62010CC0275_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
I – Introduction
1. Can a guarantee be invoked against a public entity if it itself has previously given that guarantee in breach of provisions of European Union law (‘EU law’) on State aid and without the approval of the European Commission? This is, essentially, the legal problem to be considered by the Court in the present case.
2. In 2003, an authority of the Municipality of Rotterdam in the Netherlands provided a guarantee, in mysterious circumstances, for a loan in the approximate amount of EUR 23 million, which the firm of Residex granted to the Aerospace company. When Aerospace failed to repay the loan in full, Residex called on the Municipality to honour the guarantee and, at the end of 2004, sued it for payment of a sum in excess of EUR 10 million. The Municipality’s defence in the legal proceedings was based, in particular, on the argument that the guarantee at issue had been provided in breach of EU law and was therefore null and void under civil law.
3. The Court is now asked whether EU competition law – specifically the prohibition on implementing State aid under the third sentence of Article 108(3) TFEU – authorises, or even obliges, a national court to treat a municipal guarantee that has not been notified to the European Commission or approved by it as being null and void.
II – Legal framework
A – EU law
4. The framework for this case in EU law is provided by the third sentence of Article 108(3) TFEU (formerly the third sentence of Article 88(3) EC). Reference also has to be made to the notifications and notices in which the European Commission, as the EU competition authority, makes known its administrative practice and legal view with regard to certain issues of the law on State aid. In the present case the Guarantee Notice and the Notice on the role of national courts are of significance.
The Guarantee Notice
5. It is apparent from the ‘Commission Notice on the application of Articles 87 and 88 of the EC Treaty [now Articles 107 TFEU and 108 TFEU] to State aid in the form of guarantees’ (2) (the Guarantee Notice) that a guarantee given by a public authority for a loan or other financial obligation may constitute aid to both the borrower and the lender.
6. Section 2.2 (‘Aid to the borrower’) states:
‘Usually, the aid beneficiary is the borrower. ... When the borrower does not need to pay the commission, or pays a low commission, it obtains an advantage. ... In some cases, the borrower would not, without a State guarantee, find a financial institution prepared to lend on any terms. ...’
7. The following is added, however, in section ‘2.3. Aid to the lender’:
‘2.3.1. Even if usually the aid beneficiary is the borrower, it cannot be ruled out that under certain circumstances the lender, too, will directly benefit from the aid. In particular, for example, if a State guarantee is given ex post
in respect of a loan or other financial obligation already entered into without the terms of this loan or financial obligation being adjusted, or if one guaranteed loan is used to pay back another, non-guaranteed loan to the same credit institution, then there may also be aid to the lender, in so far as the security of the loans is increased. ...
2.3.2. Guarantees differ from other State aid measures, such as grants or tax exemptions, in that, in the case of a guarantee, the State also enters into a legal relationship with the lender. Therefore, consideration has to be given to the possible consequences for third parties of State aid that has been illegally granted. ... The question whether the illegality of the aid affects the legal relations between the State and third parties is a matter which has to be examined under national law. National courts may have to examine whether national law prevents the guarantee contracts from being honoured, and in that assessment the Commission considers that they should take account of the breach of [EU] law. ...’
8. Section 3.1 of the Guarantee Notice, under the heading ‘General considerations’, sets out the ‘conditions ruling out the existence of aid’:
‘If an individual guarantee ... entered into by the State does not bring any advantage to an undertaking, it will not constitute State aid. ...’
9. The earlier version of the Guarantee Notice (3) from the year 2000 also contained more or less the same wording.
Notice on the role of national courts
10. The Commission notice on the enforcement of State aid law by national courts (4) (‘Notice on the role of national courts’) contains a section 2.2 on ‘Unlawful State Aid’.
11. Subsection ‘2.2.1. Preventing the payment of unlawful aid’ contains the following provision:
‘28. National courts are obliged to protect the rights of individuals affected by violations of the standstill obligation. National courts must therefore draw all appropriate legal consequences, in accordance with national law, where an infringement of Article [108(3) TFEU] has occurred. ... However, the national courts’ obligations are not limited to unlawful aid already disbursed. They also extend to cases where an unlawful payment is about to be made. ... Where unlawful aid is about to be disbursed, the national court is therefore obliged to prevent this payment from taking place. ...’
12. Furthermore, it is stated in subsection ‘2.2.2. Recovery of unlawful aid’:
‘30. Where a national court is confronted with unlawfully granted aid, it must draw all legal consequences from this unlawfulness under national law. The national court must therefore in principle order the full recovery of unlawful State aid from the beneficiary. ...’
B – National law
13. The Netherlands law of relevance is Article 3:40(2) of the Burgerlijk Wetboek (5) (‘BW’), which provides as follows:
‘Infringement of a mandatory statutory provision renders a legal transaction null and void; if this provision serves solely to protect one of the parties to a multilateral legal transaction, such a transaction is merely voidable; in both cases this is on condition that nothing to the contrary is to be inferred from the objective of the provision.’
III – Facts and the main proceedings
14. In 2001, Residex Capital IV CV (‘Residex’) acquired shares in MD Helicopters Holding NV (‘MDH’), a subsidiary of RDM Aerospace NV (‘Aerospace’). (6) At the same time, Residex was granted an option entitling it to sell back its holding in MDH to Aerospace at a later date, subject to certain conditions.
15. Residex exercised that option in February 2003. However, Residex did not then have the sales price paid over to it but instead, in March 2003, converted the sum of EUR 8.5 million due to it in that respect into a loan to Aerospace. In addition, Residex made a further USD 15 million (7) available to Aerospace as a loan. This meant that the total value of the loan extended to Aerospace by Residex amounted, following conversion, to approximately EUR 23 million.
