Opinion of the Advocate General — ECLI:EU:C:2012:530
Date: 2012-09-06
Language of the case: Spanish
Subject matter: State aids;Competition;Provisions governing the Institutions
Procedure: Action for failure to fulfil obligations
Origin: Spain

Summary — Judgment of the Court (Grand Chamber), 11 December 2012 1. Treaties of the European Union — Temporal application — Procedural rules — Change in the procedure in respect of the infringement by Member States of the obligation to comply with a judgment of the Court — Application to pre-litigation procedures which were pending at the time of its entry into force — No infringement of the principles of legal certainty, of the non-retroactivity of more severe penalties and of the legality of criminal offences and penalties and infringement of the rights of defence (Art. 228(2) EC; Art. 260(2) TFEU) 2. Actions for failure to fulfil obligations — Judgment of the Court establishing the failure to fulfil obligations — Period for compliance — Reference date for assessing whether there has been a failure to fulfil obligations (Art. 228(2) EC; Art. 260(2) TFEU) 3. State aid — Recovery of unlawful aid — Undertakings which have received aid and which have become insolvent — Determination of the debtor where there is a transfer of assets (Art. 108(2) TFEU) 4. Actions for failure to fulfil obligations — Judgment of the Court establishing the failure to fulfil obligations — Infringement of the obligation to comply with the judgment — Financial penalties — Discretion of the Court — Commission’s suggestions and guidelines — Effect (Art. 260(2) TFEU) 5. Actions for failure to fulfil obligations — Judgment of the Court establishing the failure to fulfil obligations — Infringement of the obligation to comply with the judgment — Financial penalties — Penalty payment — Determination of the amount — Discretion of the Court — Criteria (Arts 3(3) TEU and 51 TEU; Art. 260(2) TFEU; Protocol No 27 annexed to the EU and FEU Treaties) 6. Actions for failure to fulfil obligations — Judgment of the Court establishing the failure to fulfil obligations — Infringement of the obligation to comply with the judgment — Financial penalties — Imposition of a lump sum payment — Discretion of the Court — Criteria for assessment (Art. 260(2) TFEU) 1. With effect from the entry into force of the Treaty of Lisbon, Article 260(2) TFEU altered the conduct of the pre-litigation procedure preceding an action for failure of a Member State to comply with a judgment of the Court establishing a failure to fulfil obligations by removing the stage relating to the issuing of a reasoned opinion formerly provided for in Article 28(2) EC. From then on, that procedure involves only one stage: the communication of formal notice to the Member State concerned. A pre-litigation procedure which was initiated before the date on which the amendment entered into force but was still pending after that date is governed by those new rules which, as procedural rules, apply to any action for failure to fulfil obligations brought after the date on which they entered into force, notwithstanding the fact that the pre-litigation procedure was initiated before that date. That finding cannot be called into question by considerations relating to compliance with the principle of legal certainty. Member States were fully aware at the time of the entry into force of those new rules both of their obligation to adopt the measures to comply with a judgment of the Court finding that a Member State has failed to fulfil its obligations and of the consequences which breach of that obligation may entail, as these were set out in the primary law of the European Union well before the entry into force of the Treaty of Lisbon. The same is true as regards the principles of the non-retroactivity of more severe penalties and of the legality of criminal offences and penalties, inasmuch as the FEU Treaty has not made any change concerning either the obligation upon Member States to adopt the measures to comply with a judgment of the Court finding that there has been a failure to fulfil obligations or the penalties which Member States risk if they breach that obligation. Nor can there be any question of an infringement of Member States’ rights of defence since they have the opportunity to submit their observations in response to the letter of formal notice. (see paras 42-44, 46-48, 50-52) 2. As Article 260(2) TFEU removed from infringement proceedings the stage relating to the issuing of a reasoned opinion, the reference date which must be used for assessing whether there has been a failure to fulfil obligations is that of the expiry of the period prescribed in the letter of formal notice issued under that provision. (see para. 67) 3. If the undertaking which received the aid declared unlawful and incompatible with the common market has been declared insolvent, the restoration of the previous situation and the elimination of the distortion of competition resulting from the unlawfully paid aid may in