Opinion of the Advocate General — ECLI:EU:C:2021:732
Date: 2021-09-09
Language of the case: Latvian
Subject matter: State aids;Economic, social and territorial cohesion;Competition;European Social Fund (ESF);European Regional Development Fund (ERDF);Cohesion Fund
Procedure: Reference for a preliminary ruling
Origin: Latvia

summary, it must therefore be stated that accounting law determined by EU law distinguishes between the subscribed capital that has yet to be paid up and the capital that has already been paid up. It thus gives a true and fair view of the undertaking’s assets, liabilities, financial position and profit or loss. Publication in a register is irrelevant in that regard. 4. Consequences 60. Consequently, the concept of subscribed share capital is to be understood in isolation from the respective national company registration laws or national company laws. The concept could refer either to the promised increase in share capital (that is to say, the members’ resolution is the decisive factor) or to the payment of the promised increase in share capital (that is to say, the injection of the increase in capital is the decisive factor). 61. The latter is preferable in view of the abovementioned purpose of differentiating between undertakings in difficulty and those not in difficulty in State aid law. The risk of the purpose of the aid not being achieved due to the financial difficulties of a company continues to exist after a mere promise of an increase in capital and is ruled out only when the promise has been fulfilled, that is to say, the increased capital is actually available to the company. As rightly emphasised by the Republic of Latvia, the members’ resolution to increase the capital leads ‘only’ to a civil-law obligation and is merely the first step in increasing the subscribed capital. This also explains the separate presentation in the balance sheet (see, in that regard, point 57 et seq. above). 62. Therefore, in my view, the concept of subscribed share capital in Article 2(18)(a) of the Block Exemption Regulation refers to paid-up subscribed capital within the meaning of Annex III to the Accounting Directive. 63. At the same time, such an interpretation ensures a balance between the interests of undertakings and providers of the aid. On the one hand, undertakings are not excluded from aid for certain projects by the length of a registration procedure in a State register, a circumstance over which they cannot have any influence. On the other hand, undertakings in difficulty cannot become eligible for aid solely by making a mere promise of a future increase in capital, but, rather, they can become eligible only when the increased capital is actually available to the company. Therefore, the decisive factor in the present case is whether the resolution passed at the general meeting of the members of 29 April was actually implemented before the expiry of the application deadline on 30 April. That assessment is a matter for the referring court alone. C. Proof of eligibility for aid (undertaking not in difficulty) 64. How an undertaking must prove its eligibility for aid in such a way that national managing authorities can verify it is a separate question. 65. In that respect, Latvian law provides that, in principle, the most recent publicly available final annual report will be checked (1), unless an interim activity report approved by a sworn auditor is submitted (2). Where the project applicant refers to publicly available, verifiable, information concerning an increase in share capital undertaken after the most recent final annual report, that information will be taken into account where it is accompanied by an interim activity report approved by a sworn auditor (3). 66. The referring court ultimately now asks whether those documents are significant and can be required by the national managing authorities, because there was in any event no such interim report at the time of the application. It was submitted only subsequently in the course of the procedure. 67. As follows from recital 14 of the Block Exemption Regulation, and as rightly stated by the Commission in its observations, the determination of eligibility under that regulation is intended to be easily administrable. The recital states the following: ‘In order to provide legal certainty, it is appropriate to establish clear criteria that do not require an assessment of all the particularities of the situation of an undertaking to determine whether an undertaking is considered to be in difficulty for the purposes of this Regulation’. 68. That objective must also be taken into account in the application of Article 125 of Regulation No 1303/2013. According to that provision, the managing authority is to be responsible for managing the operational programme in accordance with the principle of sound financial management. That responsibility entails checking whether the conditions laid down in the Block Exemption Regulation are satisfied. (14) For that purpose, the managing authority may request evidence that makes it possible to determine, without having to conduct an assessment of all the particularities of the situation of an undertaking, whether more than half of its subscribed share capital has disappeared as a result of accumulated losses. 