16. The grant of this loan was apparently due to the conduct of the former head of the municipal port authority of Rotterdam, (8) who offered Residex a guarantee from the port authority for a loan to be granted to Aerospace. In March 2003, the port authority of Rotterdam did indeed give Residex a guarantee in the maximum sum of EUR 23 012 510, plus loan charges and interest.
17. According to information provided by the referring court, without that guarantee – which was not notified to the European Commission and was therefore not approved by it – Aerospace would not have been able to obtain such a loan.
18. According to Residex, Aerospace repaid only an amount of approximately EUR 16 million of the loan. In December 2004, Residex therefore invoked the guarantee from the Municipality of Rotterdam in the amount of EUR 10 240 252, plus interest and recovery costs. The Municipality refused payment, however.
19. Residex and the Municipality of Rotterdam are now disputing in the court proceedings whether the guarantee assumed by the municipal port authority is at all valid. The legal argument turns, first, on the representative powers of the head of the port authority and the compatibility of the guarantee with provisions of municipal law. Secondly, the Municipality is claiming that the guarantee is null and void as being in breach of the prohibition of State aid under EU law. The Municipality is also disputing the quantum of the debt sued for by Residex.
20. Residex was unsuccessful in its arguments both at first instance before the Rechtbank Rotterdam (Rotterdam District Court) and on appeal before the Gerechtshof te ‘s-Gravenhage (Regional Court of Appeal, The Hague). On the basis of Article 3:40(2) BW, both of those courts concluded that the guarantee was null and void because it constituted State aid within the meaning of Article 87(1) EC (now Article 107(1) TFEU) and had not been notified to the European Commission, contrary to Article 88(3) EC (now Article 108(3) TFEU).
21. Following an appeal on a point of law filed by Residex, the main proceedings are now pending before the Hoge Raad der Nederlanden (Supreme Court of the Netherlands), which is the referring court.
IV – Request for a preliminary ruling and procedure before the Court of Justice
22. By decision of 28 May 2010, lodged with the Court of Justice on 2 June 2010, the Hoge Raad referred the following question to the Court for a preliminary ruling:
‘Does the provision in the last sentence of Article 88(3) EC, now Article 108(3) TFEU, mean that, in a case such as the present, where the unlawful aid measure was implemented by granting the lender a guarantee which enabled the borrower to obtain a loan from the lender which would not have been available to it under normal market conditions, the national courts, within the framework of their obligation to remedy the consequences of the unlawful aid measure, are obliged, or at any rate authorised, to cancel the guarantee, even if that does not result in the cancellation of the loan granted under the guarantee?’
23. Residex, the Municipality of Rotterdam, the Governments of Denmark, Germany and the Netherlands, and the European Commission have made written and oral observations in the proceedings before the Court.
V – Appraisal
24. With its question the Hoge Raad is essentially asking whether the third sentence of Article 108(3) TFEU authorises, or even obliges, a national court to consider a municipal guarantee that has not been notified to the European Commission or approved by it to be null and void.
25. The parties to the proceedings have divergent opinions on this issue. Whilst Residex, as appellant in the main proceedings, naturally supports the view that the guarantee is valid and the Municipality of Rotterdam, as respondent, just as vehemently opposes that contention, the observations put forward by most of the Governments involved in the proceedings and by the Commission favour a qualified approach with differing variations.
26. I should also like to recommend such a differentiating solution to the Court.
A – Preliminary remark
27. Everything that is known about the facts in the main proceedings indicates that the guarantee in question constitutes State aid, within the meaning of Article 107(1) TFEU (formerly Article 87(1) EC), which was not notified to the European Commission or approved by it. This means that it is aid unlawful on procedural grounds
granted in breach of the third sentence of Article 108(3) TFEU (formerly Article 88(3) EC). None of the parties to the proceedings has challenged this before the Court.
28. In contrast to the position under European antitrust law, for instance, (see Article 101(2) TFEU) the provisions of the European Treaties dealing with State aid do not expressly state what legal consequences are to follow under civil law from a breach of the duty to notify and the prohibition on putting aid measures into effect (the third sentence of Article 108(3) TFEU). However, this certainly does not mean that a breach of the third sentence of Article 108(3) TFEU would have no consequences at all.
29. EU law requires national courts to order those measures which are appropriate effectively to remedy the consequences of the unlawfulness of an aid measure. (9) It is established case-law of the Court that national courts must therefore ensure that all appropriate inferences are drawn, in accordance with their national law, from an infringement of the third sentence of Article 108(3) TFEU, as regards both the validity of the measures giving effect to the aid and the recovery of financial support granted in disregard of that provision. (10)
30. This generally has the result that all transactions – civil law contracts not least of all – which are concluded in connection with the granting of State aid which is unlawful on procedural grounds are considered null and void or ineffective. The Court has held that ‘the validity of acts entailing implementation of aid measures is affected by failure, on the part of the national authorities, to observe the prohibition ... on implementing aid without Commission authorisation.’ (11)
31. The main objective is to ensure in this way that aid which is incompatible with the internal market is never implemented. (12) However, if aid is nevertheless granted in breach of the duty to notify and of the prohibition on implementation, it will at least be necessary to ensure that the recipient forfeits the resultant advantage and that the consequences of the unlawfulness of the aid measure are remedied so that no distortion of competition occurs or is perpetuated. (13) The previously existing situation should be re-established. (14)
32. However, it is doubtful whether, in the case of a guarantee provided by a public authority for a private loan, a finding by the national court that the guarantee is null and void will always necessarily and appropriately contribute to the realisation of those objectives.
