Brussels, 23 July 2014
State aid: Commission refers Italy to Court for failure to recover incompatible aid from Italian ground handling operator SEA Handling
The European Commission has referred Italy to the EU Court of Justice (EUCJ) for failing to comply with a Commission decision of 2012 ordering the recovery of incompatible state aid. In the decision, the Commission had found that around €360 million of state aid granted between 2002 and 2010 by SEA, the Italian state-owned operator of the Milan airports, to its subsidiary SEA Handling was incompatible with EU state aid rules and had to be recovered (see IP/12/1414). More than one and a half years after the Commission's decision, this has still not been done.
In June 2010, following a complaint, the Commission opened an in-depth investigation into a number of capital injections carried out by SEA into its subsidiary SEA Handling between 2002 and 2010 (see IP/10/787), without prior notification to the Commission. The Commission's investigation revealed that the repeated capital injections were not carried out on market terms. No private investor, operating under market conditions, would have accepted to grant this capital to the company. The capital injections provided SEA Handling with an undue advantage that its competitors did not benefit from, and they did not comply with the EU rules on state aid for companies in financial difficulty. The Commission therefore ordered Italy to recover the aid from SEA Handling, so as to restore the level playing field in the Single Market.
Italy had four months from the decision to implement the decision. However, to this date, according to the information at the Commission's disposal, SEA Handling has not repaid any of the aid it received.
Italy, SEA Handling and the Municipality of Milan, SEA's major shareholder, have appealed the Commission's 2012 decision before the EU General Court, asking for the suspension of the decision in March 2013 (cases T-125/13, T-152/13 and T-167/13). However, the application for interim measures was rejected by the General Court in July 2013, and in any case appeals do not suspend a Member State's obligation to recover aid that has been deemed incompatible
Moreover, on 9 July 2014, the Commission has opened an in-depth investigation to examine whether a €25 million capital injection by SEA in favour of its new ground-handling subsidiary, Airport Handling, was in line with EU state aid rules. The Commission has taken the preliminary view that the aim and result of creating the new company was to avoid repaying the incompatible state aid granted to SEA Handling, of which Airport Handling ought to be considered the economic successor (see IP/14/803).
Member States have to recover state aid that has been found incompatible by the Commission within the deadline set in the Commission decision. This is essential because delays in the recovery of unlawful subsidies perpetuate the distortion of competition created by the aid. For this reason Article 14 of Regulation n° 659/99 and the Commission's recovery notice (see IP/07/1609) provide that Member States should immediately and effectively recover the aid from the beneficiary.
To comply with a Commission decision ordering the recovery of incompatible aid, it is well established jurisprudence that insolvent beneficiaries have to be wound-up in accordance with national bankruptcy procedures, the liabilities relating to the repayment of the aid must be registered in the schedules of liabilities, and their assets have to be sold under market conditions, provided that the bankruptcy procedures lead to their exit from the market.
The EU courts have also made it clear that, when the aid has not been entirely recovered from the insolvent beneficiary and a company has been created to continue some of its activities, the pursuit of these activities (so-called "economic continuity") may prolong the distortion of competition brought about by the advantage that the incompatible aid had procured. Accordingly, the newly created company may, if it retains that advantage, be required to repay the aid in question.
If a Member State does not implement a recovery decision, the Commission may refer the matter to the EUCJ under Article 108(2) of the Treaty on the Functioning of the EU (TFEU) that allows the Commission to directly refer cases to the Court for violations of EU state aid rules.