EU

February 2018

News Update EU State Aid Special
22 February 2018
Compulsory health insurance and economic activities
On 5 February 2018, the General Court ("GC") annulled the Commission decision declaring a Slovakian capital injection to a public health insurer not to be State aid. The Commission concluded that the activity carried out by health insurance bodies in the compulsory health insurance scheme was not economic in nature. However, the GC ruled that it is only when the principle of solidarity applies and the health insurers are subject to state supervision that the activities are of a non-economic nature. According to the GC, the strict conditions framing the use and distribution of profits do not call the economic nature of the health insurance scheme into question, nor does the fact that health insurers may not freely determine the contributions, since the insurance bodies are competing on the quality and services offered.
 
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Investments of an economic nature in Brussels South Charleroi Airport
On 25 January 2018, the GC dismissed the appeal of Brussels South Charleroi Airport ("BSCA") regarding the Commission decision declaring the Walloon investment as incompatible State aid. BSCA argued that the investment for the instrument landing system ("ILS") was not an investment of an economic nature and, therefore, should not fall within the scope of the State aid rules. The GC recalled that activities that normally fall under the responsibility of the state in the exercise of its official powers are not of an economic nature. With regard to the ILS, the GC observed that it contributes to safety and allows commercial airports to receive planes in poor weather conditions, thus making them more attractive compared to airports without ILS. According to the GC, the ILS does not relate to the public task of air traffic control, but relates to the safety of air traffic on the ground which is an integral part of the commercial operation of the airport. As a consequence, the financing of the investment in the ILS relates to an economic activity and falls within the scope of the State aid rules.

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No legitimate expectations with regard to unlawful tax reduction scheme
 
On 26 January 2018, the GC dismissed the appeal of Centro Clinico Diagnostica ("CCD") concerning the Commission decision declaring an Italian tax scheme as unlawful and incompatible State aid. The tax scheme allows companies affected by an earthquake to suspend and reduce their payment of taxes and social security contributions. Since the tax scheme entered into force in 2003, CCD claimed that the principle of the protection of legitimate expectations was violated due to the delayed action of the Commission. The GC ruled that the Commission cannot be criticised for its delayed action, as the tax scheme was not notified to the Commission and only came to the attention of the Commission in 2011. Moreover, the GC underlined that favourable national court rulings confirming the entitlement to the tax reduction on the basis of the national law in question cannot contribute to the legitimate expectations of CCD.

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Importance of sincere cooperation in recovery procedure
On 17 January 2018, the Court of Justice of the EU ("CJEU") declared that Greece failed to implement the Commission decision that ordered the recovery of incompatible State aid from United Textiles, a firm in difficulties. The CJEU reaffirmed that the obligation of the Member State to recover is not affected by the insolvency of the company. The registration of the debt can only satisfy the recovery obligation when the insolvency proceedings result in the definitive cessation of its activities and the recovery through the insolvency proceedings is impossible. Although United Textiles was eventually declared insolvent, the CJEU ruled that Greece failed to implement the recovery order within the prescribed time period. Greece violated its duty of sincere cooperation as it had not requested an extension of that period from the Commission.

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GC upholds €1.3 Billion EDF recovery order
On 16 January 2018, the GC upheld the Commission decision ordering France to recover over €1.3 billion from Électricité de France ("EDF"). In 2003, France waived a corporate tax claim and converted it into share capital. In its initial decision, the Commission considered that the private investor test ("PIT") was not applicable when the state executes its prerogatives such as collecting taxes. That decision was overturned by the GC and the CJEU on appeal as the courts held that the applicability of the PIT must be based on the objective pursued and irrespective of the nature of the intervention of the state. In its second decision, the Commission concluded that the economic evidence submitted by France did not meet the conditions of the PIT and ordered the recovery of the incompatible State aid. On appeal, the GC upheld this conclusion and underlined that a Member State invoking the PIT is obliged to establish unequivocally, on the basis of objective and verifiable evidence, that it has acted as an investor. Economic evidence made after the investment is not capable of proving that the Member State has acted as a private investor. 

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Greetje van Heezik

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Advocaat | Senior Associate
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