EU General Court suspends State aid recovery

On 15 May 2018, the President of the General Court ordered the suspension of the operation of a Commission decision on State aid.

The decision concerned, among others, Spanish football club Elche Club de Futbol, SAD, which had received illegal and incompatible State aid in the form of a public guarantee from the Valencian Institute of Finance (IVF) to cover banking loans provided to Elche Club Foundation for a share subscription as part of a capital increase for the club.

Spain was therefore obliged to immediately and effectively recover the aid granted, including interest, totalling EUR 4,106,906.51.

The club contested the IVF recovery order in the national courts and lodged an action for annulment of the Commission’s decision before the General Court. Separately, the club also applied for interim measures to suspend enforcement of articles 2 to 4 of the decision (which impose the recovery of aid from its beneficiary).

The judge hearing an application for interim measures may, if he considers that the circumstances so require, order the suspension of the operation of a decision being challenged or prescribe any necessary interim measures. European law nevertheless states that, in principle, actions in annulment before the General Court do not have suspensory effect, since acts adopted by EU institutions are presumed to be lawful. It is therefore only in exceptional circumstances that a judge hearing an application for interim measures may suspend the operation of an act contested before the General Court or prescribe interim measures. In practice, there are relatively few recorded cases. Generally, reimbursing undue aid is not regarded as a serious and irreparable harm, which is one of the conditions for obtaining suspension of operation of a contested act. However, if the aid recovery is likely to bring about bankruptcy of the beneficiary, the President can suspend the operation of a contested Commission decision, provided that all the conditions specified below are met.

In this particular case, the President of the General Court considered that all of the following conditions relating to the suspension of the operation were fulfilled:

  • It has to be established that such an order is justified, at first sight, in fact and in law (prima facie case). The President considered that the Commission did not sufficiently motivate its decision concerning determination of the aid. Indeed, the Commission did not determine the relevance of a mortgage on a six hectare plot for the benefit of the IVF when assessing the level of provided securities.
  • It has to be urgent in so far as, in order to avoid serious and irreparable harm to the applicant’s interests, the suspension of the operation must be made and produce its effects before a decision is reached in the main action. The President concluded that there was urgency because of the risks to the club’s financial sustainability given its precarious financial situation (it was subject to an insolvency procedure, without sufficient liquid assets…).
  • The judge hearing such an application must also weigh the competing interests. In this respect, in a spirit of loyal cooperation, the President considered that it could rely on the ability of the IVF to ensure protection of EU interests (by allowing an efficient recovery of the aid, and by preventing the club’s restructuring in a way that would create barriers to an effective recovery).

This order thus falls under restrictive case law regarding the suspension of the operation of a Commission’s decision ordering the recovery of illegal and incompatible State aid. It also indicates the General Court’s strict authority over the Commission’s obligation to provide a statement of reasons in this matter. In the past few years, numerous Commission decisions on State aid have been annulled by the General Court because they were wrong in law or insufficiently reasoned.

Marguerite Soete, Junior Associate, marguerite.soete@cms-db.com

Annabelle Lepièce, Partner, annabelle.lepiece@cms-db.com