European Commission v Italian Republic.
Date: 2011-11-17
27. It should be recalled that, according to settled case-law, the reference date for assessing whether there has been a failure to fulfil obligations under Article 228(2) EC is the date of expiry of the period prescribed in the reasoned opinion issued under that provision (see Case C‑304/02 Commission  v France  [2005] ECR I‑6263, paragraph 30, and Case C‑369/07 Commission  v Greece  [2009] ECR I‑5703, paragraph 43), in this case 1 April 2008.
29. As to the Italian Republic’s argument that it was temporarily absolutely impossible for it to recover the aid in question because of the large number of recipient undertakings and the non-availability of the information necessary for quantifying the sums to be recovered, it should be recalled at the outset that the Court previously refused to accept a similar argument, in paragraphs 22 and 23 of the judgment in Case C‑99/02 Commission  v Italy .
32. Moreover, while it is true that the Italian Republic needed a longer period of time for identifying the recipients and the amount of the aid granted under a scheme that had been declared incompatible with the common market than if only an individual grant of aid had been concerned, that being a factor which may be taken into account in determining the basic amount of the penalty payment, it does not appear from the explanations provided by the Italian Republic that, as required for compliance with a judgment finding a failure to fulfil obligations in such a case, all the measures taken with a view to recovering the aid in question were the subject of permanent and effective monitoring.
36. It is for the Court, in each case, in the light of the circumstances of the case before it and the degree of persuasion and deterrence which appears to it to be required, to determine the financial penalties appropriate for making sure that the judgment which previously established the breach is complied with as swiftly as possible and preventing similar infringements of European Union law from recurring (Case C‑407/09 Commission  v Greece  [2011] ECR I‑0000, paragraph 29 and the case-law cited).
37. The Commission’s suggestions cannot bind the Court and merely constitute a useful point of reference. Similarly, guidelines such as those in the communications of the Commission are not binding on the Court but contribute to ensuring that the action brought by the Commission is transparent, foreseeable and consistent with legal certainty (Case C‑369/07 Commission  v Greece , paragraph 112 and the case-law cited).
A – Penalty payment
1. Arguments of the parties
42. The Court has held that the imposition of a penalty payment is in principle justified only in so far as the failure to comply with an earlier judgment of the Court continues up to the time of the Court’s examination of the facts (Case C‑369/07 Commission  v Greece , paragraph 59 and the case-law cited).
43. Also, in the case of the recovery of State aid that is incompatible with the common market, the Court’s case-law and recital 13 in the preamble to and Article 14(3) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ 1999 L 83, p. 1) require the Member State which has paid the aid actually to recover it without delay, in order to ensure the effectiveness of the Commission’s decision to order recovery of the unlawfully paid aid (see, to that effect, Case C‑232/05 Commission  v France  [2006] ECR I‑10071, paragraphs 42, 43 and 50).
44. In the present case it is clear that, on the date of the closure of the oral procedure, a substantial part of the aid in question had not been recovered, thereby impeding the restoration of effective competition as envisaged by recital 13 in the preamble to Regulation No 659/1999.
45. In those circumstances, the Court considers that an order imposing a penalty payment on the Italian Republic is an appropriate financial means by which to encourage the Italian Republic to take the necessary measures to put an end to the infringement established and to ensure full compliance with Decision 2000/128 and the judgment in Case C‑99/02 Commission  v Italy .
b) Imposition of the penalty payment
47. To determine the form of the penalty payment, account must be taken of the special character, adduced by the Italian Republic, of the operations for recovery of the aid paid under the scheme that was declared incompatible with the common market by Decision 2000/128.
48. As regards the invariable nature of the amount of the penalty payment proposed by the Commission, it appears that it will be particularly difficult for the Italian Republic in the short term to reach full compliance with Decision 2000/128, and hence with the judgment in Case C‑99/02 Commission  v Italy , in view of the fact that the operations involved relate to a large number of undertakings.
49. In view of that special factor, it is conceivable that the Italian Republic will manage significantly to increase the extent of its implementation of Decision 2000/128 but not to implement it fully in the short term. If the amount of the penalty payment were invariable, it would continue to be due in its entirety for as long as the Member State concerned had not achieved complete implementation of the decision. In those circumstances, a penalty which takes account of the progress which the Member State may have made in complying with its obligations appears appropriate to the particular circumstances of the present case and hence proportionate to the infringement that has been found (see, by analogy, Commission  v Spain , paragraphs 48 and 49).
