EU-commissaris Kroes: Partnership moet tot meer doelmatigheid leiden (en)

State aid enforcement in an enlarged Union – more partnership for increased efficiency

Neelie Kroes

Member of the European Commission in charge of Competition Policy

Conference on State Aid Enforcement

Brussels, 22nd June 2006

Ladies and Gentlemen,

Let me start by thanking the European Law Academy for hosting this international conference on the private and public enforcement of Community state aid law. I am very happy to be here to discuss this key topic with you.

The success of a policy – any policy! – depends not only on its content, but also, and probably even more so, on its proper implementation and effective enforcement. State aid is no different. Without fair and effective enforcement of state aid law there can be no level playing field for economic players in the internal market. Without proper State aid control, Member States might embark in destructive subsidy-races. They might waste scarce resources on failing firms, or prop up lame national ‘champions’. The Internal Market would suffer, competitors would suffer. But most of all, European consumers and taxpayers would suffer, as a result of wasted efforts, higher prices, lower quality and less choice.

This is why state aid policy – and for that matter, state aid reform – is the top priority of my mandate. The Commission has wide-ranging responsibilities in this field with (almost) exclusive competence to define detailed state aid rules and to sanction any violation of these rules.

As you know, we are in the process of delivering the first ever comprehensive reform of state aids law and policy – as announced in the State Aid Action Plan. We are working for the best possible results, as quickly as possible. We are aiming for less and better targeted aid, so that this policy tool contributes effectively to the wider goals of economic growth and jobs. But none of this will have any impact if it is not followed up in practice and if the rules are not respected. The Commission and the Community Courts have responsibilities here. But we share them with a wide range of actors: national, regional or local authorities, national courts, lawyers and the wider business community. All are called upon to apply these rules and make sure they are complied with in practice.

Hence the obvious need for effective partnership, as recognised in the Action Plan. We, the Commission, will never be able to do it alone. We would not want to even try! The success of our reform depends on what happens in the Member States, which is why the State Aid Action Plan also proposes that they improve their efficiency, increase their transparency and speed up their implementation of state aid decisions. Especially as regards enforcement, we are in fact dependent on you!

Two concrete issues deserve particular mention in this context:

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  The (lack of) enforcement of the standstill obligation, and
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  The (slow and hesitant) execution of recovery decisions.

In both areas, we will only be able to effectively implement our rules if each of the actors involved - the Commission, the granting authorities, the national courts and the companies – is prepared to take its responsibility, while cooperating in a constructive and open manner.

Which leads us directly to the topic of the study and today’s conference: how can we better promote more active enforcement of the standstill obligation through private litigation in national courts? And how can we contribute to a more effective and speedy execution of recovery decisions? I hope that today’s conference will give us all useful insights into these crucial questions.

Application of state aid law by national courts

Earlier today, you considered the state of play on the application of state aid law by national courts. The large body of case law which already exists in this area demonstrates that national courts are playing an ever more important role in ensuring state aid discipline. Private litigation has constantly increased in recent years – a development I really welcome!

But unfortunately the picture is not completely rosy. Not all courses for action are yet fully explored. And the enforcement of state aid law by national courts is not yet as effective as it could be. State aid law still seems to be used primarily in a defensive manner: more than 50% of all published judgements concern legal actions by taxpayers contesting the imposition of a financial burden. What is more, few competitors take action to challenge unlawful aid. And there is not a single published judgement which awards damages in such circumstances.

All this would perhaps be understandable, if we could assume that, as a matter of principle, Member States comply with their obligation to notify aid, and never grant aid before it is approved. Sadly enough, this is not so. I sometimes wonder if any article of the EC Treaty is violated more often than the standstill obligation.

Nor does it appear to be the case that enforcement of the standstill obligation by private parties and national courts has already become an effective tool for ensuring state aid discipline. It remains all too rare that after action by a competitor national courts order the reimbursement of illegal aid. Damage awards to competitors for the losses suffered are rarer still.

It’s simply not on that fifty years after the Treaty was signed, people who suffer losses as a result of violations of the Treaty do not have adequate means of legal redress. I have already started a debate in this area in the field of antitrust; I want a similar debate to start in the field of state aid as well.

Of course, I am aware of the many obstacles that applicants still face. They stem to a large extent from provisions of national law which are not always best tailored to ensure state aid discipline. But I hope that today’s conference will contribute to finding suitable ways to improve the situation.

Enforcement of recovery decisions by Member States

We have also looked at the execution of recovery decisions by Member States, and I am pleased to say that in this field, Member States’ track record has recently improved.

But there are still too many hurdles to effective recovery. True enough, aid is always somehow recovered in the end. But more often than not, this only happens in the long run. And as Keynes remarked, in the long run, we are all dead.

On average, it takes 5 years from a recovery decision until its full implementation, and some cases take significantly longer. The longest case we ever came across – and have just recently been able to conclude – took twenty years to complete. Two decades after the recovery decision. Do you call this effective? I call it appalling. This state of affairs must stop.

Obviously, when such impossible delays occur, they usually cannot be pinned down to the fault of any one authority or body. More often than not, delays result from a combination of factors, including:

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  Firstly, legal uncertainties as to the suitable legal basis for recovery under national law;
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  Secondly, a lack of motivation on the part of the authority responsible for the execution of the recovery decisions – most often the very same authority who originally granted the aid;
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  Thirdly, a tendency of Member States’ courts to suspend national recovery proceedings until litigation is completed at Community level; and
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  Finally – yes, I’m going to be honest with you - an unfortunate ‘leniency’ in the past on the Commission’s part in not following up on these matters; not providing the proper guidance and advice; and not sanctioning evasion tactics.

The status quo is untenable. Improvements are long overdue. We are all responsible for changing things – and if we fail to act, we will only have to blame ourselves that State aids discipline is not taken seriously.

Member States and national courts must increase their efforts to make recovery ‘immediate and effective’. National courts can be less generous with the suspension of national recovery proceedings, even where the recovery decision has been challenged.

A positive example is the recent decision of the Higher Administrative Court of Berlin-Brandenburg, which refused to grant a suspension of the enforcement, by an administrative act, of a national recovery decision. This is certainly progress. But more can be done, and in more Member States, to recognize the immediate enforceability of Commission decisions and limit suspensions to the rare cases of immediate and irreparable damage.

Upcoming Commission initiatives

As for the Commission, we have already taken concrete measures to improve our own track-record. We have successfully prioritised the execution of recovery decisions. Since 2004, the number of pending recovery cases has dropped from 93 to 75. And the amount of unlawful aid effectively recovered has increased to some € 8.6 billion - three quarters of the total amount due.

Of course, there is still more to be done from our side to contribute to better national state aid enforcement. This is why effective action against the granting of illegal aid will continue to be one of my priorities.

If we want to stimulate private enforcement or to achieve swifter execution of recovery decisions, we need to increase awareness of the state aid rules and the relevant case-law at national level. This is why I intend to prepare a Communication on the role of national judges in safeguarding the rights which individuals enjoy as a result of the standstill obligation.

I will also propose that the Commission adopt a Notice on the execution of recovery decisions at national level, building on the progress made in recent years. This Notice will set out the principles of our recovery policy, clarify the obligations of national authorities and national courts, and promote procedural best practices.

Finally, to increase pressure on Member States to speed up the recovery process, we also intend to systematically apply the Deggendorf case-law, to stop new aid being granted where earlier unlawful aid has not yet been recovered. If Member States still drag their feet, we will not hesitate to take them to Court, if need be. But I prefer to think we can advance through partnership, which is why the Commission will always be ready to give advice and help Member States develop best practices, and can always be contacted in case of need.

Conclusion and outlook

Ladies and gentlemen,

Making a success of the enforcement of state aid law is our joint responsibility. The Commission, Member States’ various authorities, Community and national courts, lawyers and private parties all have their role to play. We will only achieve better State aid discipline if everyone pulls their weight.

Today’s conference, and the study on which it builds, have raised all the right questions. I hope that the discussion launched today will help us find the right answers. We can have better state aid discipline, but only if we cooperate in true partnership. I am firmly convinced that we all stand to gain from that. Let us join forces to make better enforcement a reality!

Thank you.