The main legal issue of the judgment at hand consists in the definition of «existing aid» as opposed to «new aid». That distinction involves far-reaching implications on the application of EU state aid rules on grants given by Member States to third parties as beneficiaries. While existing aid escapes the scope of the «Standstill Obligation» of Member States prescribed by article 108 par.3 TFEU, on the other hand, new aid bears -from the outset- a negative presumption on its compatibility with State aid rules and constitutes the main criterion for notification of the aid to the Commission for preliminary scrutiny[1]. Although, the legal framework on State aids can be characterised as widely elaborate and analytical, when legal gaps on the interpretation of its rules appear, like in the case at hand, the Court of Justice of the European Union is called to address them.
Existing aid means: (i) all aid which existed prior to the entry into force of the TFEU in the respective Member States, that is to say, aid schemes and individual aid which were put into effect before, and are still applicable after, the entry into force of the TFEU in the respective Member States; (ii) authorised aid, that is to say, aid schemes and individual aid which have been authorised by the Commission or by the Council; (iii) aid which is deemed to have been authorised pursuant to Article 4(6) of Regulation (EC) No 659/1999 or to Article 4(6) of this Regulation, or prior to Regulation (EC) No 659/1999 but in accordance with this procedure; (iv) aid which is deemed to be existing aid pursuant to Article 17 of this Regulation; (v) aid which is deemed to be an existing aid because it can be established that at the time it was put into effect it did not constitute an aid, and subsequently became an aid due to the evolution of the internal market and without having been altered by the Member State. Where certain measures become aid following the liberalisation of an activity by Union law, such measures shall not be considered as existing aid after the date fixed for liberalisation[2].
The first type of existing aid responds to the need for regulating State aid with a provision of temporal law, the second type relates to the classification of a measure as existing after its proper authorisation by the Commission, the third instance of existing aid refers to the tacit authorisation by the Commission due to expiration of the time limits within which it has to complete the preliminary examination of the notified aid measure and take a decision on whether to initiate the formal investigation procedure, the forth type renders an aid as existing if the Commission loses its power to recover aid and finally fifth instance of existing law defines it in relation to external factors and unpredictable conditions which are able to transform a measure, initially not considered as an aid, to existing aid, with a special provision in case a liberalisation takes place. The concept of existing aid is way too complicate in practice than the above enumeration which should be considered as merely indicative. This is well illustrated by the definition of the notion of «new aid». «New aid» means all aid, individual or schemes, which is not existing aid, including alterations to existing aid. Therefore, new aid is defined in a negative way and in direct pertinence with existing aid, which leads to the further puzzling issue that lack of clarity in determining what comes under the existing aid also affects neat designation of what constitute new aid. That very last part of the definition of «new aid» is the most problematic point because it was left to the Courts to be specified instead of being as precisely as possible defined by way of EU legislation or administrative acts. That was early confirmed by the CJEU in the Namur Les Assurances du Credit v OND case[3]. The Court noted that «the emergence of new aid or the alteration of existing aid cannot be assessed according to the scale of the aid or, in particular, its amount in financial terms at any moment in the life of the undertaking if the aid is provided under earlier statutory provisions which remain unaltered. Whether aid may be classified as new aid or as alteration of existing aid must be determined by reference to the provisions providing for it». This judgment set forth an additional example of existing aid. According to the Namur case, when an aid -classified as an existing one- is amended in a quantitative manner (amount of aid) does not transform to new aid on condition that the statutory regime is not subject to any change. Therefore, the Court chose a qualitative test instead of a quantitative one to designate the difference between existing and new aid under the specific circumstances of the case before it. In case Case C-138/09 Todaro Nunziatina, the Court implied that alteration to an existing aid consists in new aid only if an increase on the budget allocated to the aid and changes in the legislation regulating the aid take place cumulatively and not in the case where there is amendment of the legislative framework, but not affecting the amount of the aid[4]. So, in that case the Court didn’t prefer between qualitative and quantitative approach to the interpretation of existing/new aid but it rather required cumulative fulfilment of the both of them.
As is obvious, the source of the problem in determining whether an aid is «existing» in nature or remains as such is to accurately interpret what constitutes an alteration. In relation to the latter case (preservation of the nature of aid as existing combined with an alteration to it) the Court of Justice of the European Union overturned the judgment of the General Court of the European Union about preferential tariff for the supply of electricity agreed between the Greek electricity power provider (DEI) and a Greek company (Alouminion AE).