50. It must also be observed that, in the case of the recovery of unlawful State aid, it is for the Member State concerned to demonstrate to the Commission that the aid has been recovered, as follows from the principle of sincere cooperation, in order to ensure that the provisions of the Treaty are fully observed, and as follows in the present case from Article 4 of Decision 2000/128 (see, to that effect, Case C‑369/07 Commission  v Greece , paragraph 75). Consequently, for calculating the penalty payment in the present case, recovery of the aid can be taken into account only on condition that the Commission has been informed of it and has been able to assess the adequacy of the evidence communicated to it in this respect.
51. In the light of the foregoing, for the penalty payment to be appropriate to the particular circumstances of the case and proportionate to the infringement that has been established, the amount of the payment must be fixed having regard to the progress made by the defendant Member State in implementing Decision 2000/128 (see, to that effect, Commission  v Spain , paragraph 50), in so far as it appears from the documents in the case that that State is capable of providing direct and reliable evidence of implementation, so that the fixing of such a variable penalty payment proves to be practicable. In the present case, the Italian Republic annexed to its rejoinder a DVD containing evidence in the form of payment slips directly and reliably attesting the movements of funds representing the recovery of the unlawful aid repaid so far. The Commission, in answer to a written question, stated that those payment slips for the individual undertakings, correlated with the amounts stated in the summary tables also annexed to the rejoinder, bear out the Italian Republic’s claims as to the amount of aid so far recovered, namely EUR 63 062 555. In those circumstances, the production of such payment slips by the Italian Republic may be regarded as the provision of direct and reliable evidence of compliance with its obligations in the present case.
52. That being so, the Italian Republic should be ordered to pay a periodic payment calculated by multiplying a basic amount by the percentage of the unlawful aid that has not yet been recovered, or not shown to have been recovered, compared to the total amount not yet recovered on the date of delivery of the present judgment (see, by analogy, Commission  v Spain , paragraph 50).
53. For calculating the penalty payment in the present case, recovery of the aid may be taken into account only on condition that the Commission has been informed of it and has been able to assess the adequacy of the evidence communicated to it in this respect (see, to that effect, Case C‑369/07 Commission  v Greece , paragraph 75).
54. The periodicity of the penalty payment should therefore be fixed by determining it on a half-yearly basis, so as to allow the Commission to assess the state of progress of the recovery operations by reference to the situation prevailing at the end of that period, while allowing the defendant Member State the time needed to compile and transmit to the Commission the evidence capable of establishing, for the period in question, the recovery of the sums wrongly paid.
55. Consequently, the penalty payment will be quantified on a half-yearly basis and its amount calculated by multiplying a basic amount by the percentage of the unlawful aid that has not yet been recovered, or not shown to have been recovered, at the end of the period concerned, compared to the total amount not yet recovered on the date of delivery of the present judgment.
ii) The basic amount of the penalty payment
56. It should be recalled that, in exercising its discretion, it is for the Court to set the penalty payment so that it is both appropriate to the circumstances and proportionate to the infringement established and the ability to pay of the Member State concerned (see Case C‑369/07 Commission  v Greece , paragraph 114 and the case-law cited).
57. In the assessment carried out by the Court, the basic criteria which must be taken into account in order to ensure that a penalty payment has coercive force with a view to the uniform and effective application of European Union law 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 of non-compliance on public and private interests and to the urgency of compliance by the Member State concerned with its obligations (Case C‑369/07 Commission  v Greece , paragraph 115 and the case-law cited).
58. As to the duration of the infringement, it is settled case-law that it is for the Court to assess the duration by reference to the time at which it assesses the facts, not the time at which the case is brought before it by the Commission (see, to that effect, Case C‑369/07 Commission  v Greece , paragraph 116 and the case-law cited).
60. As to the seriousness of the infringement, the vital nature of the Treaty rules on competition must be recalled, in particular those on State aid, which are the expression of one of the essential tasks with which the European Union is entrusted. At the time of the Court’s assessment of the appropriateness and the amount of the present penalty payment, that vital nature is apparent from Article 3(3) TEU, namely the establishment of an internal market, and from Protocol No 27 on the internal market and competition, which forms an integral part of the Treaties in accordance with Article 51 TEU, and states that the internal market includes a system ensuring that competition is not distorted.