33. As already intimated in the order made by the referring court, this essentially depends upon whether the lender itself – in this case, therefore, Residex – is to be considered a (co-) beneficiary of the aid (see section C below) or whether the aid benefits solely the borrower – in this case, therefore, Aerospace – (see Section B immediately below). (15)
B – The legal position in the event of the guarantee not giving the lender an advantage of its own
34. The referring court – like Residex, the Municipality of Rotterdam and the Danish Government – appears to assume that in this case Aerospace alone, as the borrower, derived any advantage from the municipal guarantee and is therefore the beneficiary of the aid.
35. Such an advantage to the borrower is to be assumed if it did not need to pay a commission or paid only a commission lower than that customary in the market. (16) If a borrower’s circumstances are so financially precarious that it could not obtain any more capital in the market, the entire amount of the secured loan must be regarded as constituting its economic benefit. (17)
36. In this case, irrespective of whether one considers solely the commission advantage in comparison with a normal market guarantee or the whole of the sum covered by the guarantee to be the advantage to Aerospace, (18) a finding by the national court that the guarantee is null and void would not in itself mean that the undertaking benefiting from it – namely Aerospace – would forfeit the advantage obtained under the guarantee. The invalidity of the guarantee would not necessarily mean that Aerospace would lose the amount of the loan, nor would Aerospace automatically have to pay a commission to the Municipality of Rotterdam if the guarantee were declared to be null and void.
37. In these circumstances the question that arises is whether it can be justifiable according to the objective of the third sentence of Article 108(3) TFEU for the legal consequence to the lender to be so grave as to render the guarantee null and void. This problem was discussed in the proceedings before the Court in various contexts, which I shall briefly address below.
1. The judgment in Commission
v Portugal : ‘Cancellation through recovery’
38. First, the referring court itself makes mention of the Commission
v Portugal
judgment (19) in this context. It expresses uncertainty as to how that judgment should be construed. In the opinion of some of the parties to the proceedings, the conclusion to be drawn from it is that a State guarantee in breach of EU law is to be considered or declared null and void.
39. That approach is unconvincing.
40. The Commission
v Portugal
case concerned an undertaking called EPAC, (20) which was a limited company in State ownership operating in the agricultural sector. In 1996, the Republic of Portugal authorised EPAC to negotiate the terms of a loan up to a total of PTE 50 billion (21) from a group of private banks, PTE 30 billion (22) of which would be covered by a State guarantee. By Decision 97/762/EC of 9 July 1997, the Commission ordered the Portuguese Republic ‘to cancel the aid granted to EPAC’. (23) When Portugal failed to comply with that decision, the Court ruled in its judgment in Commission
v Portugal,
on an action brought by the Commission, that the Portuguese Republic had failed to fulfil its Treaty obligations.
41. It is true that mention is made, in both Commission Decision 97/762 and in the Commission
v Portugal
judgment, of the ‘cancellation’ of ‘aid’, (24) with ‘aid’ being understood to mean the guarantee provided by the State of Portugal. (25) On closer examination, however, it is clear that what was meant by ‘cancellation’ of the guarantee was really recovery of the interest advantage
gained by EPAC as a result of the State guarantee, compared with the normal market rate. (26)
42. Hence, the Commission
v Portugal
judgment was ultimately concerned only with circumstances in which the State of Portugal had to take action vis-à-vis the borrower – in that case EPAC – to withdraw its unlawful economic advantage – the interest advantage – from it. (27) Nowhere in the Commission
v Portugal
judgment is mention made of any wider obligation on Portugal to cancel, as such, the State guarantee that was in breach of EU law or to declare it null and void, nor was Portugal found to have failed to comply with the Treaty in that respect.
43. Generally speaking, it is settled case-law that ‘ recovery
of unlawful aid is the logical consequence of the finding that it is unlawful.’ (28) However, recovery of an advantage is by no means the same thing as declaring the underlying legal transactions to be invalid.
44. In light of the foregoing, it cannot be concluded from the case-law to date, especially the Commission
v Portugal
judgment, that there is an obligation to declare a guarantee invalid if it was granted in breach of EU law on aid and if only the borrower is to be considered the beneficiary of that aid.
2. Principle of equivalence
45. Secondly, the Commission invokes the principle of equivalence. According to settled case-law, this principle requires that all the rules applicable to actions apply without distinction to actions alleging infringement of European Union law and to similar actions alleging infringement of national law. (29) In other words, no less favourable terms must be applied to implementation of EU law by the national courts than are applied to implementation of corresponding provisions of national law. (30)
46. In the view of the Commission, the principle of equivalence requires that a guarantee given in breach of the third sentence of Article 108(3) TFEU be considered null and void if it should turn out that there are mandatory provisions of national law the infringement of which might also lead to the invalidity of a guarantee under Article 3:40(2) BW.
47. That argument is unsound. It presumes something which, in reality, is still the subject of discussion – namely that the third sentence of Article 108(3) TFEU, according to its objective of protection, necessarily requires that an aid measure in breach of EU law should be null and void.
48. Under national law, there may be legislation the protective objective of which means that a breach of that legislation results in transactions being null and void under civil law, whilst there may be other legislation the protective objective of which does not mean that a breach of that legislation calls for such a consequence in law. The same applies to a breach of EU law. The crucial factor is the national legislative provisions with which the third sentence of Article 108(3) TFEU is to be compared: should it be compared with those provisions the breach of which, according to their protective objective, is linked to the consequence of invalidity, or with those which do not trigger such a consequence in law.
