of breach of the notification obligation set in Article 108 (3) TFEU. Finally, the CJ clarifies that the ten-year limitation period set out in Article 15, paragraph 1, of Regulation 659/1999 (repealed by Regulation 2015/1589), only applies to Commission investigation under Article 108, paragraph 3, TFEU and only refers to the Commission’s power and time limit for recovery of illegal aid, but does not apply in damages proceedings before the national jurisdictions. Keywords: Existing aid; Recovery; National enforcement; Prescription; Damages.

The Interest in Bringing Annulment Proceedings · Case C-544/17 P BPC Lux 2 Sàrl and Others v European Commission · Annotation by Federica Maldari journal article

Annotation on the Judgment of the Court of Justice (First Chamber) of 7 November 2018 in Case C-544/17 P BPC Lux 2 Sàrl and Others v European Commission

Federica Maldari

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 398 - 403

The Case deals with the decision of Portuguese authorities to put Banco Espirito Santo SA (BES) into resolution and to immediately create a ‘Bridge Bank’. The Portuguese authorities notified to the EC the proposal to grant €4.899 million of State aid to the ‘Bridge Bank’ by way of initial share capital. The EC concluded that the State aid at issue was compatible with the internal market. BPC Lux 2 Sàrl and the other subordinated creditors of BES initiated proceedings before national courts and ultimately to the Court of the Justice of the European Union. On 7 November 2018, the Court of Justice rejected the General Court’s Order to dismiss the action as inadmissible due to lack of interest. Consequently, the Court of Justice confirmed the principle that an interest in bringing annulment proceedings may arise where the annulment might benefit the applicant in pending proceedings before national courts. Keywords: State aid; Financial crisis; Subordinated creditors; Damages; Annulment proceedings; National legal basis.

Can an ICSID Award be State Aid? · Cases T-624/15, T-694/15 and T-704/15 Micula · Annotation by Marija Momic journal article

Annotation on the Judgment of the General Court (Second Chamber, Extended Composition) of 18 June 2019 in Cases T-624/15, T-694/15 and T-704/15 European Food SA and Others v European Commission (Micula)

Marija Momic

European State Aid Law Quarterly, Volume 18 (2019), Issue 3, Page 346 - 351

On June 18, 2019, the General Court rendered the judgment in the Micula Case, trying to put an end to the more-than-a-decade-long Micula saga. The judgment was expected to clarify the question of when an arbitral award for the compensation of damages can be regarded as State aid. The Case, however, was decided on a rationae temporis issue, and the General Court did not provide a more detailed guidance on that question. Since all the events relating to the State aid took place before Romania’s accession to the EU, the General Court concluded the Commission did not have the jurisdiction to review the legality of the State aid granted to Romanian investors. Considering that part of the compensation awarded to the applicants included the period after Romania’s accession, the General Court left open the possibility for the Commission to re-assess the compatibility of the compensation for the post-accession period. The Commission, however, has decided to challenge the ruling before the Court of Justice. Keywords: Award of Damages; Investor-State Arbitration; New Aid; Compensation.

Private Enforcement of EU State Aid Law Through Damages Claims journal article

Achieving Effective Redress

Alvaro Ummen Almeida

European State Aid Law Quarterly, Volume 18 (2019), Issue 2, Page 169 - 179

A new enabling framework for damages claims based on competition law infringements has arisen in light of the European Damages Directive coming into force and its implementation across EU Member States. Hitherto, one of the reasons why damages awards derived from State aid infringements have been rare is the absence of EU cause of action in claims against the aid beneficiary and on the standards of proof in causality analysis. These obstacles can be surpassed by amplifying the scope of the Damages Directive and through a broader interpretation of the goals of Articles 107 and 108 TFEU with further instruments such as compensation. Aligned with the expectation of initiatives at the EU level, five steps are suggested: amplifying the scope of the Damages Directive to State aid infringements; joint and several liability between Member States and aid recipients; presumption of harm to reduce causal uncertainty; counterfactuals for quantifying damages; and a right of recourse from contractual liability by the aid recipient. A more economic approach in line with the overarching principle of effectiveness will enable an active role by competitors, promoting equivalence between antitrust and State aid harm redress, while also functioning as a complementary deterrence mechanism of enforcement by strengthening the recovery procedure. Keywords: Damages; Enforcement; Framework Equivalence; Effective Redress.