Introduction
The European Commission is required by Regulation 2015/1589 to order recover of State aid that it finds to be incompatible with the internal market. However, it may not order recovery of illegal aid – i.e. non-notified aid – until it assesses its compatibility with the internal market.
By contrast, national courts have no competence to assess the compatibility of State aid. However, they do have competence to order the recovery of illegal aid. On 7 December 2023, the Court of Justice ruled in case C-700/22, RegioJet & STUDENT AGENCY, that national courts may also, under national rules, order the recovery of illegal aid that was granted more than 10 years earlier; i.e. aid for which the so-called limitation period had expired.1
A Czech court asked the Court of Justice for a preliminary ruling concerning the interpretation of State aid rules on existing aid and recovery of illegal aid by national courts. Apparently, illegal State aid had been received by České dráhy, a railway operator. The question was whether the aid had been granted more than 10 years before legal action was initiated. The procedural regulation, i.e. Regulation 2015/1589, lays down a limitation period of ten years, meaning that the Commission may not order recover of incompatible aid that was granted more than 10 years before the Commission asks for the first time information or explanation about that aid.
As is well-known, any action taken by the Commission, such as a request for information sent to the granting Member State, interrupts the limitation period, the clock is reset and starts counting from zero the next 10-year period. Moreover, the limitation period is suspended for as long as the decision of the Commission is the subject of proceedings before EU courts. Any aid for which the 10-year limitation expires is deemed to be existing aid.
On 26 June 2008, České dráhy, a railway undertaking established in the Czech Republic, concluded a contract with the National Railway Administration, under which the former sold part of its assets and operations to the latter.
RegioJet and STUDENT AGENCY, competitors of České dráhy, claimed that the price paid to České dráhy in the context of that transaction constituted State aid within the meaning of Article 107(1) TFEU and that it was unlawful since it was neither notified to the Commission, nor authorised by it.
During the hearing of the dispute before the local court, the question arose whether the limitation period had expired. Therefore, the referring local court wanted to know whether the expiry of the limitation period laid down in Article 17(1) of Regulation 2015/1589 was relevant to the decision of a national court that was petitioned to order recovery of unlawful State aid.
The Court of Justice prefaced its analysis by noting that “(12) the question asked is based on several premisses and, inter alia, on the fact that the measure at issue is State aid within the meaning of Article 107(1) TFEU, which it is for the referring court to verify, in particular in the light of the information available to it and any assessments made by the Commission in the context of the analysis of the complaint submitted to it concerning that measure.”
The role of national courts and the protection of the rights of individuals
First, the Court of Justice reiterated established principles on the respective roles of the Commission and national courts. “(13) It should be borne in mind that, according to settled case-law, the national courts and the Commission fulfil complementary and separate roles. Whilst assessment of the compatibility of aid measures with the internal market falls within the exclusive competence of the Commission, subject to review by the EU Courts, it is for the national courts to ensure that the rights of individuals are safeguarded where the obligation to give prior notification of State aid to the Commission pursuant to Article 108(3) TFEU is infringed”.
“(14) Consequently, national courts must offer to individuals entitled to rely on disregard of the obligation of notification the certain prospect that all appropriate conclusions will be drawn, in accordance with national law, with regard to both the validity of the acts giving effect to the aid and the recovery of financial support granted in disregard of that provision or possible interim measures”.
The scope of Regulation 2015/1589
Next, the Court examined the application of the provisions of Regulation 2015/1589.
“(15) In respect of the effect, in that regard, of the possible expiry of the 10-year time limit provided for in Article 17(1) of Regulation 2015/1589, it is necessary, first of all, to recall that that regulation contains rules of a procedural nature which apply to all administrative procedures in the matter of State aid pending before the Commission, that it codifies and reinforces the Commission’s practice in reviewing State aid and does not contain any provision relating to the powers and obligations of the national courts, which continue to be governed by the provisions of the Treaty as interpreted by the Court”.
“(16) The Court has also stated that it is only the powers of the Commission to recover State aid that are referred to in Article 17(1) of Regulation 2015/1589”.
In other words, the recovery procedure laid down in Article 17 of Regulation 2015/1589 concerns the Commission and not national court that must follow national rules when instructing recovery.
“(17) Thus, the Court has held that the expiry of that limitation period cannot have the effect of retroactively legalising State aid vitiated by illegality merely because it becomes existing aid and, consequently, of depriving of any legal basis an action for damages brought against the Member State concerned by individuals and competitors affected by the grant of the unlawful aid. Any other interpretation would amount to reducing the scope of the obligation on the Member States to notify the aid measures and thus to depriving Article 108(3) TFEU of its practical effect”.
The rules binding the Commission are not the same as those that bind national courts
The Court of Justice went on to clarify “(18) that that limitation period cannot be applied, neither directly, nor indirectly, nor by analogy, to the procedure for recovery of unlawful aid by the competent national authorities”.
The 2019 judgment in case C-349/17, Eesti Pagar, is very relevant here.
“(19) It is appropriate, in that regard, to note that, where there is no EU legislation on the subject, the unlawful aid must be recovered in accordance with the rules for implementation laid down by the applicable national law … In that context, the limitation rules that might be applicable are, therefore, those of national law, subject to the principles of effectiveness and equivalence”.
“(20) As regards the arguments of the recipient undertaking, České dráhy, which claims that, in the case of existing aid, which falls within the scope of Article 108(1) TFEU, the national courts do not have the power to order its recovery, it should be noted that the case in the main proceedings concerns a particular situation in which Article 108(3) TFEU was infringed when the aid at issue was granted. As has been recalled in paragraph 17 of the present judgment, the expiry of the limitation period laid down in Article 17(1) of Regulation 2015/1589 does not have the effect of retroactively regularising State aid vitiated by illegality merely because it becomes existing aid.”
What the Court probably meant in the last sentence of paragraph 20 above was that aid becomes “existing” after expiry of the limitation period only with respect to the Commission’s powers to order recovery.
Therefore, the Court concluded that “(21) in the light of the foregoing, the answer to the question referred is that Article 108(3) TFEU must be interpreted as meaning that national courts may order the repayment of State aid granted in breach of the obligation of prior notification laid down in that provision, even though the limitation period laid down in Article
17(1) of Regulation 2015/1589 has expired in respect of that aid, such that that aid must be regarded as existing aid pursuant to Article 1(b)(iv) and Article 17(3) of that regulation.”