49. The principle of equivalence would not have the consequences portrayed by the Commission unless it were already established that a breach of the third sentence of Article 108(3) TFEU must necessarily lead to the invalidity of a guarantee under EU law. However, as it is first necessary in the present proceedings to clarify whether EU law necessarily requires that a guarantee be null and void, the third sentence of Article 108(3) TFEU cannot a priori be equated with other national prohibitory legislation within the meaning of Article 3:40(2) BW.
50. Reliance upon the principle of equivalence is therefore not pertinent in the present case.
3. The conditionality link between a guarantee and a loan
51. Thirdly, in the view of the Municipality of Rotterdam there is a conditionality link between the guarantee and the loan such that any invalidity of the guarantee results in the loan becoming immediately repayable and the previously existing situation being re-established. (31) This also supports the conclusion that, in application of the national provision in Article 3:40(2) BW, a guarantee that infringes the third sentence of Article 108(3) TFEU is null and void.
52. One counter-argument to this is that, whilst any invalidity of the guarantee might lead to the loan becoming immediately repayable, this does not generally result precisely in withdrawal of the advantage to the borrower that infringes EU law.
53. First, the mere fact that repayment is due does not ensure that the loan will also indeed be promptly repaid, particularly if the borrower is already experiencing financial difficulties. Secondly, repayment of the entire loan would in most cases exceed what would be necessary to withdraw the advantage that is in breach of EU law; as stated above, (32) that advantage generally consists only of a difference in commission compared with the normal market commission and only in exceptional cases does it extend to the whole of the sum covered by the guarantee. Finally, it should be noted that the advantage to the borrower that is in breach of EU law would not in this way be restored to the public authority which provided it in the form of the guarantee, but to a third party – the lender – which is not entitled to any such share of the benefit at all and where it could trigger new distortions of competition.
54. It therefore follows that any link of conditionality between a guarantee and the loan secured by it does not lead to the conclusion that the guarantee must necessarily be considered null and void in the event of a breach of the third sentence of Article 108(3) TFEU.
4. Impediment to further implementation of aid
55. Fourthly, the Municipality of Rotterdam argues that further implementation of aid could be impeded by the invalidity of the guarantee.
56. In a case such as the present, however, in which the loan has already been paid out in full, this argument is unconvincing.
57. If only the borrower – that is to say, Aerospace – is to be considered the beneficiary of aid, then the aid measure at issue was implemented in full as soon as the loan secured by the guarantee was paid out. Whether the guarantee can later be invoked against the public authority as guarantor does not alter the fact that the borrower has obtained its unfair competitive advantage in full and also retains the same. In such a case, establishment that the guarantee is null and void does not help to impede implementation of the aid that is in breach of EU law.
5. Possible duties of care on the lender with regard to effective compliance with the third sentence of Article 108(3) TFEU
58. Fifthly, some of the parties to the proceedings have mentioned duties of care on the lender necessary to ensure, as far as possible, the practical effectiveness of the third sentence of Article 108(3) TFEU. They argue that the lender should not be able to rely on the existence of the guarantee until its compatibility with the internal market has been confirmed by the European Commission. If the lender prematurely pays out the loan secured by the guarantee, it does so at its own risk.
59. However, I am not persuaded by that argument either.
60. According to established case-law of the Court, it behoves a diligent businessman to determine whether the procedure under the third sentence of Article 108(3) TFEU has been followed. (33) As far as can be seen, such a duty of care under EU law has been concluded only with regard to the actual recipient of aid, rather than with regard to third-party undertakings, which – as is so often the case with lenders (34) – were merely involved in the processing of the aid without also themselves being beneficiaries of that aid. (35)
61. The Court of First Instance of the European Union (now the General Court) admittedly stated in its judgment in EPAC
v Commission
in connection with the aforementioned Portuguese State guarantee (36) that the creditor banks, too, were under a duty to display the requisite prudence and diligence and to make the necessary checks as to the lawfulness of the aid. (37) However, the General Court did not substantiate that statement in any way (38) and did not, in particular, deal with all of the aspects that have been the subject of discussion in the present preliminary-ruling procedure.
62. It might certainly be possible to produce the greatest conceivable deterrent effect if, in the case of the grant of a guarantee by a public authority, one were always to extend the duty of care under aid law to a lender which is not itself a beneficiary of the aid. In my view, however, this would exceed what is necessary to effectively enforce the third sentence of Article 108(3) TFEU.
63. To burden a lender with the aforementioned duties of care regarding compliance with EU law would be tantamount to a clear shifting of the economic risk of a guarantee from the public authority to a private undertaking that is not itself a beneficiary of aid. The risk of the borrower becoming insolvent would then be borne, not by the public authority guarantor, but by the lender. This would unreasonably encourage public authorities to recklessly give guarantees that might not be compatible with EU law and to essentially shift the financial burden resulting from any reversal of the transaction on to the private-sector lender. (39)
64. Such a transfer of the risk to private-sector lenders could at the same time have a chilling effect, thereby prejudicing the supply of capital to undertakings – particularly in the form of bank loans. The seriousness of the problem to the entire economic development of the European Union when lenders hesitate to provide loans to undertakings operating in the internal market has been made spectacularly clear during the recent economic and financial crisis.
65. In light of the foregoing I do not see any reason for the Court to adhere on this point to the view of the law expressed by the General Court in EPAC
v Commission . (40) If State aid is granted in the form of a guarantee, no further duty of care under EU law should arise with regard to a lender that is not itself a beneficiary of the aid.