69. As already stated above, an undertaking’s annual financial statements together with the balance sheets are certainly useful in that regard. There can therefore be no objection to the first criterion laid down in Latvian law. 70. Since those documents are only ever prepared at the end of a financial year, but the financial situation can also improve during the year, interim reports prepared by an independent expert are also useful. There is therefore no reason to criticise the second criterion laid down in Latvian law either. 71. Nor can there be any objection to the third criterion in respect of an administrable assessment of an undertaking’s financial situation. Where the candidate refers to publicly available information in order to prove an increase in share capital undertaken in the course of the year, that information is to be taken into account together with an interim report pertaining thereto. 72. Read in the light of the responsibility of the national managing authorities which is provided for in Article 125 of Regulation No 1303/2013, all of the criteria referred to above implement the objective of the Block Exemption Regulation (exclusion of undertakings in difficulty, which are ineligible under that regulation). This is in conformity with EU law. D. Exclusion of the submission of documents after the expiry of the deadline 73. By its third question, the referring court seeks to ascertain, in essence, whether the exclusion of documents and information submitted only after the application for aid has been made is compatible with Article 125(3)(a) of Regulation No 1303/2013. That provision requires that the managing authority draw up and, once approved, apply appropriate selection procedures and criteria that ensure the contribution of operations to the achievement of the specific objectives and results of the relevant priority and that are non-discriminatory and transparent. 74. However, as rightly pointed out by the Commission in its observations, national law does not appear to exclude the subsequent submission of documents at all. On the one hand, Article 25 of the Law on the Management of the Funds also permits the conditional approval of a project. On the other hand, the regulations on the selection of project applications drawn up by the Agency proceed on the assumption that the decision as to whether a project applicant is an undertaking in difficulty is taken at the time of the decision as to whether to grant the aid. Therefore, the referring court must rule on the question as to whether Article 30 of the Law on the Management of the Funds, which states that further clarification of project applications is not permissible during the period between the submission of an application and the decision to grant or to refuse approval, is also applicable to the assessment of the applicant’s financial situation. 75. If it is assumed that Article 30 of the Law on the Management of the Funds excludes the subsequent submission of such documents, the question arises as to whether EU law precludes this. The reason for this is because, in the present case, the non-consideration of the interim report subsequently submitted leads to the exclusion of the applicant from the group of persons eligible for aid, since it was to be regarded as an undertaking in difficulty until the capital increase was effected and it was thus not eligible for aid under the Block Exemption Regulation. 76. However, the fact that certain aid is in principle permissible under EU law by virtue of the Block Exemption Regulation does not mean that the Member States are also required to disburse that aid. (15) The same applies to aid under the ERDF. As is apparent from recitals 3 and 4 of that regulation, aid can be granted for certain projects, but does not have to be. Therefore – and as rightly stated by the Commission – the Member States can make disbursement subject to certain further conditions, such as compliance with certain deadlines and formalities. This also includes the possibility not to take into account documents submitted subsequently. 77. As resources from EU funds are not infinite, managing authorities must ultimately make a selection decision among several applicants seeking the same funds. As also rightly stated by the Republic of Latvia, the principle of equal treatment plays a very important role in that selection decision. Article 125(3)(a)(ii) of Regulation No 1303/2013 provides that the managing authority is to draw up appropriate selection procedures and criteria that are non-discriminatory and transparent. 