61. The recovery of aid that is incompatible with the common market aims to remove the distortion of competition caused by the competitive advantage the recipient of the aid has enjoyed in the market compared with its competitors, thereby restoring the situation prior to the payment of the aid (see, to that effect, Case C‑348/93 Commission  v Italy  [1995] ECR I‑673, paragraph 27).
63. Finally, it should be added that in the present case, apart from the fact that the unlawful aid in question is particularly harmful to competition because of its large amount, the unusually large number of recipients and its being paid regardless of the economic sector of the recipients, as the Commission rightly points out, it is common ground that a substantial part of the aid has not yet been recovered, or that proof of recovery has not been provided to the Commission.
65. As to the ability to pay of the Italian Republic, the Court has repeatedly held that the method of calculation proposed by the Commission, in which the basic amount is multiplied by a specific coefficient applicable to the Member State concerned, is an appropriate means of reflecting that State’s ability to pay while keeping the variation between the Member States within a reasonable range (Case C‑369/07 Commission  v Greece , paragraph 123 and the case-law cited). The recent development of inflation and the gross domestic product in the Member State in question must therefore be taken into account, as the Commission did pursuant to the 2010 communication.
72. In cases in which the aid has to be recovered from undertakings which are bankrupt or subject to bankruptcy proceedings whose purpose is to realise the assets and clear the liabilities, it is settled case-law that the fact that undertakings are in difficulties or bankrupt does not affect the obligation of recovery (see, inter alia, Case C‑280/05 Commission  v Italy , paragraph 28 and the case-law cited).
73. It is also settled case-law that 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 by registration of the liability relating to the repayment of the aid in question in the schedule of liabilities (Case C‑331/09 Commission  v Poland  [2011] ECR I‑0000, paragraph 60 and the case-law cited).
76. In cases in which the unlawful aid in question has to be recovered from undertakings against which individual protective or enforcement measures have been adopted without success, it is for the Member State concerned to take and then communicate to the Commission all measures enabling repayment of the unlawful aid to be obtained and, if need be, measures aimed at the judicial liquidation of those undertakings, so that that State can enforce its claims against their assets (see, to that effect, C‑280/05 Commission  v Italy , paragraph 28 and the case-law cited). Consequently, it is for the Member State to demonstrate, first, that bankruptcy proceedings have been taken against the undertakings concerned and, secondly, that the claims against them have been registered in accordance with the principles set out in paragraphs 72 to 74 above.
78. Finally, in cases in which orders for recovery of the unlawful aid in question are challenged in the national courts, it is for the Member State concerned, in accordance with the requirement actually to recover aid that is incompatible with the common market, to contest any national decision depriving the Commission’s decision of effect, in particular on grounds relating, as in the present case, to  the application of limitation rules (see, by analogy, Case C‑24/95 Alcan Deutschland  [1997] ECR I‑1591, paragraphs 34 and 38) or rules of evidence. Consequently, for similar reasons to those stated in paragraph 74 above, proof that such efforts have been made suffices to exclude the aid concerned from the volume of as yet unrecovered aid to be taken into account for calculating the penalty payment.
B – Lump sum
1. Arguments of the parties
82. Having regard to the objectives of the procedure provided for in Article 228(2) EC, the Court is empowered, in the exercise of the discretion conferred on it in connection with that article, to impose a penalty payment and a lump sum payment cumulatively (see, to that effect, Case C‑304/02 Commission  v France , paragraph 83).
83. The imposition of a lump sum payment must depend in each individual case on all the relevant factors relating both to the characteristics of the infringement established and to the conduct of the Member State involved in the procedure initiated under Article 228 EC. That provision confers a wide discretion on the Court in deciding whether or not to impose such a penalty (Case C‑369/07 Commission  v Greece , paragraph 144 and the case-law cited).
84. In the present case, besides the seriousness of the infringement as established in paragraphs 60 to 63 above, it should be noted that on the date of the closure of the oral procedure, more than 7 years after the date of delivery of the judgment in Case C‑99/02 Commission  v Italy  and more than 12 years after the adoption of Decision 2000/128 on 11 May 1999, the Italian Republic was still unable to establish precisely the definitive total amount of the aid to be recovered, as may be seen from its rejoinder.