6. Interim conclusion
66. As shown above, effective enforcement of EU law on State aid does not
require a State guarantee to be considered null and void for breach of the third sentence of Article 108(3) TFEU if the lender is not itself a beneficiary of the aid.
67. I would add that, in such a case, it also does not fall within the discretion of the national court to nevertheless consider that guarantee null and void for the abovementioned breach of the third sentence of Article 108(3) TFEU. Different rights and obligations for undertakings operating in the internal market according to the Member State and competent national court concerned must not follow from EU competition law. European competition law must rather be interpreted and applied in such a way that, as a result of a uniform legal framework, equivalent conditions of competition apply to all undertakings operating in the internal market (‘level playing field’). (41)
68. Contrary to the view taken by several parties to these proceedings, no opposite inference is to be derived from the CELF
judgment. The Court simply said there that the national court may order the recovery of aid paid out in breach of the third sentence of Article 108(3) TFEU even if it was subsequently approved by the Commission. (42) As shown above, (43) however, the recovery
of the economic advantage obtained is not at all synonymous with the invalidity
under civil law of the transaction linked to the aid measure.
C – Legal position where the lender procures an advantage of its own from the guarantee
69. What remains to be considered is the legal position in the case where the lender (as well) is itself a beneficiary of State aid linked to a guarantee.
1. Indications that the lender procures its own advantage
70. The German Government and the Commission correctly point out that it is not necessarily just the borrower who profits from a guarantee by a public authority. The lender whose claims against the borrower are secured by a State guarantee can also derive solid economic advantages from that guarantee.
71. The referring court will therefore have to examine in depth whether the lender (Residex) should also be considered a beneficiary of the aid in the present case in addition to the borrower (Aerospace). (44) Contrary to the view expressed by Residex, the findings of fact established in the main proceedings contain clear indications that this undertaking, in its capacity as lender, did indeed procure an economic advantage from the municipal guarantee within the meaning of the law on State aid.
72. Such an advantage is certainly not simply attributable to the fact that an authority of the Municipality of Rotterdam guaranteed the loan made by Residex. Many undertakings conclude legal transactions with a public authority – whether public contracts, credit transactions or guarantees – but an element of State aid prohibited under EU law is not necessarily inherent in every such transaction. (45) It should be noted in the case of a guarantee given by a public authority for a private loan, in particular, that although the lender thereby obtains security so that its risk is reduced, the loan interest that the lender agrees with the borrower in such a case would at the same time prove to be considerably lower than in the case of an unsecured loan.
73. Nevertheless, according to the guidelines published by the Commission in its Guarantee Notice, (46) a lender is to be considered a beneficiary of State aid in two groups of cases, in particular:
– if the guarantee is given to secure ex post
a debt to the lender already entered into without the terms of this loan or financial obligation being adjusted, or
– if debt restructuring
takes place in such a way that one guaranteed loan is used to pay back another, non-guaranteed loan to the same creditor.
74. As the referring court states, (47) at the time when the municipal guarantee was given Residex was owed a debt of millions of euros by Aerospace in respect of payment of the buy-back price for shares in MDH, which Residex had sold back to Aerospace on the exercise of its put option. This debt was converted by Residex into a loan to Aerospace, with the guarantee provided by the port authority of Rotterdam playing a significant role in the matter.
75. All of this indicates clearly that the municipal guarantee in this case was given to secure ex post
a debt already entered into or in the course of a debt restructuring process, which would mean that Residex procured an economic advantage of its own from the municipal guarantee within the meaning of the law on State aid. Furthermore, there is no indication that Residex had paid the Municipality of Rotterdam a normal market commission for the guarantee in exchange for its advantage under the guarantee. Hence, both Aerospace and Residex would have to be considered beneficiaries of the aid.
2. Consequences with regard to the validity of the guarantee
76. In contrast with the circumstances discussed before, (48) the invalidity of a guarantee is a necessary and appropriate means by which to achieve the objective of the third sentence of Article 108(3) TFEU in the case where the lender is a beneficiary of the aid as well as the borrower.
77. First, the invalidity of a guarantee under civil law is an appropriate
means of realising the objective of the third sentence of Article 108(3) TFEU because it helps to withdraw from the lender, as one of the beneficiaries of the aid, the economic advantage obtained by it from a public authority in a manner contrary to EU law.
78. Any payment by the Municipality of Rotterdam under the guarantee would contribute to a deepening of the violation of the prohibition on implementation under EU law and would perpetuate the unlawful advantage that Residex, as a beneficiary of the aid, might procure from the non-approved guarantee. If the national court establishes that the guarantee is null and void, on the other hand, this prevents any further benefit to Residex. In this way the national court is able to fulfil its function of preventing payment of State aid in breach of EU law from taking place. (49)
79. If Residex had indeed trusted that the guarantee was valid, such an expectation would not be legitimate. As a beneficiary of aid it could have been expected, in the context of its duty of care, to determine whether the procedure under the third sentence of Article 108(3) TFEU had been followed. (50) This is not altered by any legal opinions that were apparently obtained by the Municipality of Rotterdam, (51) which allegedly assumed that the third sentence of Article 108(3) TFEU did not apply. A legitimate expectation does not arise until there is a final decision by the Commission, as the European competition authority, in which it is either decided that the guarantee does not constitute aid or that it is, in any event, compatible with the internal market. (52)
80. Precisely because it had its own duty of care, Residex cannot rely, as against the Municipality, on estoppel ( venire contra factum proprium ) . (53) It would be the antithesis of the protective purpose of European competition law in general and of the third sentence of Article 108(3) TFEU in particular for the Municipality of Rotterdam to be bound by its guarantee agreed in breach of EU law. A public authority must be able to present the defence in court that the advantage or the payment required of it by an undertaking would infringe competition rules under EU law. (54) Conversely, it is recognised that an undertaking may also claim in judicial proceedings that a payment demanded of it is incompatible with competition law. (55)
81. Secondly, the invalidity under civil law of a guarantee not approved by the Commission is also necessary
in order to realise the objective of the third sentence of Article 108(3) TFEU.
