State aid: Commission welcomes Court ruling on recovery of illegal aid

The European Court of Justice (ECJ) ruled that France has failed to fulfil its obligations under EC Treaty state aid rules by failing to execute a Commission decision adopted on 16 December 2003. This decision ordered France to abolish an aid scheme granting tax exemptions for the takeover of firms in difficulties and to recover the illegal aid already granted from the beneficiaries. The Court fully confirmed the Commission's decision and rejected all pleas brought by France. The ruling is important, because the Court defined clear criteria to assess the correct implementation of a recovery decision.

In April 2007, the Commission brought an action before the European Court of Justice against France for failure to execute the recovery Decision within the prescribed time-limit. More than four years after the adoption of the recovery Decision, France had not taken any practical action to recover illegal aid from the recipients. France claimed that it was impossible to recover the aid from the beneficiaries.

The Court specified in particular, that where a beneficiary of illegal aid has ceased its activity by the time when the aid has to be recovered, the liability must be registered in the schedule of liabilities; in case the period for registration has expired, any available procedure must be applied to lift a time-bar so as to allow the presentation of claims out of time. As regards recipients which have transferred their assets, the authorities must check whether the financial conditions of the transfer complied with market conditions.

As regards the argument invoked by France of absolute impossibility to recover, the Court confirms its settled jurisprudence that the condition of absolute impossibility is not fulfilled where the defendant Member State merely informs the Commission of the legal, political or practical difficulties involved in implementing the decision, without taking any real steps to recover the aid from the undertakings concerned and without proposing to the Commission any alternative arrangements for its implementation which could enable those difficulties to be overcome. In this context, the Court recognises that despite the efforts made by the Commission in the framework of loyal cooperation under Article 10 EC, to facilitate the recovery process, France has not taken any advantage of this framework.