Private enforcement in national courtsRelevant courts and standing
Which courts will hear private complaints against the award of state aid? Who has standing to bring an action?
Apart from complaints before the EC, competitors (private undertakings) can - under certain circumstances - bring actions relating to state aid before the civil courts (for instance, an act of a state-owned undertaking taking discriminatory or favourable measures for the benefit of certain competitors may be appealed).
Apart from exceptional cases, individuals may not directly challenge legislation. Legislative provisions may be repealed by the Constitutional Court, which can be called upon by the competent court or the parties in the course of remedy proceedings.Available grounds
What are the available grounds for bringing a private enforcement action?
Under private law, a competitor may, for example, file an action for omission. The most likely material basis for the claim for damages would, in our view, be article 107 et seq of the Treaty on the Functioning of the European Union (TFEU).
As a general rule, the claimant bears the burden of proof for his or her arguments. The defendant will contest the claim by arguing that the claimant has not provided sufficient evidence that a certain measure constituted aid.Defence of an action
Who defends an action challenging the legality of state aid? How may defendants defeat a challenge?
The defendant of actions challenging state aid is the body that has granted state aid. The body could argue that the measure does not fall under the scope of state aid law because the measure, for example, does not entail any (unlawful) benefit or that the aid falls under the scope of the GBER or De Minimis Regulation and that the respective conditions are met. In any case, the defence depends on the arguments of the lawsuit.
In certain circumstances, it may also be possible to bring a claim against the state aid recipient. How and under which circumstances this may happen, however, has not yet been entirely clarified by Austrian courts.Compliance with EU law
Have the national courts been petitioned to enforce compliance with EU state aid rules or the standstill obligation under article 108(3) TFEU? Does an action by a competitor have suspensory effect? What is the national courts’ track record for enforcement?
The number of court appeals against illegal state aid is still relatively low in Austria. Given the very different circumstances of the few individual cases, it is also difficult to give a general idea of a success rate. However, the awareness of state aid issues continues to increase with more literature and more cases in legal practice.
In a quite recent decision, the Austrian Supreme Court ruled that a municipality’s decision to refuse to pay an agreed subsidy to the recipient because it found out that it would constitute unlawful aid (the measure was not notified) and therefore be against EU law, was justified on the basis of the standstill obligation (6 Ob 235/16a). In this case the potential beneficiary sued the municipality.
As to actions based on unfair competition, the Austrian Supreme Court has ruled that the promotion of other competition can constitute unlawful behaviour under the Austrian Unfair Competition Act. Whether other competition was promoted intentionally is, however, not relevant for the assessment; only the objective suitability of the behaviour to promote other competition is decisive. In any case, the Supreme Court has tolerated such behaviour if it is led by public interests outbalancing the negative effects (eg, securing livelihood).
However, the Supreme Court has ruled that an action for injunction provides legal protection until the Commission decides on a notification. The Supreme Court did not distinguish between aid being unlawful on procedural grounds or material grounds. Therefore, some scholars argue that it remains unclear whether a competitor may file an action regarding unlawful aid on procedural grounds based on article 108(3) TFEU in conjunction with sections 1 and 15 of the Austrian Federal Act against Unfair Competition.
Moreover, in cases where there has been no notification or where the Commission has not yet issued a decision, an action for repayment can be combined with a request for preliminary injunction. This might be particularly important since national courts must not stay their proceedings until the Commission has ruled on the compatibility of the aid. Where the court considers that the aid is unlawful on procedural grounds, it has to uphold the action, even though there is an indication that the aid is lawful based on material grounds.Referral by national courts to European Commission
Is there a mechanism under your jurisdiction’s rules of procedure that allows national courts to refer a question on state aid to the Commission and to stay proceedings?
No, there is no such provision under national Austrian law. However, it might be possible to stay the proceedings based on section 190, paragraph 1 of the Austrian Code of Civil Procedure. This provision stipulates that a court may stay the proceedings if the existence or non-existence of a legal relationship is subject to another proceeding. The Austrian Supreme Court has already applied this provision. However, in the aforementioned case the proceeding was stayed owing to proceedings before the General Court, not the Commission.
Austrian courts may refer certain questions to the ECJ under article 267 TFEU (questions concerning the interpretation of the Treaties of the European Union and the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union). Last-instance courts are obliged to refer questions relevant to the decision to the ECJ. Generally, Austrian courts are a bit reluctant when it comes to procedures under article 267 TFEU (eg, Decision of the Austrian Supreme Court 6 Ob 235/16a, where it stipulated that the legal situation is clear and therefore the procedure under article 267 TFEU is not required).
We are not aware of any proceedings in the area of state aid where the Commission acted as amicus curiae.
The filing of a complaint to the EC does not affect national civil proceedings.Burden of proof
Which party bears the burden of proof? How easy is it to discharge?
As a general rule, the burden of proof rests on the claimant and the burden of disproving the claimant’s arguments is borne by the defendant. This rule also applies to private enforcement proceedings concerning state aid. The claimant is, in particular, obliged to prove the existence of a measure that can be qualified as state aid, and that the aid was not duly notified and not declared compatible with the internal market.Deutsche Lufthansa scenario
Should a competitor bring state aid proceedings to a national court when the Commission is already investigating the case? Do the national courts fully comply with the Deutsche Lufthansa case law? What is the added value of such a ‘second track’, namely an additional court procedure next to the complaint at the Commission?
