EU Law Blog

State Aid Procedure, Access to File and Transparency: Case C-139/07 P

The Court of Justice has handed down a controversial judgment in Case C-139/07 P Commission v. Technische Galswerke Ilmenau GmbH. It held that the EU institutions may refuse under Regulation 1049/2001 to grant members of the public access to documents concerning the review of State aids because of a general presumption that disclosure of those documents would undermine investigation activities. Rather oddly, it held that such a general presumption may arise from the fact that the specific procedures applicable to the review of State aid allow only a very limited access to the documents on the file to the Member state granting the aid.

The facts are rather specific to this case and may be the source of the trouble. In December 1998, Germany notified the Commission of various measures designed to give financial aid to Technische Glaswerke Ilmenau (TGI). The Commission adopted a decision on June 12 2001 finding that the financial assistance granted constituted State aid incompatible with the common market. TGI brought an action for the annulment of that decision which was dismissed.

Then, in July 2001, the Commission opened a second formal investigation procedure in relation to aid granted by Germany to TGI, particularly a bank loan. In March 2002, TGI applied under Regulation 1049/2001 for access to all the documents in the Commission's files regarding State aid cases concerning TGI. By decision of May 28 2002, the Commission rejected the request for access, on the ground that disclosure of those documents would be likely to undermine the protection of the purposes of inspections and investigations, invoking the exception to the right of access laid down in Article 4(2), third indent, of Regulation No 1049/2001.

TGI brought an action before the Court of First Instance seeking annulment of that Commission decision.

In its judgment in Case T-237/02 Technische Galswerke Ilmenau GmbH v. Commission [2006] ECR II-5131, the General Court annulled the decision refusing access holding that the Commission had failed to examine each document covered by the request for access in a concrete, individual manner.

The Commission then appealed that judgment in this case.

The Court of Justice's judgment on appeal is interesting because it highlights the relationship between particular rules on access to file that may - or not - be contained in specific procedural regulations, such as Regulation 659/1999, and the general right of the public to have access to documents under Regulation 1049/2001.

The Court recalled that having been adopted on the basis of Article 255(2) EC, Regulation No 1049/2001 is designed to confer on the public as wide a right of access as possible to documents of the institutions. But that right of access is subject to certain limits based on reasons of public or private interest. It also recalled that in order to justify refusal of access to a document the disclosure of which has been requested, it is insufficient, in principle, for that document to fall within an activity mentioned in Article 4(2) of Regulation No 1049/2001. The institution concerned must also supply explanations as to how access to that document could specifically and effectively undermine the interest protected by an exception laid down in that article (Joined Cases C‑39/05 P and C‑52/05 P Sweden and Turco v Council [2008] ECR I‑4723, paragraph 49). (See our post on that case here).

The Court went on that it has acknowledged that the EU institution can in principle to base its decisions in that regard on general presumptions which apply to certain categories of documents, as considerations of a generally similar kind are likely to apply to requests for disclosure relating to documents of the same nature (Sweden and Turco, paragraph 50).

But where does such a presumption come from ? As regards procedures for reviewing State aid, such general presumptions may arise from Regulation No 659/1999 and from the case-law concerning the right to consult documents on the Commission’s administrative file. Regulation No 659/1999, and its Article 20, do not lay down any right of access to documents in the Commission’s administrative file for interested parties in the context of the review procedure opened in accordance with Article 108(2) TFEU.

By contrast, holds the Court, Article 6(2) of Regulation 659/1999 provides that comments received by the Commission in the context of the said review procedure are to be submitted to the Member state concerned, the latter then having the opportunity to reply to those comments within a given time-limit. The procedure for reviewing State aid is, in view of its general scheme, a procedure initiated in respect of the Member State responsible for granting the aid, and the Commission cannot, without infringing the rights of the defence, use in its final decision information on which that Member State was not afforded an opportunity to comment (Joined Cases C‑74/00 P and C‑75/00 P Falck and Acciaierie di Bolzano v Commission [2002] ECR I-7869, paragraph 81).

The Court then draws the conclusion that the interested parties, except for the Member State responsible for granting the aid, do not have a right under the procedure for reviewing State aid to consult the documents on the Commission’s administrative file. Account must be taken of that fact for the purposes of interpreting the exception laid down by Article 4(2), third indent, of Regulation No 1049/2001. If those interested parties were able to obtain access, on the basis of Regulation No 1049/2001, to the documents in the Commission’s administrative file, the system for the review of State aid would be called into question.