principle be achieved through registration of the liability relating to the repayment of such aid in the schedule of liabilities. Such a registration can, however, meet the recovery obligation only if, where the State authorities are unable to recover the full amount of aid, the insolvency proceedings result in the winding up of the undertaking which received the unlawful aid, that is to say, in the definitive cessation of its activities. Where the recipient undertaking is insolvent and a company has been created to continue some of its activities, the pursuit of those activities may, where the aid concerned is not recovered in its entirety, prolong the distortion of competition brought about by the competitive advantage which it enjoyed in the market as compared with its competitors. Accordingly, such a newly created company may, if it retains that advantage, be required to repay the aid in question. That is inter alia the case where it is established that that company continues genuinely to derive a competitive advantage because of the receipt of that aid, especially where it acquires the assets of the company in liquidation without paying the market price in return or where it is established that the effect of that company’s creation is circumvention of the obligation to repay the aid. That applies, in particular, if the payment of a market price is not sufficient to cancel out the competitive advantage linked to receipt of the unlawful aid. In such a case, the registration in the schedule of liabilities of the liability relating to such aid is not sufficient, on its own, to make the distortion of competition thus created disappear. (see paras 72, 99, 104, 106, 107) 4. See the text of the decision. (see paras 115, 116) 5. Where it is necessary to impose a penalty payment on a Member State to penalise its failure to comply with a judgment establishing a failure to fulfil obligations, such a penalty must be decided upon according to the degree of pressure needed in order to persuade the defaulting Member State to comply with that judgment and to alter its conduct in order to bring to an end the infringement complained of. In that regard, in exercising its discretion, it is for the Court to set the penalty payment at a level that is both appropriate to the circumstances and proportionate to the infringement established and to the ability to pay of the Member State concerned. Accordingly, in the assessment which it is for the Court to carry out, the criteria which must be taken into account in order to ensure that penalty payments have coercive force and that EU law is applied uniformly and effectively are, in principle, the duration of the infringement, its degree of seriousness and the ability of the Member State concerned to pay. In applying those criteria, the Court is required to have regard, in particular, to the effects on public and private interests of failure to comply and to the urgency with which the Member State concerned must be induced to fulfil its obligations. As regards the Member State’s ability to pay, it is necessary to take into account recent trends in inflation and the gross domestic product of that Member State at the time of the Court’s examination of the facts. In that regard, in the case of a failure to fulfil the obligation to adopt the measures necessary to comply with a decision of the Commission, the fact that a Member State has conferred on its regions responsibility for the implementation of that decision cannot have any bearing on the application of Article 260 TFEU. While each Member State may freely allocate internal central and regional powers as it sees fit, the fact remains that the Member State alone is responsible towards the European Union under Article 260 TFEU for compliance with obligations arising under EU law. The duration of the infringement must be assessed by reference to the time when the Court assesses the facts, not the time at which the case is brought before it by the Commission. As regards the seriousness of the infringement, if the judgment which has not been complied with relates to the recovery of unlawful State aid, it is necessary to take into account the vital nature of the rules of the TFEU on State aid, which are the expression of one of the essential tasks with which the European Union is entrusted under Article 3(3) TEU — namely the establishment of an internal market — and under Protocol No 27 on the internal market and competition, which, pursuant to Article 51 TEU, forms an integral part of the Treaties and under which the internal market is to include a system ensuring that competition is not distorted. Repayment of aid declared unlawful and incompatible with the common market eliminates the distortion of competition caused by the competitive advantage afforded by the aid and, by repaying the aid, the recipient forfeits the advantage which it had enjoyed over its competitors on the market. (see paras 117-120, 125-127, 131, 132) 6. See the text of the decision. (see paras 141, 143-145)