The European Commission has decided to refer Italy to the EU Court of Justice because it did not fully recover the state aid illegally granted to the hotel industry in Sardinia.
The Commission is taking Italy to Court for a second time regarding aid to several hotels in Sardinia, as the Italian authorities did not comply with the Court's first ruling of March 2012 (case C-243/10). In this ruling the Court confirmed that Italy had failed to implement the Commission's decision of 2 July 2008, which found that the Autonomous Region of Sardinia had granted aid to some hotel companies in breach of the conditions laid down in the framework approved by the Commission. The Commission ordered Italy to recover illegal aid amounting to close to € 15 million.
Still today, almost € 13 million (of the initial € 15 million) have not been recovered. The delay in recovery is caused by national court decisions that have suspended recovery orders issued by the Italian national administration. The Commission considers that many of these suspensions do not respect the strict requirements set out by EU jurisprudence for decisions by national courts to block, even provisionally, the implementation of Union acts. The Commission therefore asks the Court of Justice to condemn Italy a second time and requests that the Court imposes on Italy a lump sum penalty of about € 20 million, in addition to a daily penalty payment of about € 160,000 until Italy has fully recovered the aid and thereby ended the infringement.
Recovery of unlawful and incompatible aid is the infringement side of State aid control. The Commission only orders a Member State to recover State aid from undertakings (and is legally obliged to do so) when it finds that such aid was granted by the Member State in breach of its procedural obligation to await clearance by the Commission (the so-called 'stand-still obligation') and the aid cannot be declared compatible with the functioning of the internal market.
Since the Commission's State aid modernisation initiative, Member States have a much larger flexibility under the 'safe harbour' of the General Block Exemption Regulation (GBER) to grant aid without prior notification. Therefore, it is all the more important that aid which does not fulfil the conditions of the GBER is notified to and vetted by the Commission in accordance with the Treaty before the Member State concerned puts it into effect.
Compliance by Member States with State aid rules has become even more important in this new context. Should a Member State grant incompatible aid in breach of the standstill obligation, the Commission is legally obliged to order the Member State to recover the undue advantage that beneficiaries have received over their competitors.
Delays in the recovery undermine the effectiveness of the state aid rules and prolong the distortion of competition as well as the functioning of the internal market. Article 14 of Regulation No 659/99 and the Commission's Notice on the recovery of state aid therefore provide that Member States should recover incompatible aid from the beneficiaries effectively and immediately.
Should a Member State fail to implement a recovery decision, the Commission may take it to court on the basis of Article 108(2) of the Treaty on the Functioning of the European Union (TFEU). In case the Member State concerned still does not fulfil its obligations, Article 260(2) TFEU allows the Commission to refer Member States to Court a second time and ask the Court to fine the Member State.
On the April infringement package decisions, see MEMO/15/4871
On the general infringement procedure, see MEMO/12/12
For more information on infringement procedures: http://ec.europa.eu/eu_law/infringements/infringements_en.htm