Brussels, 20 November 2013
State aid: Commission takes action against Italy for failure to respect Court ruling to recover illegal aid
The European Commission has referred Italy to the EU's Court of Justice for failure to implement a previous ruling by the Court that confirmed that certain reliefs granted by Italy from social security contributions in Venice and Chioggia were illegal state aid and had to be recovered from the beneficiaries. The Commission had originally reached this conclusion in a decision in 1999. As this is a second court referral for non-compliance with a previous judgment, the Commission has asked the Court of Justice to impose penalties on Italy.
From 1995 to 1997, all companies in the areas of Venice and Chioggia were granted reductions or exemptions from social security contributions for creating and maintaining jobs. In 1999, the Commission found that some of these reliefs, paid only in order to maintain existing jobs or granted to large companies operating in areas without regional handicap, were incompatible with EU state aid rules and ordered Italy to recover the aid from the beneficiaries (see IP/99/887). The scheme had been suspended with effect from 1 December 1997.
In 2007, the Commission found that Italy had not complied with its obligation to recover the aid and referred Italy to the Court of Justice (see IP/07/648). In 2011, the Court ruled that Italy had failed to implement the Commission's 1999 decision (case C-302/09). In 2012, the Commission warned Italy through a letter of formal notice that continued failure to recover the aid would trigger a second referral to the Court of Justice.
From Italy's reply to the letter of formal notice, it appears that, 14 years after the Commission decision and two years after the first judgment by the Court of Justice, only around 20% of the incompatible aid has been recovered. The Commission has therefore decided to refer Italy to the Court a second time, in order to ask the Court of Justice to impose a lump sum and a penalty payment.
The Commission proposes a daily penalty of € 24.578,4 multiplied by the number of days between the first Court ruling and either the full compliance by the Member State or the second Court ruling under Article 260(2) TFEU and a degressive penalty payment of € 187.264,00 for every day from the judgment until implementation. The final amount of the daily penalties will be decided by the Court.
According to Article 260 of the Treaty on the Functioning of the European Union (TFEU), the Commission may refer back to the Court of Justice the Member States that fail to comply with a previous ruling by the Court that found a violation of EU law. In this second referral, the Commission may ask the Court to impose daily penalties and/or a lump sum on the Member State concerned to bring the infringement to an end.
Companies that have received incompatible state aid received an undue economic advantage over their competitors who had to operate without state funding. This distorts competition in the Single Market. To remedy the effects of this distortion, it is therefore important that the beneficiaries of incompatible aid pay this advantage back as soon as possible.
To step-up the recovery of incompatible aid, the Commission adopted best practices in 2007 (see IP/07/1609). The notice recommends to clearly identify the beneficiaries of aid and the amounts involved. 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 largely due to the fact that part of the payment orders issued by the Italian authorities was suspended by national courts. At the end of 2012, Italy adopted new provisions aimed at solving the deadlock at the level of the national courts. However, these provisions have not yielded the intended results.
Several beneficiaries of the incompatible aid have lodged appeals against the Commission's 1999 decision before the EU courts. All appeals have been dismissed as either inadmissible or unfounded. In 2011, the Court of Justice gave its final ruling, fully upholding the Commission's 1999 decision (see CJE/11/55).
More general information on infringements is available at:
See also MEMO/13/1005