82. It would admittedly be conceivable, theoretically, to find this guarantee to be only partially null and void – that is to say, in so far as it conveys an advantage to the lender that is in breach of competition rules. In a case such as the present this would mean that the Municipality, as guarantor, would have to pay up under the guarantee and might then be entitled to deduct from the amount for which it is liable such sum as would have corresponded to a normal market commission for providing the guarantee.
83. An assumption of such partial invalidity, however, would be much less apposite to realising the objective of the third sentence of Article 108(3) TFEU than full invalidity.
84. On the one hand, the national court would be faced with the difficult task of establishing what commission was normal in the market and therefore reasonable at the time when the guarantee was provided. If – as in this case – the borrower would have been unable to obtain a loan on the market at all, the whole volume of credit, that is to say, the entire sum covered by the guarantee, would have to be regarded as constituting the advantage to the lender since the credit transaction would not have come into being at all without that guarantee. (56)
85. On the other hand, if the guarantee were to be (only) partially null and void the lender benefiting from the aid would for the most part be relieved of its joint liability for compliance with the competition rules under EU law. (57) Lenders benefiting from aid would then have an improper incentive to hastily participate in the financing of projects for which no approval would be forthcoming under the European law on aid.
86. The Court certainly does not in every case require full reversal of an aid measure that has taken place in breach of the third sentence of Article 108(3) TFEU. In CELF, for instance, it was enough for the Court that the aid recipient was ordered to pay a reasonable amount of interest on its economic advantage procured from a public authority, without being obliged to repay the aid per se. (58) This CELF
case-law only applies, however, in instances where aid granted in breach of the third sentence of Article 108(3) TFEU is subsequently approved by a ‘positive decision’ adopted by the Commission. (59) The criterion that determines whether aid can be disbursed to a recipient in relation to a period predating a positive decision, or whether that recipient can keep aid already disbursed is therefore the finding, by the Commission, that the aid is compatible with the internal market. (60)
3. Interim conclusion
87. To summarise:
A State guarantee for a private loan provided in breach of the third sentence of Article 108(3) TFEU and also not approved ex post by the European Commission is to be considered null and void if the lender is itself a beneficiary of the aid.
VI – Conclusion
88. In view of the foregoing considerations, I propose that the Court should answer the question referred by the Hoge Raad der Nederlanden in the following terms:
A State guarantee for a private loan provided in breach of the third sentence of Article 108(3) TFEU and also not approved ex post by the European Commission is not to be considered null and void unless the lender is itself a beneficiary of the aid.
(1) .
(2)  –	OJ 2008 C 155, p. 10.
(3)  –	Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (OJ 2000 C 71, p. 14); see sections 2.1.1, 2.2.1, 2.2.2 and 6.5 in particular.
(4)  –	OJ 2009 C 85, p. 1.
(5)  –	Netherlands Civil Code.
(6)  –	All three are companies incorporated under Netherlands law.
(7)  –	Equivalent at the time to approximately EUR 13.9 million.
(8)  –	Gemeentelijk Havenbedrijf Rotterdam.
(9)  –	Case C‑199/06 CELF and Ministre de la Culture et de la Communication
( ‘CELF’ ) [2008] ECR I‑469, paragraph 46; and Case C‑384/07 Wienstrom
[2008] ECR I‑10393, paragraph 28; also, to that effect, Case C‑368/04 Transalpine Ölleitung in Österreich and Others
( ‘Transalpine Ölleitung’ ) [2006] ECR I‑9957, paragraph 50.
(10)  –	Transalpine Ölleitung
(cited in footnote 9, paragraph 47) and CELF
(cited in footnote 9, paragraph 41; see also paragraph 45); also, to that effect, Case C‑354/90 Fédération nationale du commerce extérieur des produits alimentaires and Syndicat national des négociants et transformateurs de saumon
( ‘FNCE’ ) [1991] ECR I‑5505, paragraph 12; Case C‑39/94 SFEI and Others
[1996] ECR I‑3547, paragraph 40; Joined Cases C‑261/01 and C‑262/01 van Calster and Others
[2003] ECR I‑12249, paragraph 64; and Case C‑71/04 Xunta de Galicia
[2005] ECR I‑7419, paragraph 49. See also paragraph 30 of the Notice on the role of national courts.
(11)  –	See FNCE
(cited in footnote 10, paragraphs 12 and 17), and Case C‑390/98 Banks
[2001] ECR I‑6117, paragraph 73.
(12)  –	This is the so-called ‘preservative purpose’ or ‘prohibition rule’ based on the third sentence of Article 108(3) TFEU; see, in this respect, CELF
(cited in footnote 9, paragraphs 47 and 48).
(13)  –	See, to that effect, CELF
(cited in footnote 9, paragraphs 38 and 46) and Transalpine Ölleitung
(cited in footnote 9, paragraphs 46 and 50); similarly Banks
(cited in footnote 11, paragraph 75) and Case C‑148/04 Unicredito Italiano
[2005] ECR I‑11137, paragraph 113.
