Keywords

Summary



Keywords

1. State aid – Commission decision – Identification of the beneficiary of aid following a series of reorganisations – Concept of economic unit

(Arts 87 EC and 88 EC)

2. State aid – Prohibition – Exceptions – Commission decision making authorisation to disburse aid subject to the prior repayment by the undertaking concerned of unlawful aid previously received – Need to avoid aid that has not been repaid and planned aid having a cumulative effect

(Arts. 87(3)(c) EC and 88(2) EC)

Summary

1. In the field of State aid, when it is necessary to identify the beneficiary of aid, the Commission does not overstep the bounds of its discretion when it takes the view that, following a restructuring entailing a transfer of production facilities from one company to other newly constituted manufacturing companies, the former company still having an interest in those newly constituted manufacturing companies, all those companies may, as far as the aid in question is concerned, together form a single group, notwithstanding the fact that each of the newly constituted manufacturing companies has a legal personality separate from the former company.

The former company and the new operating companies can form an economic unit, inter alia, when the restructuring carried out constitutes an indivisible whole, from an industrial and economic point of view. An entity which, owning controlling shareholdings in a company, actually exercises that control by involving itself directly or indirectly in the management thereof must be regarded as taking part in the economic activity carried on by the controlled undertaking. In those circumstances, the fact that that control is exercised only in conjunction with another company with a greater share in the capital of the controlled company than in that of the former company does not preclude the Commission from concluding that the former company and the controlled company formed an economic unit.

If that were not the case, the simple separation of an undertaking into two different entities, the first of which pursues directly the former economic activity and the second of which controls the first, being fully involved in its management, would be sufficient to deprive the rules of the European Union relating to State aid of their practical effect. It would enable the second entity to benefit from subsidies or other advantages granted by the State or by means of State resources and to use them in whole or in part for the benefit of the first, in the interest, also, of the economic unit formed by the two entities.

Moreover, the risk that the order for recovery of unlawful aid might be circumvented cannot be taken into account by the Commission only where such an objective can be proved to exist in the factual circumstances of the case because, if that were so, undertakings would be encouraged to devise arrangements designed to circumvent the recovery of unlawful aid by taking advantage of the fact that the burden of proving that such an objective was being pursued lay with the Commission.

What may reveal that it is possible to exercise functions relating to control, direction and financial support – going beyond the simple placing of capital by an investor – and illustrate the existence of organic, functional links between an entity owning a controlling shareholding in a company and the controlled company itself, is the fact that members of the management committee and the controlling body of that entity are appointed to the equivalent bodies of the controlled company.

(see paras 47-51, 55, 59, 63-64)

2. The Commission may make compatibility of aid conditional upon prior repayment of earlier unlawful aid. Regardless of whether individual aid or aid covered by an aid scheme is in issue, the need to prevent the cumulative effect of aid that has not been repaid and of aid which is planned is the same. First, the Commission must, where appropriate, take into account any cumulative effect of the earlier unlawful aid that has not been repaid and the new aid and, second, it can find that the new aid is compatible with the common market only when the evidence at its disposal enables it to reach such a conclusion.

When the Commission decides to initiate a formal investigation procedure, it is for the Member State and the potential beneficiary of new aid to provide the Commission with evidence capable of showing that the aid is compatible with the common market and that obligation also extends to the need to establish that the new aid and the earlier unlawful aid, incompatible with the common market and not repaid, do not have a cumulative effect.

(see paras 96-97, 99)