85. Furthermore, it was not until at best two years after the delivery of the judgment in Case C‑99/02 Commission  v Italy  that the first coherent measures were adopted by the Italian Republic to remedy the difficulties of identifying and recovering the aid that had been declared unlawful and incompatible by Decision 2000/128, as is apparent from paragraphs 10 to 19 above and was admitted by the Italian Republic at the hearing. In particular, Decree-Law No 59 of 8 April 2008, intended to solve the procedural problem caused by the Italian courts’ suspension of the orders for recovery of the unlawful aid in question, was not enacted until after the period prescribed in the reasoned opinion of 1 February 2008 had expired, and provided only an imperfect solution to the delay in recovering the aid covered by that decision (see, by analogy, Case C‑304/09 Commission  v Italy  [2010] ECR I‑0000, paragraphs 40 to 42, and Case C‑305/09 Commission  v Italy  [2010] ECR I‑0000, paragraphs 38 to 40).
86. It is settled case-law that the Member State must actually recover the sums owed, belated recovery after the prescribed time-limits have expired not satisfying the requirements of the Treaty (see, to that effect, Case C‑305/09 Commission  v Italy , paragraph 27 and the case-law cited).
87. The justifications put forward by the Italian Republic in this regard, namely that the delay in complying with the judgment was attributable to internal difficulties connected with the complexity of the measures to be taken to identify the recipients of the unlawful aid in question and recover the aid from them, cannot be accepted. As the Court has repeatedly held, a Member State cannot plead provisions, practices or situations prevailing in its domestic legal order to justify failure to observe obligations arising under European Union law (see, inter alia, Case C‑568/07 Commission  v Greece  [2009] ECR I‑4505, paragraph 50), and the elimination of unlawful aid by means of recovery is the logical consequence of the finding that it is unlawful and that consequence cannot depend on the form in which the aid was granted (see, to that effect, Commission  v Poland , paragraph 54 and the case-law cited).
88. It is thus clear that the infringement of which the Italian Republic is accused lasted for a quite considerable period which in any event had no relation to the difficulties in recovering the aid paid under a scheme that had been declared unlawful and incompatible with the common market.
89. Moreover, the Court considers that the legal and factual context of the infringement established may be an indication that effective prevention of future repetition of similar infringements of European Union law may require the adoption of a deterrent measure (see, to that effect, Case C‑121/07 Commission  v France  [2008] ECR I‑9159, paragraph 69).
90. In particular, the Italian Republic has already been the subject of a number of judgments on the basis of Article 88(2) EC holding that it has failed to fulfil its obligations by not immediately and actually recovering aid paid under schemes declared unlawful and incompatible with the common market.
91. In addition to the finding of failure immediately and actually to implement Decision 2000/128 made in the judgment in Case C‑99/02 Commission  v Italy , the failure to comply with which gave rise to the present proceedings, several other findings of failure to fulfil obligations have been made by the Court, in particular in Case C‑207/05 Commission  v Italy , Case C‑280/05 Commission  v Italy , Case C‑304/09 Commission  v Italy  and Case C‑305/09 Commission  v Italy .
92. Having regard to the foregoing, the Court considers that it is justifiable in the present case to order the Italian Republic to pay a lump sum.
b) The amount of the lump sum payment
93. If the Court decides to order a lump sum payment, it must, in the exercise of its discretion, set the payment in such a way that it is, first, appropriate to the circumstances and, secondly, proportionate both to the infringement that has been established and to the ability to pay of the Member State concerned (see Case C‑407/09 Commission  v Greece , paragraph 31).
94. The relevant factors in this respect include matters such as the length of time for which the breach of obligations has persisted since the judgment establishing it was delivered and the seriousness of the infringement (see, to that effect, Case C‑369/07 Commission  v Greece , paragraphs 147 and 148 and the case-law cited).
95. To offset the considerations set out in paragraphs 58 to 63, 84 and 85 above relating to the duration and seriousness of the infringement, account should be taken of the points raised by the Italian Republic to show that the recovery of the unlawful aid in question was made more difficult by the fact that it had been paid under an aid scheme, that Decision 2000/128 had made the compatibility of the aid subject to conditions, and that implementation of the decision therefore meant that the Italian Republic first had to identify the recipients of the aid and the amounts received by each of them.