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State aid: Commission refers Italy to Court for failure to respect Court ruling to recover illegal aid

European Commission - IP/10/1401   28/10/2010

Other available languages: FR DE IT

IP/10/1401

Brussels, 28 October 2010

State aid: Commission refers Italy to Court for failure to respect Court ruling to recover illegal aid

The European Commission has decided to refer Italy to the Court of Justice for failure to implement a European Court of Justice decision ordering the recovery of illegal and incompatible state aid from utilities with a majority public capital holding. Although the relevant Court judgement dates back to 2006 and in spite of the progress recently made in the recovery, the Italian authorities have still not notified the Commission that the recovery has been successfully completed. Given that this is a referral to Court for failure to respect a previous Court ruling, the Commission has decided to ask the Court to impose a daily penalty payment €65.280 for each day after the second Court ruling until the infringement ends and a lump sum €7.140 per day for the period between the 2006 Court judgement and the second Court ruling. These payments would act as an incentive to ensure that the illegal aid were recovered rapidly from the beneficiaries.

The original Commission decision dates back to 2002 (see IP/02/817). The Commission had found that a three-year income tax exemption and the possibility to contract reduced-interest loans with Cassa Depositi e Prestiti were in breach of EU state aid rules and required Italy to recover the illegal aid. In practice, these measures had the effect of strengthening the competitive position of the undertakings concerned vis-à-vis that of privately owned operators, Italian or other, without there being any acceptable justification under EU State aid rules for granting such an advantage. The Court confirmed the Commission decision in 2006. The Commission started formal infringement proceedings in 2007 for failure to respect the 2006 Court ruling by sending a letter of formal notice and a reasoned opinion (see IP/08/133).

With today's decision, the Commission is asking the Court to impose fines composed of a daily penalty payment of €65.280 from the date of the second Court ruling until compliance with the state aid decision, and a lump sum corresponding to €7.140 per day from the date of the first Court ruling until the second Court ruling. This is in accordance with Article 260 of the Treaty on the Functioning of the EU.

The fines proposal takes into consideration the seriousness of the infringement, the period which has already elapsed since the previous Court judgement and the situation of the Member State concerned. The Commission has also attached particular importance to the progress already made by the Italian authorities in recent years.

Background

Article 260 of the Treaty says that if a Member State fails to comply with a Court of Justice ruling confirming a violation of EU law, the Commission may refer the Member State concerned back to the Court and seek the imposition of daily penalties and/or a lump sum to bring the infringement to an end.

With regard to the recovery of illegal state aid, the Commission in 2007 adopted a Notice setting out best practices to ensure that state aid decisions are complied with more rapidly and in full (see IP/07/1609). For this, the beneficiaries of the aid and the amounts involved must be clearly identified. Member States must have in place rapid and effective recovery procedures, including in their national legal systems. The Notice recalls the principles applying in case of litigation before European and/or national courts. The Italian authorities' failure to recover the aid in this case is partially the result of difficulties encountered at the level of the national judiciary and of national court judgements that are not in line with the requirements of EU law, since they have granted companies injunctions against having to repay illegal subsidies.

Recovery of illegal state aid has improved in recent years. In the last ten years the Commission declared roughly €12 billion worth of subsidies illegal, of which close to 90% have been successfully recovered by Member States to their budgets. In the case of companies that cease to exist (and not necessarily because of the aid being declared illegal), Member States are expected to make their best efforts to recover the aid, including by staking claims alongside other creditors.

For more information on EU infringement procedures, see MEMO/10/530.


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