In a paragraph that must surely be described as weird, the Court held:

"It is true that the right to consult the administrative file in the context of a review procedure, opened in accordance with Article 88(2) EC, and the right of access to documents, pursuant to Regulation 1049/2001 are legally distinct, but the fact remains that they lead to a comparable situation from a practical point of view. Whatever the legal basis on which it is granted, access to the file enables the interested parties to obtain all the observations and documents submitted to the Commission, and, where appropriate, adopt a position on those matters in their own observations, which is likely to modify the nature of such a procedure."

And thus concludes that for the purposes of interpreting the exception laid down in Article 4(2), third indent, of Regulation 1049/2001, the General Court should, in the judgment under appeal, have taken account of the fact that interested parties other than the Member state concerned in the procedures for reviewing State aid do not have the right to consult the documents in the Commission’s administrative file, and, therefore, have acknowledged the existence of a general presumption that disclosure of documents in the administrative file in principle undermines protection of the objectives of investigation activities.

The problem with this judgment is that the applicant requesting the documents under Regulation No 1049/2001 was an "interested party" in the State aids procedure (in fact the beneficiary of the aid) and thus had very limited access to the file under Regulation 659/1999. The Court seems to want to prevent interested parties improving their position in a round about way by using the public access rules in Regulation 1049/2001. But under Regulation 1049/2001 anyone, including interested parties, have a general right to obtain documents and need not plead any special interest in seeking them.

State Aids, National Courts and Commission Procedures: Case C-1/90

The Court of Justice has handed down a quick judgment in Case C-1/90 CELF that clears up the situation of national courts seised of an action for the recovery of unlawful state aid pending a decision of the Commission on its compatibility.

The main issue was whether a national court, seised by a competitor of an action for the recovery from a beneficiary of unlawful state aid, may stay those recovery proceedings until the Commission has taken a decision declaring the aid to be compatible with the common market.

The Court of Justice held that the national court may not stay the recovery proceedings in such circumstances but must rule on the matter without waiting for a Commission decision.

The background to the case is rather tortuous and need not really concern us. In short, the French state provided aid to CELF, a cooperative, to promote the export of French language books. A competitor to CELF, which did not benefit from any state support, complained to the Commission that the aid granted was incompatible with the EU and brought an action before the French courts seeking recovery of the aid granted to CELF. The Commission had adopted three successive decisions declaring the aid to CELF to be compatible with the common market but the Court of First Instance (now, General Court) annulled each and every one of those decisions. So the question came up as to what the national court should do with the recovery action pending the adoption of the Commission's fourth decision: To stay or not to stay ?

Definitely, do not stay, is the Court of Justice's answer.

The Court recalled that Article 108 §3 TFEU (ex Article 88(3) EC) entrusts the national courts with the task of preserving, until the final decision of the Commission, the rights of individuals faced with a possible breach by State authorities of the prohibition laid down by that provision (Case C-199/06 CELF I [2008] ECR I-469, paragraph 38). The Court has already in essence ruled, in Case C‑39/94 SFEI and Others [1996] ECR I‑3547, paragraphs 44 and 50 to 53, that:
– the initiation by the Commission of an examination procedure cannot release national courts from their duty to safeguard the rights of individuals in the event of a breach of the requirement to give prior notification;
– where it is likely that some time will elapse before it gives its final judgment, for example, where it seeks clarification from the Commission for the purposes of interpreting the concept of State aid which it may have cause to grant or where it refers a question to the Court for a preliminary ruling, the national court must decide whether it is necessary to order interim measures in order to safeguard the interests of the parties.

The Court also noted that a stay of the national proceedings would amount to maintaining the benefit of aid during the period in which implementation is prohibited which would be inconsistent with the very purpose of Article 108 §3 TFEU and would render that provision ineffective.

The Court adds for good measure that the annulment by the EU courts of a previous positive Commission decision cannot justify any different conclusion prompted by the consideration that, in that case, the aid might subsequently be once again declared compatible by the Commission. The purpose of Article 108 §3 TFEU is clearly prompted by the consideration that, until a new decision has been adopted by the Commission, it cannot be presumed that that decision will be positive in its content.

Reasoning, Public Policy, Human Rights and Raising a Plea on Own Motion: Case C-89/08 P

It is not every day that the Court of Justice beats up the Court of First Instance (as it was known) for violating the human rights of the parties. But that is just what it did in its judgment in Case C-89/08 P Commission v. Ireland and others.

What happened was this. The Commission adopted a decision partly approving state aid schemes introduced by France, Italy and Ireland and partly declaring them incompatible with the common market and ordering their recovery.

Ireland, France and Italy then challenged that decision before the Court of First Instance. That Court annulled the decision in its judgment in Joined Cases T- 50/06, T-56/06, T-62/06 and T-69/06 Ireland and others v. Commission (ECR [2007] II-172). The Court of First Instance held that the Commission had failed to give proper reasons for its decision and annulled it on that sole ground.

