Introduction
The first judgment of 2025 on State aid was rendered by the Cour of Justice of the EU [CJEU] in case C-588/23, Scai, on 16 January 2025. It was a response to a request for a preliminary ruling by an Italian court.[1] Scai had initiated legal proceedings before a national court to contest a request by Regione Campania for repayment of State aid that had been found to be unlawful and incompatible with the internal market.
In January 2015, the Commission, by decision 2015/1075, ordered Italy to recover incompatible State aid from Buonotourist, a bus transport company. Buonotourist appealed unsuccessfully both to the General Court [T-185/15, Buonotourist v Commission] and the CJEU [C-586/18 P, Buonotourist v Commission]. Both judgments endorsed the Commission’s assessment that a public service obligation could not be imposed ex post on Buonotourist in order to enable it to receive compensation so as to cover its operating losses. Both courts also agreed with the Commission that being licensed to transport passengers was not the same as being obliged to provide public transport services. What was also interesting in those cases was that a local court, on a request by Buonotourist, had ordered Regione Campania to pay “compensation” to Buonotourist. The regional authority then notified the payment to the Commission which concluded that, since the payment constituted incompatible State aid, the regional authority was required not to comply with the ruling of the local court.
In May 2019, Scai leased from Buonotourist its staff and buses for the operation of local public transport services. Subsequently, AIR Campania purchased those assets from Scai in order to provide transport service on a contract that it was awarded to it by Regione Campania. In 2020, Buonotourist was declared insolvent.
After attempting unsuccessfully to recover the State aid from Buonotourist, Regione Campania ordered Scai to repay that aid, on the basis of the existence of economic continuity between Buonotourist and Scai. The recovery order was contested by Scai on the ground that it was not identified in Commission decision 2015/1075. The Italian court that was hearing the case asked the CJEU for guidance on whether Scai was liable for the aid that had been granted to Buonotourist and whether recovery from Scai would violate its right to good administration and fair trial that are safeguarded by Article 41 and Article 47, respectively, of the Charter on Fundamental Rights.
Who is liable to pay back incompatible aid?
The CJEU, first, framed the questions of the referring court as follows. “(34) The referring court asks, in essence, whether Article 108 and the fourth paragraph of Article 288 TFEU, Articles 16 and 31 of Regulation 2015/1589 and Articles 41 and 47 of the Charter must be interpreted as meaning that, in a situation where a Commission decision orders the recovery of State aid from a beneficiary which it identifies, those provisions preclude national legislation under which the competent national authorities, in the context of their task of implementing that decision, may order the recovery of that aid from another undertaking on account of the existence of economic continuity between that undertaking and the beneficiary of the aid identified in that decision.”
“(35) In the first place, it should be noted that the fourth paragraph of Article 288 TFEU provides that a decision ‘shall be binding in its entirety’ and that, where it ‘specifies those to whom it is addressed’, it is to be binding only on them.”
“(36) Furthermore, it follows from Article 31 of Regulation 2015/1589 that decisions finding the notified aid to be incompatible with the internal market (‘negative decisions’), […], and decisions ordering the recovery of the aid, […], are to be addressed to the Member State concerned”.
“(37) It follows from the foregoing considerations that, in the present case, the Commission decision […] is addressed only to the Italian Republic and that Buonotourist, described in that decision as the beneficiary of the State aid at issue, is not the addressee of that decision.”
“(38) In the second place, […], the Member State to which a decision requiring recovery of unlawful aid is addressed is obliged under Article 288 TFEU to take all measures necessary to ensure implementation of that decision”.
“(39) It is apparent from recital 25 and the first sentence of Article 16(3) of Regulation 2015/1589 that recovery of aid is to be effected without delay and in accordance with the procedures under the national law of the Member State concerned, provided that they allow the immediate and effective execution of the Commission’s decision. To that end, the Member States concerned must, in accordance with the last sentence of Article 16(3) of that regulation, ‘take all necessary steps’ which are available in their respective legal systems, including provisional measures, without prejudice to EU law”.
“(40) Given that the main purpose of the repayment of unlawfully paid State aid is to eliminate the distortion of competition caused by the competitive advantage afforded by the unlawful aid, such aid must be recovered from the company which carries on the economic activity of the undertaking which initially benefited from the advantage associated with the grant of State aid and which, therefore, retains the actual benefit thereof”.
“(41) The considerations set out in paragraphs 38 to 40 above thus preclude Article 288 TFEU from being interpreted as meaning that the Member States are required to recover State aid that has been declared unlawful and incompatible by a Commission decision solely from the beneficiary of the aid at issue identified in that decision.”
Since the Commission decision referred specifically to Buonotourist that was the beneficiary of an individual aid, the CJEU added that “(42) as regards a recovery decision specifically identifying, as in the present case, the beneficiary of individual aid, it should be noted that that identification corresponds only, […], to an assessment of the situation carried out when that decision was adopted, on the basis of the information available to that institution at that precise time.”
“(43) Accordingly, that identification forms part of the identification of the aid referred to in the Commission decision. Therefore, that decision cannot be interpreted as preventing the Member State concerned from recovering the aid in question from another undertaking where, […], that other undertaking carries on the economic activity of the beneficiary of the aid and retains the actual benefit of the competitive advantage associated with the grant of the aid.”
The notion of economic continuity
Next the CJEU recalled the conditions under which State aid may be passed on from one undertaking to another.
An undertaking other than the first recipient of the aid may enjoy its benefit when “(44) the competitive advantage associated with the grant of individual aid is passed on to another undertaking after the adoption of the Commission recovery decision, for example on the occasion of a transfer of assets”.