Currently, no Austrian case law refers to the Deutsche Lufthansa scenario. However, it is likely that the opening of a proceeding before a national court would not provide any benefit. The court will most probably stay the proceeding until the Commission has completed its investigation and has issued a decision (see question 24).Economic evidence
What is the role of economic evidence in the decision-making process?
Austrian courts are not bound by formal evidential rules when assessing the merits and evidence (testimonies, documents, expert opinions, etc) provided by the parties (free appraisal of evidence). Accordingly, the courts may take into account economic evidence and evaluate it according to its plausibility.Timeframe
What is the usual time frame for court proceedings at first instance and on appeal?
In contrast to proceedings before the administrative courts, Austrian law does not set a time frame or a maximum period for civil proceedings. The duration depends on the specific circumstances of the individual case.
Court proceedings at first instance may last from a few months to several years. In any case, there is a possibility of a first appeal to the superordinate court; a second appeal to the Supreme Court is limited in different ways, such as a certain value in dispute and the presence of a legal question of fundamental importance.Interim relief
What are the conditions and procedures for grant of interim relief against unlawfully granted aid?
The claimant may combine its action with an application for an injunction. The application may be based on general provisions (article 381 of the Austrian Enforcement Act) or on an act on unfair competition. In general, the applicant has to prove a serious risk of frustration of full and adequate final restoration of damages and that its case is prima facie well founded.
Usually, a decision on the application for an injunction can be expected within a few weeks.
There is little case law on interim relief in the area of EU state aid law. In one case, the Austrian Supreme Court ruled that the right to an injunction already exists under the Act Against Unfair Competition and if the authority has objectively infringed the standstill obligation such interim relief may be granted where there is a risk of repetition or a risk of infringement. The justifiability of the legal opinion underlying this conduct shall not be relevant. Furthermore, that the risk of imminent infringement, necessary for a right to an injunction, through the sale to the regional bidding consortium (risk of first infringement) cannot be seriously contested if there is already a decision of the regional parliament authorising the sale (4 Ob 154/09b).
In one (not published) decision, the Higher Regional Court Vienna stated that interim relief shall not be granted as the claimant did not argue that the measure affects trade between the member states.Legal consequence of illegal aid
What are the legal consequences if a national court establishes the presence of illegal aid? What happens in case of (illegal) state guarantees?
Generally, illegal state aid has to be recovered. However, Austrian scholars disagree about the consequences of a breach against the ban on implementation. While some argue that it is null and void based on section 879 of the Austrian Civil Code, others argue that an agreement is only provisionally invalid until the Commission issues a positive decision. However, even the second group admits that an agreement is null and void as soon as the Commission issues a negative decision.
As proceedings about illegal state aid usually take place before civil courts, court decisions may order a repayment of the aid. In March 2017, the Austrian Supreme Court held that the 10-year limitation period does not start with the signing of the agreement to grant state aid, but with the actual payment or grant (OGH 6 Ob 235/16a) and refers to the (new) Procedural Regulation.
There is no legally binding (published) Austrian case law regarding illegal state guarantees. However, in 2018 the Higher Regional Court Vienna had to deal with guarantees based on the Corporate Liquidity Strengthening Act and the question whether certain guarantees could constitute unlawful state aid. As findings of the Court of First Instance were missing, the Higher Regional Court Vienna referred the case back to the Court of First Instance. However, it held that according to the case law of the ECJ, the finding of illegality of an aid leads to its annulment by recovery in order to eliminate the distortion of competition that has arisen. Only in exceptional circumstances can it not be appropriate to order repayment of the aid. However, recovery presupposes that the national courts determine the recipient or recipients of the aid. If the prohibited aid is reflected in lower interest rates on loans, an additional claim for the difference in interest rates can eliminate the distortion of competition. Therefore, if only the borrower is favoured by a state guarantee that is contrary to European law, the distortion of competition caused by the aid can therefore be offset even if the guarantee remains in force. Thus, the Higher Regional Court of Vienna concluded that on the basis of the previously mentioned legal principles the continued procedure will first have to examine whether the liabilities contravene the standstill obligation under European law. If this is the case, it must be examined whether the prohibited aid exclusively favoured the borrower or whether the lenders are also to be regarded as beneficiaries of the aid; if so, to what extent this is the case (1 R 163/17y).Damages
What are the conditions for competitors to obtain damages for award of unlawful state aid or a breach of the standstill obligation in article 108(3) TFEU? Can competitors claim damages from the state or the beneficiary? How do national courts calculate damages?
There is no specific national legislation on the conditions for competitors to obtain damages for an award of unlawful state aid or a breach of the standstill obligation (see question 20).
In cases where a competitor takes actions based on the Federal Act against Unfair Competition or the Austrian Civil Code, it seeks damages from the beneficiary.
It is worth mentioning that public authorities can - under certain circumstances - be liable to pay compensation to individuals who have suffered damage because of a breach of EU law. The action has to be lodged with the civil courts. However, there is basically no state liability in the private sector.