The problem with that, though, was that none of the applicants had pleaded lack of reasoning as a ground of annulment and the Court of First Instance did not question the parties on that aspect of the case at all during the written or oral phase of the proceedings: It just pulled that ground of annulment out of its hat when handing down the judgment.

And so the Commission appealed.

The Court of Justice upheld the Commission's appeal on that point.

It held that the Court of First Instance could raise the ground of annulment for lack of reasoning of its own motion. It recalled that it has consistently been held that an absence of or inadequate statement of reasons constitutes an infringement of essential procedural requirements for the purposes of Article 263 TFEU and is a plea involving a matter of public policy which may, and even must, be raised by the Community judicature of its own motion (Case C‑166/95 PCommission v Daffix [1997] ECR I‑983, paragraph 24; Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 67; Case C‑265/97 P VBA v Florimex and Others [2000] ECR I‑2061, paragraph 114; and Case C‑413/06 P Bertelsmann and Sony Corporation of America v Impala [2008] ECR I‑4951, paragraph 174).

So far so good. But then Court of Justice dealt with whether it was proper for the Court of First Instance to raise the plea of its own motion without hearing the parties on that point at all.

The Court of Justice drew the line at that and held that the Court of First Instance should have heard the parties before deciding the case on that point. It held that the principle that the parties should be heard means, as a rule, that the parties have a right to a process of inspecting and commenting on the evidence and observations submitted to the court (Case C‑450/06 Varec [2008] ECR I‑581, paragraph 47) and, moreover, that that basic principle of law is infringed where a judicial decision is founded on facts and documents which the parties, or one of them, have not had an opportunity to examine and on which they have therefore been unable to comment (Joined Cases 42/59 and 49/59 SNUPAT v High Authority [1961] ECR 53, 84; Case C‑480/99 P Plant and Others v Commission and South Wales Small Mines [2002] ECR I‑265, paragraph 24; and Case C‑199/99 P Corus UK v Commission [2003] ECR I‑11177, paragraph 19). It insisted that a court must itself observe the rule that the parties should be heard, in particular, when it decides a dispute on a ground it has identified of its own motion (see, by analogy, in the sphere of human rights, the judgments of the European Court of Human Rights in Skondrianos v. Greece, nos. 63000/00, 74291/01 and 74292/01, §29 and 30, 18 December 2003; Clinique des Acacias and Others v. France, nos. 65399/01, 65405/01 and 65407/01, §38, 13 October 2005; and Prikyan and Angelova v. Bulgaria, no. 44624/98, §42, 16 February 2006).

In a final rebuke to the Court of First Instance, the Court of Justice recalled that, in the analogous context of Article 6 of the ECHR, it has held that it is precisely in deference to that article and to the very purpose of every individual’s right to adversarial proceedings and to a fair hearing within the meaning of that provision that the Court may of its own motion, on a proposal from the Advocate General or at the request of the parties, order that the oral procedure be reopened, in accordance with Article 61 of its Rules of Procedure, if it considers that it lacks sufficient information, or that the case must be dealt with on the basis of an argument which has not been debated between the parties (Order of 4 February 2000 in Case C‑17/98 Emesa Sugar [2000] ECR I‑665, paragraphs 8, 9 and 18, and Joined Cases C‑270/97 and C‑271/97 Deutsche Post [2000] ECR I‑929, paragraph 30).

Olympic Airways, State Aid, Infringements and Financial Penalites against Greece: Case C-369/07

The Court of Justice has once again ordered Greece to pay a lump sum and a periodic penalty payment under Article 228 EC for failing to comply with a Court judgment.

This time Greece failed to comply with the judgment of the Court in Case C-415/03 Commission v. Greece [2005] ECR I-3875 that found that Greece had failed to recover unlawful state aid paid to Olympic Airways.

In its judgment in Case C-369/07 Commission v. Greece, the Court of Justice held that Greece had failed to recover the illegal state aid as required by the judgment in Case C-415/03, imposed a periodic penalty payment of €16 000 per day until Greece complies with that judgment and also imposed lump sum of €2 million.

The judgment says nothing new about infringement proceedings and the reasoning set out is similar to that in Case C-109/08 Commission v. Greece and Case C-568/07 Commission v. Greece, both cases noted here.

A point that arose was whether set-off was a valid manner of reclaiming illegal state aid paid to a company. What had happened was that Greece had paid illegal aid to Olympic Airways on the one hand but, on the other hand, following a separate dispute between the Greek government and the airline, the latter was awarded compensation by an arbitration panel. The Greek government then set-off part of the illegal aid owed back to it against the amount of the compensation it had to pay to the airline.

