Legitimate expectations claims and EU State aid rules after SAM: some thoughts

One of the points I raised in my paper "Digging Itself Out of the Hole? A Critical Assessment of the European Commission's Attempt to Revitalise State Aid Enforcement after the Crisis" concerned the treatment of legitimate expectations claims in EU State aid enforcement proceedings in the scenario created by the State Aid Modernisation (SAM). In probably not very clear terms, I submitted that
... the Commission will most likely not have the upper hand in withdrawal procedures where Member States (and beneficiaries) will raise important issues related to due process guarantees and good administration duties that limit the Commission’s leeway—unless the old mantra that ‘there is no legitimate expectation to be protected in the field of State aid so as to trump the application of Article 107(1) TFEU’ is extended and applied in an absolute manner—which I do not think possible after the Treaty of Lisbon granted binding force to the EU Charter of Fundamental Rights[68] and, in particular, to the rights to good administration (Art 41)[69] and to an effective remedy and to a fair trial (Art 47).[70]
[68] Charter of Fundamental Rights of the European Union [2010] OJ C 83/389. The specific reasons for this assessment exceed the scope of this paper. For discussion, see R Luja, “Does the Modernisation of State Aid Control Put Legal Certainty and Simplicity at Risk” (2012) EStAL 765-66.
[69] P Craig, “Article 41 – Right to Good Administration”, in S Peers, T Hervey, J Kenner and A Ward (eds), The EU Charter of Fundamental Rights: A Commentary (Oxford, Hart, 2014) 1069-98.
[70] P Aalto et al, “Article 47 – Right to an Effective Remedy and to a Fair Trial”, in S Peers, T Hervey, J Kenner and A Ward (eds), The EU Charter of Fundamental Rights: A Commentary (Oxford, Hart, 2014) 1197-275.
I was rightly challenged on this point by an anonymous reviewer, to whom I am grateful for the opportunity to rethink and expand my arguments on the treatment of legitimate expectations claims for the purposes of State aid enforcement after SAM. I have now addressed the comments and, in the final version of the paper (hopefully soon to be published in the Journal of Antitrust Enforcement), I now explain in more detail what I meant. I hope the argument is now easier to share or, at least, more strongly supported.
... the Commission will most likely not have the upper hand in withdrawal procedures where Member States (and beneficiaries) are likely to raise important issues related to due process guarantees and good administration duties that can limit the Commission’s leeway.[78] It is generally accepted that the principle of legal certainty is one of the general principles recognised in the EU legal order,[79] and that this principle and the corollary protection of legitimate expectations are binding on the Member States and the EU Institutions when they implement EU rules.[80] Nonetheless, the traditional position in this area has been to consider that ‘there is no legitimate expectation to be protected in the field of State aid so as to trump the application of Article 107(1) TFEU’.[81] This has been repeatedly criticised as an inconsistency in the development of the principle of legal certainty and its corollary, the protection of legitimate expectations, in the area of EU State aid law as compared to general EU law.[82] Furthermore, this old mantra may well have been significantly eroded by the entry into effect of the Treaty of Lisbon,[83] which granted binding force to the EU Charter of Fundamental Rights[84] and, in particular, to the rights to good administration (Art 41)[85] and to an effective remedy and to a fair trial (Art 47).[86] Any attempt to transfer the pre-Lisbon ‘no protection of legitimate expectations in State aid law’ paradigm to the post-Lisbon, post GBER paradigm is problematic. The Commission may be tempted to insist that nothing has changed and that, consequently, arguments of legal certainty cannot restrict its ability to dis-apply BER coverage ex post. That would push the old mantra to its extremes and, in my view, would break it. Relatively recent clarifications by the CJEU have tried to establish a balance, whereby recipients of State aid cannot claim legitimate expectations protection if, being diligent, they should have been capable of determining whether or not the EU procedure leading to the award of the aid was complied with or not.[87] Thus, the argument ultimately rests on the observability of the Commission’s ex ante intervention or the absence of such mandatory intervention, where prescribed by EU law (ie Arts 107 and 108 TFEU). In the case of BER protection, this is highly problematic because the restriction of any substantive analysis by the Commission to an ex post phase by necessity requires the recipient to rely on the Member States’ assessment of the BER. As the CJEU has also clarified, ‘a person may not plead breach of the principle of the protection of legitimate expectations unless he has been given precise assurances by the competent authority’.[88] A contrario, such assurances by the Member State as a co-enforcer of EU State aid law in the new post 2014 GBER paradigm may well trigger significant levels of protection of those legitimate expectations.[89] It is submitted, this is likely to increase the weight given to arguments based on legitimate expectations and legal certainty, particularly in the case of attempts to withdraw BER coverage based on a Commission’s ex post assessment that runs contrary to arguments of reasonable reliance (by recipients) on Member State-supported interpretations of the applicable BER,[90] particularly if it derives from a stricter interpretation of the EU State aid rules.[91] This arguments, or at least litigation based on these arguments, can add more layers of ineffectiveness to the post 2014 GBER paradigm based on more withdrawal procedures.
[78] Indeed, this argument is frequently raised in State aid litigation before the EU Courts. For a recent example, see Opinion of AG Whatelet in A2A SpA v Agenzia delle Entrate, C-89/14, U:C:2015:211, paras 44 to 53. However, the AG Whatelet rejected the arguments on the basis of reasons similar to those criticised in the main text.
[79] ISD Polska and Others v Commission, C-369/09 P, EU:C:2011:175, para 122.
[80] Gerekens and Procola, C-459/02, EU:C:2004:454, paras 21 to 24.
[81] However, this is not warranted upon closer examination of the case law, as demonstrated by A Giraud, “A study of the notion of legitimate expectations in State aid recovery proceedings: ‘Abandon all hope, ye who enter here’?” (2008) 45(5) CMLRev 1399-1431.
[82] See T Tridimas, The General Principles of EU Law, 2nd edn (Oxford, OUP, 2006, repr. 2009) 296; W Weiβ and M Haberkamm, “Legitimate expectations in state aid and the CFI” (2010) 9(2) EStAL 537; A Winckler and FC Laprévote, “Reconciling legal certainty, legitimate expectations, equal treatment and the prohibition of state aids” (2011) 10(2) EStAL 321-326.
[83] Similarly, see E Fink, “The Possibility of Protection of Legitimate Expectations in Recovery of Unlawful State Aid” (2013) 1 Juridica International 133-141.
[84] Charter of Fundamental Rights of the European Union [2010] OJ C 83/389. The specific reasons for this assessment exceed the scope of this paper. For discussion, see R Luja, “Does the Modernisation of State Aid Control Put Legal Certainty and Simplicity at Risk” (2012) EStAL 765-66.
[85] P Craig, “Article 41 – Right to Good Administration”, in S Peers, T Hervey, J Kenner and A Ward (eds), The EU Charter of Fundamental Rights: A Commentary (Oxford, Hart, 2014) 1069-98.
[86] P Aalto et al, “Article 47 – Right to an Effective Remedy and to a Fair Trial”, in S Peers, T Hervey, J Kenner and A Ward (eds), The EU Charter of Fundamental Rights: A Commentary (Oxford, Hart, 2014) 1197-275.
[87] Fink (n 83) 136, with reference to France Télécom v Commission, C-81/10 P, EU:C:2011:811, para 59.
[88] AJD Tuna, C-221/09, EU:C:2011:153, para 72; Agrargenossenschaft Neuzelle, C-545/11, EU:C:2013:169, para 25.
[89] At least, where the interpretation by the Member State was reasonable, in line with the original case law in the area of State liability as per The Queen v H.M. Treasury, ex parte British Telecommunications, C-392/93, EU:C:1996:131, para 43 in particular.
[90] The situation is not completely different to that of reliance on legal advisors’ advice, which could erode the argument by reference to Schenker & Co. and Others, C-681/11, EU:C:2013:404. However, this is clearly a controversial area of EU procedural law that requires future developments. In my view, a new wave of protection of legitimate expectations can be expected, particularly where domestic constitutional principles of protection of legitimate expectations as part of the right to good administration are engaged. For discussion, see R Bousta, 'Who Said There is a ‘Right to Good Administration’? A Critical Analysis of Article 41 of the Charter of Fundamental Rights of the European Union' (2013) 19(3) European Public Law 481-488.
[91] Fink (n 83) 139, with reference to Alcoa Trasformazioni v Commission, C-194/09 P, EU:C:2011:497.

