State aid: Commission refers Greece to Court for failure to recover incompatible State aid from mining company Larco

(Evan Wise, Unsplash)

This article is brought to you in association with the European Commission.

The European Commission has decided to refer Greece to the Court of Justice of the European Union for failing to comply with a 2017 ruling by the Court of Justice. In its ruling, the Court had condemned Greece for failure to implement a 2014 Commission decision requiringit torecover €135.8 million of incompatible aid from Larco General Mining & Metallurgical Company S.A. (“Larco”).

In March 2014, the Commission found that various public measures (in the form of capital injections and state guarantees) in favour of Larco gave the company an undue advantage over its competitors, in breach of EU State aid rules. The Commission ordered Greece to recover the incompatible State aid amounting to €135.8 million, plus interest. On the same date, the Commission also adopted a decision finding that a plan proposed by Greece for the sale of certain assets of Larco could be implemented without the buyer being liable to repay any of the incompatible State aid granted to Larco. The sale plan has not yet been implemented.

In November 2017, the Court of Justice (case C-481/16 European Commission v Hellenic Republic) found that Greece had failed to implement the Commission’s 2014 recovery decision and condemned Greece for not having recovered the incompatible State aid, as required by the 2014 recovery decision.

In January 2019, the Commission sent a letter of formal notice to Greece regarding the non-implementation of the 2017 Court’s ruling.

To this date, more than five years after the adoption of the Commission decision and following the Court’s judgment and the Commission’s letter of formal notice, Greece has still not recovered the incompatible State aid from Larco.

The Commission has therefore now requested the Court of Justice to impose on Greece the following financial sanctions:

–    A lump sum payment of approximately € 3 709 per day for the period between 9 November 2017 (date of the first ruling by the Court of Justice) and the date Greece complies with the Court’s ruling, or, alternatively, failing compliance, the date of delivery of the Court’s second ruling. The minimum lump sum payment should not be lower than € 1.3 million.

–    A daily penalty payment of approximately € 26 697 from the day of its judgment until the date Greece brings the infringement to an end.

Background

The General Court dismissed, upon appeal, the action for annulment brought by Larco against the 2014 Commission decision (case T-423/14). An appeal by Larco against that judgment is currently pending before the Court of Justice in Case C-244/18 P. In his opinion delivered on 24 October 2019, Advocate General Saugmandsgaard Øe proposed to reject the grounds of appeal of Larco that he examined.

Article 107 allows certain categories of aid that further an objective of common interest without unduly distorting competition in the Single Market. Aid that does not fulfil these conditions is incompatible. Where Member States have already granted incompatible aid, they need to recover it swiftly from the beneficiaries. This is essential because delays in the recovery of unlawful subsidies perpetuate the distortion of competition created by the aid and undermine the functioning of the Single Market. For this reason Article 16(3) of Regulation 2015/1589and theCommission’s recovery noticeprovide that Member States should immediately and effectively recover the aid from the beneficiary.

Actions for annulment brought against Commission decisions to the Court of Justice do not suspend a Member State’s obligation to recover aid that has been deemed incompatible (Article 278 TFEU).

Should a Member State fail to implement a recovery decision, the Commission may first seek a declaratory judgment by the Court of Justice on the basis of Article 108(2) TFEU for failure to implement the decision. In case the Member State concerned still does not fulfil its obligations, Article 260(2) TFEU allows the Commission to refer Member States to Court a second time and ask the Court to impose penalty payments.