(14)  –	See, to that effect, Case C‑142/87 Belgium
v Commission
( ‘Tubemeuse’ ) [1990] ECR I‑959, paragraph 66; Case C‑24/95 Alcan Deutschland
[1997] ECR I‑1591, paragraph 23; Unicredito Italiano
(cited in footnote 13, paragraph 113); and Case C‑210/09 Scott and Kimberly Clark
[2010] ECR I‑4613, paragraph 31.
(15)  –	The Court also appears to make this underlying distinction in Joined Cases C‑329/93, C‑62/95 and C‑63/95 Germany and Others v Commission
( ‘Bremer Vulkan’ ) [1996] ECR I‑5151, paragraph 56; it is to be concluded from that case that an undertaking involved in a credit transaction may not itself be considered a recipient of aid unless it derives an economic advantage of its own.
(16)  –	Guarantee Notice, section 2.2.
(17)  –	Case C‑288/96 Germany v Commission (‘Jadekost’)
[2000] ECR I‑8237, paragraph 31; see also, to that effect, the Commission’s Guarantee Notice, section 4.1(a): ‘If the likelihood that the borrower will not be able to repay the loan becomes particularly high, [a] market rate may not exist and in exceptional circumstances the aid element of the guarantee may turn out to be as high as the amount effectively covered by that guarantee’.
(18)  –	In the present case the Hoge Raad states that ‘granting the lender a guarantee ... enabled the borrower [Aerospace] to obtain a loan from the lender which would not have been available to it under normal market conditions’. This suggests that Aerospace would certainly also not have secured the guarantee as such at all under normal market conditions – and not just on less favourable terms.
(19)  –	Case C‑404/97 Commission
v Portugal
[2000] ECR I‑4897.
(20)  –	Empresa Para a Agroalimentação e Cereais SA.
(21)  –	On 26 July 1996, when EPAC was authorised by the Portuguese State to negotiate the terms of the loan, PTE 50 billion were worth approximately ECU 255.2 million (rate of exchange as per OJ 1996 C 288, p. 1) with one ECU today corresponding to one euro.
(22)  –	On 30 September 1996, the date on which the guarantee was approved, PTE 30 billion were worth approximately ECU 153.7 million (rate of exchange as per OJ 1996 C 288, p. 1) with one ECU today corresponding to one euro.
(23)  –	Article 1 and Article 2(1) of Commission Decision 97/762/EC of 9 July 1997 on measures taken by Portugal to assist EPAC (OJ 1997 L 311, p. 25), quoted in paragraph 16 of the Commission
v Portugal
judgment (cited in footnote 19).
(24)  –	Commission
v Portugal
(cited in footnote 19, paragraphs 16 and 38).
(25)  –	Commission
v Portugal
(cited in footnote 19, paragraph 47).
(26)  –	In paragraph 46 of the Commission v Portugal
judgment (cited in footnote 19), the Court refers to ‘the obligation to cancel unlawful aid by way of its recovery’; in paragraph 48 of that same judgment it says that the ‘financial advantage which is to be recovered is ... represented by the difference between the market financial cost of bank loans ... and the financial cost actually paid by EPAC’; see, in addition, paragraph 56 of that judgment, which deals again with what is ‘necessary in order to recover the financial advantage referred to in the decision at issue’.
(27)  –	The former practice of the Commission was based on the interest advantage whereas, according to current practice, it is the commission advantage that would more likely be considered.
(28)  –	Tubemeuse
(cited in footnote 14, paragraph 66); Banks
(cited in footnote 11, paragraph 74); Commission
v Portugal
(cited in footnote 19, paragraph 38); Case C‑110/02 Commission
v Council
[2004] ECR I‑6333, paragraph 41; CELF
(cited in footnote 9, paragraph 54); and Case C‑507/08 Commission
v Slovakia
[2010] ECR I‑0000 paragraph 42; (emphasis added). To that effect, see also paragraph 30 of the Notice on the role of national courts.
(29)  –	Joined Cases C‑392/04 and C‑422/04 i-21 Germany and Arcor
[2006] ECR I‑8559, paragraph 62; Case C‑118/08 Transportes Urbanos y Servicios Generales
[2010] I‑635, paragraph 33; and Case C‑542/08 Barth
[2010] I‑3189, paragraph 19.
(30)  –	See, to that effect, Case 33/76 Rewe-Zentralfinanz and Rewe-Zentral
[1976] ECR 1989, paragraph 5, and Case C‑268/06 Impact [2008] ECR I‑2483, paragraph 46.
(31)  –	The Municipality relies here, first, on current lending practice and, secondly, on a clause in the loan agreement between Residex and Aerospace specifically agreed in this case.
(32)  –	See point 35 of this Opinion.
(33)  –	Case C‑5/89 Commission
v Germany
[1990] ECR I‑3437, paragraph 14; Alcan Deutschland
(cited in footnote 14, paragraph 25); Joined Cases C‑183/02 P and C‑187/02 P Demesa and Territorio Histórico de Álava
v Commission
[2004] ECR I‑10609, paragraphs 44 and 45; and Joined Cases C‑346/03 and C‑529/03 Atzeni and Others
[2006] ECR I‑1875, paragraph 64.
(34)  –	See points 69 to 87 of this Opinion below regarding the special case in which a lender is itself to be considered the beneficiary of aid.