Judgment T‑542/11 Alouminion AE v European Commission
In 1960, Alouminion, which produced aluminium, entered into an agreement with the state-owned electricity company [DEI], the then incumbent and sole generator of electricity, to buy electricity at preferential tariffs. The agreement was to remain in force until 2006. The agreement also contained provisions on renewal or termination. In 1992 the Commission, in Decision NN 83/1991, examined the preferential tariff and concluded that it did not constitute State aid. In 2006, DEI informed Alouminion that it would not renew the agreement. Alouminion then initiated court proceedings and succeeded to secure the suspension of the termination of the agreement. In 2008, the Commission received complaints that State aid was granted to Alouminion through the preferential tariff. In 2010, the Commission decided to initiate the formal investigation procedure and in July 2011, it adopted Decision 2012/339. In that Decision, the Commission reversed its earlier position and found that Alouminion had received State aid that was incompatible with the internal market. It ordered Greece to recover it. The Greek company Alouminion appealed against Commission Decision 2012/339[5].
What the Court decided can be summarized as follows:
Measures taken after the entry into force of the Treaty to grant or alter aid, whether or not the alterations relate to existing aid, must be regarded as new aid. In that regard, the extension of an existing aid creates a new aid which is distinct from the aid which was extended and the amendment of the duration of an existing aid should also be regarded as a new aid. However, for Article 108(1) and (3) TFEU to apply, the emergence of new aid or the alteration of existing aid must be determined by reference to the provisions providing for it, its detailed rules and its limits. It is therefore only where the alteration affects the actual substance of the original scheme that the latter is transformed into a new aid scheme. In the context of an annulment action brought against a Commission decision declaring as new aid the suspension, by a national court, in interlocutory proceedings, provisionally and ex nunc, of the effects of the termination of a contract, concluded between the public electricity company and a company before the accession of the Member State to the European Communities, granting a preferential electricity tariff to that company, the intervention of the court hearing the interlocutory action, provisionally maintaining that tariff for a certain period, has neither the purpose nor the effect of altering the substance of the existing aid. It does not alter the contractual or legislative provisions relating to the preferential tariff, or alter the conditions or the limits of that tariff, but is merely an assessment as to whether the termination of the contract was lawful.
Hence, the Court hearing the interlocutory action, rather than granting new aid, merely gave an interim ruling in the dispute before it in the matter of whether the contract under which the preferential tariff was granted had ceased to have effect. It necessarily follows that suspension of the termination of the contract after the interlocutory order is not regarded as being a new privilege separate from the existing aid[6].
The General Court’s judgment recognized in the beginning of its above-mentioned reasoning that alterations of an existing aid, in the form of a time extension of the contract conferring an advantage, are to be considered, in principle, as new aid subject to notification to the Commission and independent from the existing aid. However, it is of necessity for the alteration to fall under the category of new aid to incur a substantial change to the regulatory content and terms of the existing aid measure. Then, it noted that the judgment of a national court adjudicating on an interim legal protection application and ruling in favour of the illegality of the termination of the contractual basis of the existing aid measure on behalf of the Member State by way of awarding interim relief to the Greek company cannot be deemed as altering the substance of the existing aid. It further argued that the interim relief granted by a Court does not change neither the legislative/contractual basis of the existing aid nor the limits or the amount of it. This means that it applied in the Alouminion case the Namur/Todaro Nunziatina test as described above. It concentrated on the inherent nature of the decision of the Court as judicial act and drew a distinction between cases where the dispute at stake revolves around state aid allegations and cases where the main subject of the proceedings relates to the interpretation and implementation of a contract. When the national court is called to decide a case which have no obvious link with State aid matters, then the national court is not bound to interpret and apply directly EU State aid law in conformance with its sincere cooperation duty set by article 4 (3) of the TEU. It is also very important to discern the difference in meaning between the extension or prolongation of measure by a legislative body or administrative authority and the suspension decided by the Court on a certain case heard before it. This is the decisive point in relation to which the Courts embraced different legal understanding.