New SSRN paper on State aid enforcement after the crisis

I have uploaded a new paper on the University of Leicester School of Law Research Paper SSRN Series. It is entitled "Digging Itself Out of the Hole? A Critical Assessment of the European Commission's Attempt to Revitalise State Aid Enforcement after the Crisis" and has the following abstract:

This paper aims to assess the likelihood that State aid enforcement can be revitalised in the post-crisis period as a result of the 2012-2014 State aid modernisation process (SAM). The paper takes the view that State aid enforcement was left in a difficult impasse as a result of the extraordinary measures the Commission implemented during and immediately after the 2008 economic breakdown, which left the Commission in a difficult position due to the unavoidable concessions and lowering of standards that dealing with the soaring volume of State aid required. The paper builds on this premise to critically assess whether a scenario of stronger enforcement can be foreseen under the modernised, post-2014 procedural framework of SAM. It pays particular attention to the need for the European Commission to (re)engage in a more substantive assessment of aid measures and to promote judicial (or private) enforcement of State aid rules in an effective manner. It concludes that revitalisation of State aid enforcement under SAM is highly unlikely.

I have attempted some statistical analysis to support my view that State aid enforcement is not being efficient. As a taster (full details in the paper), I argue that 'it seems conservative to estimate at around 100 billion Euros the amount of (non-investigated) illegally-granted State aid in the EU28 between 2008 and 2013' and that the Commission is accumulating a significant backlog of State aid cases (of around 500 in the same period), despite having expanded its State aid workforce by 53% between 2007 and 2011.

I also argue that the Commission's push for more transparency of the awards of State aid will not result in an actual involvement of private parties and society at large as stewards of EU State aid rules, in particular due to the restriction of the locus standi to submit (admissible) complaints to the Commission (following Sarc v Commission and the rules under the revised art 11a of reg 794/2004) and the compounded effect of the mandatory use of a standard form that requires significant information.


I will present a reworked version of this paper at the Antitrust Enforcement Symposium held by the Centre for Competition Law and Policy of the University of Oxford in June, where I am honoured to share a session on Competition and the State with such distinguished scholars and practitioners as Conor Quigley QC, Damien Geradin, James Cooper, David Szafram, Isabel Taylor, Angus Johnston and Ioannis Lianos. As you see, not the easiest audience. So all comments that can help me improve the paper are most welcome! I already thank my colleague Dr Paolo Vargiu for his first reactions.
The full citation for the paper is: A Sanchez Graells, "Digging Itself Out of the Hole? A Critical Assessment of the European Commission's Attempt to Revitalise State Aid Enforcement after the Crisis" (May 5, 2015) University of Leicester School of Law Research Paper No. 15-15. Available at SSRN: http://ssrn.com/abstract=2602798.