(35)  –	See, in particular, Alcan Deutschland
(cited in footnote 14, paragraph 49); Demesa and Territorio Histórico de Álava
v Commission
(cited in footnote 33, paragraphs 44 and 45); Atzeni and Others
(cited in footnote 33, paragraphs 64 and 65); and Case C‑408/04 P Commission
v Salzgitter
[2008] ECR I‑2767, paragraph 104. Similarly, the view expressed by the Commission in section 2.3.2 of its Guarantee Notice, where effects of illegality of aid on the relationship between the State and the lender are discussed in the case of the lender itself being the beneficiary of aid. Nothing else is to be inferred from the Commission’s occasionally discussed 1983 communication (OJ 1983 C 318, p. 3), which also only focuses on the recipient of unlawful aid: ‘the Commission ... informed potential recipients of State aid ... that any recipient of aid granted illegally ... might have to refund the aid’.
(36)  –	See above, in that respect, point 40 of this Opinion.
(37)  –	Judgment of the Court of First Instance in Joined Cases T‑204/97 and T‑270/97 EPAC
v Commission
[2000] ECR II‑2267, paragraph 144; to the same effect, the judgment in Joined Cases T‑415/05, T‑416/05 and T‑423/05 Greece and Others
v Commission
[2010] ECR II‑0000, paragraph 354.
(38)  –	The same applies to the Opinion delivered by Advocate General Cosmas on 28 March 1996 in Bremer Vulkan
(cited in footnote 15, point 102) and by Advocate General Ruiz-Jarabo Colomer on 28 October 1999 in Commission
v Portugal
(cited in footnote 19, point 53).
(39)  –	See too CELF
(cited in footnote 9, paragraph 40), in which the Court decided against an interpretation of EU law that would have the effect of according a favourable outcome to the non‑observance, by the Member State concerned, of the third sentence of Article 108(3) TFEU (formerly the third sentence of Article 88(3) EC).
(40)  –	See above, point 61 of this Opinion and footnote 37.
(41)  –	See, in that respect, my Opinion delivered on 29 April 2010 in Case C‑550/07 P Akzo Nobel Chemicals and Akcros Chemicals
v Commission
[2010] ECR I‑0000, point 169.
(42)  –	CELF
(cited in footnote 9, paragraph 53); also Wienstrom
(cited in footnote 9, paragraph 29).
(43)  –	See above, points 41 to 43 of this Opinion.
(44)  –	The courts dealing with the facts in the main proceedings apparently left this question unanswered; see footnote 53 in the opinion delivered by Advocaat-Generaal Keus on 12 February 2010 in the appeal on a point of law to the Hoge Raad.
(45)  –	Not even the Commission assumes in any way in its Guarantee Notice that all guarantees by a public authority always automatically contain an element of aid benefiting the lender. It is indeed apparent from sections 2.2 and 2.3.1 of the Guarantee Notice that the aid beneficiary is usually the borrower and only under certain circumstances will the lender, too, directly benefit from the aid. The Commission also reaffirmed that view in the present case at the hearing before the Court.
(46)  –	See section 2.3.1 of the Guarantee Notice. Wording of essentially the same substance was to be found in section 2.2.2 of the Guarantee Notice from the year 2000 (cited above in footnote 3).
(47)  –	See above, points 14 to 17 of this Opinion.
(48)  –	See above, points 34 to 68 of this Opinion (on the legal position if the guarantee does not
procure the lender an advantage of its own).
(49)  –	To that effect, the last sentence of paragraph 28 of the Notice on the role of national courts.
(50)  –	See above, point 60 of this Opinion and the case-law cited in footnote 33.
(51)  –	The Commission mentions such opinions in its pleading. Obviously, no comment can be made here as to the quality of those opinions.
(52)  –	To that effect, CELF
(cited in footnote 9, paragraphs 66 to 68) and section 2.3.2 of the Guarantee Notice; see also Alcan Deutschland
(cited in footnote 14, paragraphs 25 and 49), according to which undertakings to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure laid down in Article 108 TFEU.
(53)  –	The same applies to the maxim ‘ nemo audiatur propriam turpitudinem allegans’
to which the German Government referred at the hearing.
(54)  –	The Court also assumes this in Case C‑172/03 Heiser
[2005] ECR I‑1627, paragraph 18, in conjunction with paragraphs 58 and 59, and Transalpine Ölleitung
(cited in footnote 9, especially paragraph 49).
(55)  –	This is particularly so where a parafiscal charge forms an integral part of an aid provision in breach of EU law: see van Calster and Others
(cited in footnote 10, especially paragraphs 54 and 65); Case C‑526/04 Laboratoires Boiron
[2006] ECR I‑7529, especially paragraph 40; and Case C‑333/07 Régie Networks
[2008] ECR I‑10807. Even in an action between private parties it is permissible for one contracting party to rely on the fact that an agreed payment would be in breach of provisions of European competition law: see Case C‑453/99 Courage and Crehan
[2001] ECR I‑6297, especially paragraph 24.
(56)  –	The considerations expressed in point 35 of this Opinion apply mutatis mutandis
in this respect.
(57)  –	See point 60 of this Opinion above and the case-law cited in footnote 33 with regard to an aid recipient’s duty of care.
(58)  –	CELF
(cited in footnote 9, paragraphs 52 and 55); to that effect, Wienstrom
(cited in footnote 9, paragraphs 28 to 30).
(59)  –	This is emphasised in CELF
(cited in footnote 9) with wording such as ‘[w]hen the Commission adopts a positive decision ...’ (paragraph 49), ‘[i]n that case ..., ‘[i]n a situation such as that in the main proceedings ...’ (paragraph 52) and ‘where the Commission has adopted a final decision’ (paragraph 55).
(60)  –	Wienstrom
(cited in footnote 9, paragraph 31).