Judgment C-590/14, DEI v Alouminion tis Ellados and Commission
This judgment by the General Court was overruled by the Court of Justice on appeal. The main legal question to be decided by the CJEU was whether the interim order of the Greek court must be regarded as an alteration to existing aid (tantamount to new aid subject to notification to the Commission) or as an existing aid (exempted by the obligation to notify it).The General Court distinguished between legislative and judicial power and focused on the nature of the authority prescribing the suspension of the termination of contract granting preferential tariffs while the CJEU adopted a single approach to the term «Member State» including every kind of national authorities and concluded that the extension of the duration of existing aid must be regarded as an alteration of the existing aid and therefore is equivalent to new aid, even if the «granting authority» is actually a Court. Both the General Court and the Court of Justice accept that prolongation of the period of validity of an existing aid must be treated as new aid for State aid purposes which is perfectly correct as a legal assertion but they disagree on the potential nature of the granting authority of a Member State. It could be alleged that the CJEU does not pay due heed on the difference between the fact of extending an aid by means of legislative/administrative acts and the fact of suspending the termination of an aid in the context of a dispute examined by a judicial authority which was successfully stressed by the General Court. It also accepts that an omission attributed to a Member State may result in the emergence of State aid, such would, a fortiori, be the case of a measure taken by an organ of the State, even when it is not a legislative measure[7]. Thus, the CJEU imposed a broad obligation on national courts to notify to the Commission any aid measures directly deriving from a contract as a part of the dispute before them if the interpretation or implementation of the contract affects in any way the internal market or competition. That decisional practice aligns with the obligation of the any[8] Greek court to examine of its own motion the compatibility of the law governing the dispute at hand both with the Constitutional provisions and the provisions of EU law due to its supremacy over the national law of each Member State.
The CJEU finds all the cited case law by the General Court to be extraneous to the case. It doesn’t even accept that adduced case law could also be referred to as an interpretation method to be adopted in order to establish whether there is in actual fact an alteration to an existing aid scheme[9]. It concludes that the first order for interim measures had the effect of altering the time limits of application of that tariff, as agreed in the 1960 contract, and therefore the time limits of the aid scheme, as authorised by the Commission in its decision of 23 January 1992. The first order for interim measures must, consequently, be regarded as constituting alteration of existing aid[10]. It also considers that the legal basis of the unlawful aid at hand was the first order for interim measures. It could be sustained that this is legally inaccurate as a statement. To accept that a judgment of a court offering provisional legal protection to the applicant could, a posteriori, substitute the original legal basis of the existing aid -that is to say the initial contract- presupposes that the second act of a Member State (here the judgment on interim measures) could by itself and a priori constitute the legal basis of the existing aid, regardless of the issue of any other (legislative/administrative) legal act. To my knowledge, it is absolutely impossible to grant aid legitimately by means of a judicial decision at first hand. The materially competent authorities of Member States for granting State aid comprise their legislative bodies and administrative authorities with regulatory power gained by virtue of legislative delegation. The Courts of Member States, according to the shared constitutional principle of separation of powers in all Member States which follow the European continental legal system, serve an entirely different goal which is the resolution of legal disputes before them by applying the relevant legislation and offering effective legal protection and restitution for prejudice suffered.
The Court also supports that it is for the national court, in the context of interlocutory proceedings, to notify the Commission and to subject to its preventive review any new measure granting new aid or altering existing aid, from which it is apparent that exclusive competence of the Commission and the primacy of EU law preclude the national court from applying a national measure where its application would be an obstacle to the recovery of the State aid[11]. In connection to the latter, national courts are bound to interpret and apply the concept of ‘State aid’ in Article 107(1) TFEU, in particular in order to determine whether a measure introduced without observance of the preliminary examination procedure provided for in Article 108(3) EC ought to have been subject to this procedure[12]. If the national courts reach the conclusion that the measure at issue should have in fact been notified to the Commission, they must ascertain whether the Member State concerned has fulfilled that obligation and, if that is not the case, declare that measure unlawful[13]. Therefore, the CJEU didn’t confirm the distinction made by the General Court between ‘new aid or alterations of aid properly so-called’ and measures that affect the interpretation and implementation of a contract by judicial order for interim measures, and concluded that even the national court hearing the application for interim measures is indeed subject to the obligations falling upon the national court in accordance with Articles 107 and 108 TFEU. It must be borne in mind that the application of the EU State aid rules is based on a duty of sincere cooperation between the national courts, on the one hand, and the Commission and the European Union courts, on the other, in the context of which each acts on the basis of the role assigned to it by the FEU Treaty. In the context of that cooperation, national courts must take all the measures, whether general or specific, necessary to ensure fulfilment of the obligations under EU law and must refrain from those that may jeopardise the attainment of the objectives of the Treaty, as follows from Article 4(3) TEU. Accordingly, national courts must, in particular, refrain from taking decisions that conflict with a decision of the Commission[14]. It is for the national courts to verify whether the detailed arrangements for the implementation of an aid regime have been amended and, if it were to transpire that any amendments had had the effect of extending the scope of the regime, it could be necessary to consider that the aid was new, with the consequence that the notification procedure set out in Article 108(3) TFEU would be applicable[15]. What the General Court missed to deal with is the obligation of sincere cooperation on which the CJEU elaborates and merely uses as a justifying ground for deciding the case in a different manner.
Comparative conclusions
The question is whether the extent of the obligation for sincere cooperation between national courts and both the Commission and European Union courts encompasses except for cases dealing directly with state aid violations equally to cases brought before national court where state aid violations are well hidden and can be spotted only by the judge. The CJEU delivered a decision which fully complies with the obligations imposed by State aid soft law, effectively ensures the consistent application of State aid rules in national level and correctly -or most accurately- correctively interpret the letter of the provisions of the Notice on the Enforcement of State aid law by national courts. In relation to the latter, articles 28,29,56 and 58 of the above Notice refer to the obligation of national courts to prevent payment of unlawful aid. Those provisions concern due exercise of the national courts competences in order to prevent the mere disbursement of unlawful aid (which means that there is already a valid state aid measure in place), to decide on challenges of the validity of a national act granting unlawful aid, to rule on violations of the Standstill obligation which necessitate national courts to draw all legal consequences to protect rights of individuals and to enjoin interim measures when there is the risk of imminent granting of illegal aid during the course of national court proceedings. Those conditions, described in the Notice, under which national courts should act towards safeguarding both the effective application of State aid law and the individuals’ rights do not correspond with the facts of the case at hand because of the following reasons. In the Alouminion case there was no disbursement to be made but on the contrary the continuity of the advantage was provisionally and for the first time decided by the national court (as opposed to the usual granting of a time extension of the aid measure by the legislature or administrative authorities). Neither challenge of the validity of a national act granting unlawful aid nor violations of the Stanstill obligation took place since the subject matter of the dispute was based on different facts. The preferential tariffs were granted lawfully as existing aid on the basis of the contract escaping the duty of notification, there was no scope of application for Standstill obligation and therefore the element of «unlawfulness» was completely absent. Likewise, there was no risk of imminent granting of illegal aid during the course of national court proceedings. Instead of that, the risk consisted in the imminent granting of aid after the termination of the national proceedings and its nature as illegal or not was more than disputable as the present cases demonstrate. Thus, the CJEU established a new instance of new aid due to alteration of an existing aid. It interpreted the national courts’ duty for direct application of State aid rules under the light of the general principle for sincere cooperation of article 4(3) TEU and concluded that the amendment of the duration of an existing aid should be regarded as a new aid, even if the said prolongation is decided by a Court and not by legislation or administrative act. The lesson to be learnt from that judgment is twofold. New aid is also considered to arise by the violation of the principle of sincere cooperation between national courts and the Commission/European Union courts. The judgment illustrates with the most fluent way the deficit of EU law proper knowledge and application by national judges.
[1] Article 2 et seq. of Council Regulation (EC) No 659/99, but also Article 2 et seq. of Council Regulation (EU) 1589/2015 («New Procedural Regulation»)
[2] Article 1 of Council Regulation (EU) 1589/2015 («New Procedural Regulation»)
[3] Judgment of the Court of 9 August 1994, C-44/93 Namur Les Assurances du Credit v OND
[4] Paragraph 42 & Case C-138/09 Todaro Nunziatina Available at http://curia.europa.eu/juris/document/document.jsf?text=&docid=80312&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=796150
[5] Recovery of State Aid and Penalty for Failing to Recover Incompatible Aid, Phaedon Nicolaides 18.11.2014 Available at http://stateaidhub.eu/blogs/stateaiduncovered/post/429
[6] T-542/11 Judgment Summary Available at http://curia.europa.eu/juris/document/document.jsf?text=&docid=165345&pageIndex=0&doclang=en&mode=req&dir=&occ=first&part=1&cid=690914
[7] Paragraph 64 of C-590/14
[8] For the peculiarity of the control of constitutionality of laws in Greece please see: Anastasia Kaltsa, 'The Review of the Constitutionality of Laws in Greece' (1998) 4 European Public Law, Issue 3, pp. 292–298
[9] Paragraph 40 of C-590/14
[10] Paragraph 59 of C-590/14
[11] Paragraph 90 of C-590/14
[12] Paragraph 98 of C-590/14
[13] Paragraph 99 of C-590/14
[14] Paragraph 105 of C-590/14
[15] Paragraph 106 of C-590/14