The Court held that a member State is free to choose the means by which unlawful state aid must be recovered (Case C-209/00 Commission v. Germany [2002] ECR I-11659, paragraph 34) and that a set-off operation can constitute an appropriate means.

It is worth noting also that the Commission had proposed to the Court of Justice that it impose a periodic penalty payment of €53 611 but the Court reduced the amount considerably because Greece was able to adduce evidence that part of the illegal aid had in fact been recovered already by the set-off operation.

State Aids and National Courts: Commission Guidelines

The Commission has adopted and published new guidelines to assist the courts of member States' in applying EU state aid rules. The guidelines are supposed to support national courts and potential claimants in challenging domestic state aid, in particular in the recovery of illegal aid from the beneficiary, interim relief or possible damages actions. In addition, the guidelines cover how national judges can ask the Commission for information or opinions on how to apply of the state aid rules.

You can see the complete guidelines here.

The Commission has published a press release and some useful "faqs" here.

Those guidelines on state aids are rather like these on those in antitrust on coöperation with domestic courts.

Banking Crisis - Overview of National Bailout Measures

The Commission has published a handy table listing the measures taken by the member States to date to bail out the financial sector.

You can find it here. And it is really worrying because it sets out rather graphically the utterly calamitous states of the banking sector in the EU.

The new guidance the Commission has just published also shows that it expects far worse to come.

Banking Crisis, State Aids and Commission Guidance

As we announced a few days ago, the Commission has now issued its new guidance on how governments of member States can spend vast sums to try to save all those bankrupt banks in the EU. And get away with it.

The practical result is that the Commission all but suspends the application of the rules on state aids and backs off from trying to restrain the member States in any meaningful way.

The Commission paper states that the aim is to try to comply with the rules on state aid by approving any aid the states are likely to give on the basis of Article 87(3) b) EC if six basic conditions are fulfilled by the national measures :

- They give non-discriminatory access to the aid in order to protect the functioning of the Single Market by making sure that eligibility for a support scheme is not based on nationality;
- State commitments should be limited in time so that support can be provided as long as it is necessary to cope with the current turmoil in financial markets but will be reviewed and adjusted or terminated as soon as improved market conditions so permit;
- State support should to be clearly defined and limited in scope to what is necessary to address the acute crisis in financial markets while excluding benefits for shareholders;
- An appropriate contribution should be made by private sector by way of an adequate remuneration for the introduction of general support schemes (such as a guarantee scheme) and the coverage by the private sector of at least a significant part of the cost of assistance granted;
- The State imposes sufficient behavioural rules for beneficiaries that prevent an abuse of state support, like for example expansion and aggressive market strategies on the back of a state guarantee (that presumably is the abuse the Commission seeks to prevent, not the rule it seeks to impose);
- An appropriate follow-up by structural adjustment measures for the financial sector as a whole and/or by restructuring individual financial institutions that had to rely on state intervention should be foreseen.

So, if member States do that, the Commission promises to rubber stamp its approval, if possible in 24 hours.

Banking Crisis, State Aids and What is to Come

Ms. Kroes, the member of the Commission responsible for State aid control and antitrust recently addressed the Economic and Monetary Affairs Committee of the European Parliament.

Her speech, which gives some indication of the calamitous state of the banking sector in Europe, outlines what has been done so far to shore up all those bankrupt banks. In essence, it seems that the Commission is rubber stamping the aid given by member States to their banking and credit institutions.

The speech seems to imply that far worse is to come.

In expectation of the coming catastrophe, the Commission will issue new guidance for bank recapitalization and guarantee schemes.

Regional aid block exemption: Regulation 1628/2006

The Commission has adopted and published a new state aid block exemption Regulation - Regulation 1628/2006 - for regional investment aid see also the press release).

The aim of the new regulation is to simplify the treatment of aid which seeks to promote the economic development of the many disadvantaged regions of the EU.

According to the new regulation member States will no longer have to notify regional investment aid schemes to the Commission if they fulfill a certain number of conditions laid down. In particular, the regulation block exempts schemes for which it is possible to calculate precisely the aid intensity as a percentage of the investment costs ex ante without the need for a risk assessment. Regional aid schemes involving public shareholdings, risk capital and state guarantees are presumed not to fulfill that condition.

The regulation is based on the new Guidelines for regional aid 2007-2013 (see also the press release and explanation) which were adopted in December 2005 and which are in line with EU cohesion policy and European Council requests for less and better targeted state aid. There are also new notification forms for regional aid schemes that do not meet the conditions of the new regulation and thus still have to be notified individually to the Commission for approval before they can be implemented.

The new regulation applies to aid schemes put into effect or which enter into force after December 31st, 2006 and expires December 31st, 2013.