78. In view of the fact that applicants seeking aid under an EU fund are in competition with one another to a greater or lesser extent, the situation is entirely comparable to that of public procurement law. In that area too, the managing authority must make a selection and inevitably reject some of the applicants. It is possible that the competitive situation in that area is more intense and requires particularly strict equal treatment in the procedure. However, this does nothing to change the fact that the State allocates a limited resource (a contract or funding) to some applicants only, to the exclusion of others. Therefore, the selection procedure must be transparent and non-discriminatory in that area also, as provided for in Article 18(1) of Directive 2014/24. (16) 79. As rightly argued by the Commission at the hearing, a cut-off date principle whereby only applications submitted before a certain date that applies equally to all are taken into consideration is transparent and non-discriminatory. The same applies to a procedural rule that prohibits applications already submitted from being subsequently supplemented after the expiry of the application deadline. This is because such a rule serves merely to safeguard the cut-off date principle and to reduce the administration burden associated with the selection decision to be taken. The decision need only take into account information submitted prior to the expiry of the deadline and does not have to set out further considerations after that point in time. 80. This is in line with the principle of equal treatment. It prevents a situation where applications that are initially erroneous or incomplete are submitted within the deadline but are subsequently supplemented and corrected, with the result that the application deadline is de facto extended. This would disadvantage applicants who submitted error-free and complete applications in the first place. Provided that it was clearly apparent to the respective applicants which documents had to be submitted by the expiry of the application deadline and it was in principle also possible for the applicant to provide those documents by that deadline, there is no cause for concern with regard to not taking into account subsequently submitted documents, either in terms of the requirement of transparency or the requirement of equal treatment. 81. In that respect, the Court has already ruled, in the context of the exclusion of a candidate in a public tendering procedure, that Directive 2004/18 does not preclude the exclusion of a tenderer on the ground that he or she has omitted to provide certain information in his or her tender. In particular, in so far as the contracting authority takes the view that that omission is not a purely formal irregularity, it cannot allow the tenderer subsequently to remedy the omission in any way after the expiry of the deadline for submitting bids. (17) Furthermore, Article 51 of Directive 2004/18, which provides that the contracting authority may invite operators to supplement or clarify the certificates and documents submitted pursuant to Articles 45 to 50 of the directive, cannot be interpreted as permitting that authority to accept any rectification of omissions which, as expressly provided for in the contract documentation, must result in the exclusion of the bid. (18) 82. That thinking also applies – in a somewhat reduced form, in my opinion – to the selection decision among several applications for aid, at least in so far as – as in the present case – a procedure for the selection of projects was publicly announced. If it was clear from the procedural rules available to the applicant that an interim activity report approved by a sworn auditor was mandatory for an applicant deemed to be an undertaking in difficulty according to the old annual financial statements, the submission of such an interim report only after the expiry of the application deadline can (19) be considered irrelevant and the application can be rejected. The Court does not need to rule here on the question as to whether – as can be the case under public procurement law under certain circumstances (20) – it actually must be rejected. (21) 83. Ultimately, however, the referring court must assess whether that condition was sufficiently transparent for the applicant. In that respect, it is true that the formulations in Annex 5 to the regulations on the selection of project applications do indicate that an interim report of the type referred to above was necessary in the applicant’s situation. However, since it is also stated in that same set of rules that the assessment based on that interim report is made when the decision on the granting of the aid is taken, this could also be understood to mean that it is not until then that those documents have to be presented. VI. Conclusion 84. I therefore propose that the Court answer the questions referred for a preliminary ruling by the Administratīvā rajona tiesa (District Administrative Court, Latvia) as follows: (1) The