“(45) Concerning a transfer of assets, economic continuity between companies who are parties to the transfer is assessed in the light of the subject matter of the transfer (assets and liabilities, maintenance of the workforce, bundled assets), the transfer price, the identity of the shareholders or owners of the acquiring undertaking and the original undertaking, the moment when the transfer takes place”.
“(46) Consequently, in the context of their task of recovering the aid, and in order to ensure the full effectiveness of a Commission recovery decision specifically identifying the beneficiary of the aid and to effectively eliminate the distortion of competition caused by the competitive advantage linked to the receipt of the aid, the national authorities and courts are required to identify an undertaking other than that identified in that recovery decision, where the advantage linked to the aid in question has actually been transferred to that other undertaking, after the adoption of that recovery decision.”
Are the 2019 Commission Notice on aid recovery and the advice offered by the Commission to Member States binding on Member States?
The Commission published a Notice in 2019 on the recovery of incompatible State aid in which it also provides guidance on the existence of economic continuity between undertakings for the purpose of determining whether aid is passed on from one to another undertaking. In addition, Commission services regularly offer advice to national authorities that seek to recover incompatible aid. The referring Italian court asked whether national authorities were bound by that Notice and the related advice of the Commission.
The reply of the CJEU was that “(48) as to whether or not the notes and informal instructions provided by the Commission’s services to the national authorities for the purpose of carrying out the analysis of economic continuity have decision-making character, the Court has held that such statements of position are not among the acts which may be adopted on the basis of Regulation 2015/1589 and cannot be regarded as being binding on the national court. The Court has stated however that, to the extent that such statements of position, as well as the Commission opinions which may be sought by the national court, are intended to facilitate the accomplishment of the task of the national authorities in the immediate and effective execution of the recovery decision, and having regard to the principle of cooperation in good faith laid down in Article 4(3) TEU, the national court must take them into account as a factor in the assessment of the dispute before it and must state reasons having regard to all the documents in the file submitted to it”.
Right to good administration and fair trial
Scai claimed that, since, it had no standing to challenge Commission decision 2015/1075 when it was adopted, its rights under Articles 41 & 47 of the CFR were violated.
The CJEU, first, explained that “(49) it is necessary, as regards Articles 41 and 47 of the Charter, to distinguish between, on the one hand, the possibility, for an undertaking in a situation such as that of the applicant in the main proceedings, of participating in the procedure for the examination of State aid by the Commission and, where appropriate, challenging the Commission decision declaring that aid unlawful and incompatible, and, on the other hand, the possibility for that undertaking of participating in the procedure before a national authority which may lead to a decision finding the existence of economic continuity between that undertaking and the beneficiary of the aid identified in the Commission decision and requiring that undertaking to repay the aid in question, and, where appropriate, the possibility of challenging that national decision.”
“(50) As regards the procedure before the Commission, […], interested parties other than the Member State concerned cannot themselves seek to engage in an adversarial debate with the Commission in the same way as is offered to that Member State. That procedure is not a procedure initiated against the recipient or recipients of aid, entailing rights on which it or they could rely which are as extensive as the rights of the defence as such”.
“(51) As regards the situation in which the actual beneficiary of aid, designated as such in a national recovery measure on account of the existence of economic continuity with the earlier beneficiary, would not have been entitled to bring an action for annulment under Article 263 TFEU against the Commission decision declaring that aid unlawful and incompatible and ordering its recovery, it must be observed that an actual beneficiary of that type is nevertheless guaranteed judicial protection by EU law.”
“(52) The review, by the national court, of a national measure seeking the recovery of unlawful and incompatible State aid must be viewed simply as an expression of the right to effective judicial protection enshrined in Article 47 of the Charter”.
Then the CJEU made a very important statement.
“(53) In that context, the actual beneficiary may also challenge before the national courts the validity of the Commission decision declaring the aid unlawful and incompatible, where that actual beneficiary would not, beyond any doubt, have been entitled to bring a direct action under Article 263 TFEU against that decision […] Admittedly, national courts have no jurisdiction themselves to declare such a decision invalid, since only the Court of Justice is empowered to determine that EU acts are invalid […] However, where a national court or tribunal considers that one or more arguments for invalidity of an EU act, put forward by the parties or, as the case may be, raised by it of its own motion, are well founded, it is incumbent upon it to stay proceedings and to make a reference to the Court for a preliminary ruling on the act’s validity, the Court alone having jurisdiction to declare an EU act invalid”.
“(54) As regards respect for the rights of the actual beneficiary of aid in proceedings before a national authority which may lead to a decision finding the existence of economic continuity and ordering the recovery of the aid from that actual beneficiary, it should be noted at the outset that, […], the referring court starts from the premiss that the finding of the existence of economic continuity falls within the sole discretion of the Commission. It is clear from paragraphs 41 and 43 above that that premiss is incorrect.”
“(55) In any event, […], the fact remains that, […], when they take measures which come within the scope of EU law, the authorities of the Member States are also, as a rule, subject to the obligation to observe the rights of the defence of addressees of decisions which significantly affect their interests […] It is therefore for the national authority which intends to adopt a decision to recover aid that has been declared unlawful from the actual beneficiary of that aid to ensure that the latter’s rights of defence are observed.”
“(56) It must be possible for the actual beneficiary of the aid to have such a decision reviewed by a national court, which, if it has doubts as to the interpretation of EU law, may or, as the case may be, must refer the matter to the Court for a preliminary ruling, in accordance with Article 267 TFEU.”
On the basis of the above reasoning, the CJEU concluded that a Commission decision that orders the recovery of State aid from an identified beneficiary does not preclude national authorities recovering that aid from another undertaking on account of the existence of economic continuity between that undertaking and the beneficiary of the aid identified in that decision.
[1] The full text of the judgment can be accessed at:
