On 15 October 2018, the General Court ("GC") annulled a European Commission ("Commission") decision authorising a Dutch aid scheme concerning subsidies for the acquisition of land for conservation and cultural activities. The scheme had been put into effect in breach of the notification requirement. According to the GC, the Commission clearly faced serious difficulties during its preliminary examination of the scheme and should therefore have initiated a formal investigation instead of deciding not to raise objections to the scheme.
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- It is possible for competitors of aid beneficiaries to appeal Commission decisions to approve grants of aid. However, there is an admissibility hurdle: complainants need to be able to show that they are seeking to safeguard their procedural rights.
- When the Commission approves aid following a preliminary investigation and fails to open a formal investigation in circumstances in which it ought to have done, a complainant would have been denied its procedural right to submit comments in that formal investigation.
- The Commission is obliged to open a formal investigation where it encounters serious difficulties in assessing the compatibility of a State aid measure during its preliminary investigation.
- The existence of serious doubts can be revealed by evidence relating (a) to the preliminary examination stage (such as the circumstances and length of the procedure) and (b) to the content of the decision.
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Back in 2008, two private foundations (later succeeded by the Association for Equal Rights for Landowners or "VGG") filed a complaint about measures adopted in favour of certain organisations entrusted by the Netherlands to carry out nature conservation activities which had been designated as public service obligations. The measures, which included subsidies, were intended to enable the beneficiaries to acquire land to carry out their public service obligations.
Six years and eight months after the initial complaint, the Commission finally took a formal State aid decision not to raise objections to the scheme on the grounds that it was compatible with the EU's internal market rules. VGG appealed the decision by lodging an application at the GC.
In its judgment, the GC noted a number of established principles in State aid cases:
- First, interested parties, such as complainants, do not have a procedural right to submit comments during the Commission's preliminary investigation procedure. However, the Treaty on the Functioning of the European Union imposes an obligation on the Commission to give notice to interested parties to submit their comments on a State aid measure after the formal investigation procedure has been initiated.
- Second, an interested party should have standing to challenge a Commission decision not to open a formal investigation (for example, where the Commission does not consider the aid raises issues and therefore does not raise objections) where that party is seeking to safeguard the procedural rights it would have had during a formal investigation. Direct or indirect competitors of aid beneficiaries are generally considered to be interested parties provided the granting of aid has a material impact on their situation.
- Third, the Commission must initiate the formal procedure where it experiences serious difficulties in establishing whether or not aid is compatible with the EU's internal market rules.
An applicant seeking the annulment of a decision not to raise objections therefore has to prove that the Commission had or ought to have had serious doubts as to the aid's compatibility with the internal market. This can be demonstrated by reference to a body of consistent evidence relating to the conduct of the preliminary examination stage, the information made available to the Commission during its preliminary investigation and the content of the contested decision. In the case at hand, the GC found that the unusually and partially unjustified long duration of the preliminary investigation together with the content of the contested decision evidenced the existence of serious difficulties. The GC therefore annulled the decision in so far as the latter infringes the procedural rights of the applicant.
Successful actions for annulment of Commission decisions not to raise objections to State aid measures are relatively rare. This is on the basis that:
- it can be difficult for applicants to negotiate the admissibility hurdle;
- applicants are generally required to demonstrate that the Commission has made a manifest error of assessment, which is a high threshold; and
- it is well-established that the Commission enjoys a wide margin of discretion in making the complex assessments involved in State aid cases.
However, this case shows that both the admissibility and standard of proof hurdles may be lower for applicants seeking the annulment of a decision not to raise objections compared with applicants seeking the annulment of a decision following a formal investigation.
With thanks to Jessica Bracker of Ashurst for her contribution