concept of subscribed capital in Article 2(18)(a) of Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty must be given an autonomous interpretation in EU law. It encompasses paid-up subscribed capital within the meaning of Annex III to Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC. That is the case irrespective of whether an entry has already been made in the register in accordance with the national law in question and whether such an entry is necessary in order for an increase in capital to be effective. (2) In order to prove that that condition is met and to assess whether an undertaking is in difficulty within the meaning of Article 2(18)(a) of Regulation No 651/2014, the Member State may require the submission of the most recent publicly available current annual report or an interim activity report approved by a sworn auditor. (3) The exclusion of documents and information submitted only after the application for aid has been made is compatible with Article 125(3)(a) of Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 in so far as it is clearly apparent to all applicants that those documents must be submitted together with the application and cannot be submitted subsequently. 1 Original language: German. 2 Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty (OJ 2014 L 187, p. 1). 3 Regulation (EU) No 1301/2013 of the European Parliament and of the Council of 17 December 2013 on the European Regional Development Fund and on specific provisions concerning the Investment for growth and jobs goal and repealing Regulation (EC) No 1080/2006 (OJ 2013 L 347, p. 289). 4 Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ 2013 L 347, p. 320). 5 Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law (OJ 2017 L 169, p. 46). 6 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ 2013 L 182, p. 19). 7 All Latvian laws are available in both their current and previous versions on the website https://likumi.lv/. 8 The regulations on the selection of project applications and annexes thereto are available at https://www.cfla.gov.lv/lv/es-fondi-2014-2020/izsludinatas-atlases/3-1-1-5-k-2 (consulted on 9 July 2020). 9 Judgments of 24 September 2020, NMI Technologietransfer (C‑516/19, EU:C:2020:754, paragraph 44); of 5 February 2020, Staatssecretaris van Justitie en Veiligheid (Signing-on of seamen in the Port of Rotterdam) (C‑341/18, EU:C:2020:76, paragraph 40 and the case‑law cited); and of 15 October 2015, Axa Belgium (C‑494/14, EU:C:2015:692, paragraph 21 and the case‑law cited); see also Opinion of Advocate General Campos Sánchez-Bordona in Nerea (C‑245/16, EU:C:2017:271, point 49 et seq.) concerning the concept relevant in the present case. 10 Opinion of Advocate General Campos Sánchez-Bordona in Nerea (C‑245/16, EU:C:2017:271, point 48). 11 See, in greater detail in that regard, judgment of 6 July 2017, Nerea (C‑245/16, EU:C:2017:521), and Opinion of Advocate General Campos Sánchez-Bordona in Nerea (C‑245/16, EU:C:2017:271). 12 Regarding the ‘incentive effect’, see, in greater detail, judgment of 5 March 2019, Eesti Pagar (C‑349/17, EU:C:2019:172, paragraph 55 et seq.). 13 See also, in that sense, Opinion of Advocate General Campos Sánchez-Bordona in Nerea (C‑245/16, EU:C:2017:271, point 67). 14 See also judgment of 5 March 2019, Eesti Pagar (C‑349/17, EU:C:2019:172, paragraph 70). 15 See orders of 6 May 2020, Blumar and Others (C‑415/19 to C‑417/19, EU:C:2020:360, paragraph 23), and of 30 May 2018, Yanchev (C‑481/17, not published, EU:C:2018:352, paragraph 22); and also Opinion of Advocate General Campos Sánchez-Bordona in Nerea (C‑245/16, EU:C:2017:271, point 74). 16 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ 2014 L 94, p. 65). 17 Judgments of 2 June 2016, Pizzo (C‑27/15, EU:C:2016:404, paragraph 49); of 6 November 2014, Cartiera dell’Adda and Cartiera di Cologno (C‑42/13, EU:C:2014:2345, paragraph 45); and of 2 May 2019, Lavorgna (C‑309/18, EU:C:2019:350, paragraph 28). 18 Judgment of 6 November 2014, Cartiera dell’Adda and Cartiera di Cologno (C‑42/13, EU:C:2014:2345, paragraph 46), and, similarly, judgment of 2 June 2016, Pizzo (C‑27/15, EU:C:2016:404, paragraph 50). 19 Similarly, judgment of 28 October 2020, INAIL (C‑608/19, EU:C:2020:865, paragraph 46), according to which Member States are not obliged to allow an application for aid to be amended so that the applicant does not exceed certain ceilings. 20 Judgment of 6 November 2014, Cartiera dell’Adda and Cartiera di Cologno (C‑42/13, EU:C:2014:2345, paragraphs 45 and 46), and, similarly, judgment of 2 June 2016, Pizzo (C‑27/15, EU:C:2016:404, paragraphs 49 and 50); see also, however, judgment of 2 May 2019, Lavorgna (C‑309/18, EU:C:2019:350, paragraph 31). 21 In any event, the judgment of 28 October 2020, INAIL (C‑608/19, EU:C:2020:865, paragraph 42), militates in favour of Member States having the possibility to grant applicant undertakings the right to reduce the amount applied for in their applications for aid.