Private enforcement against state aid awards in France

Private enforcement in national courts

Which courts will hear private complaints against the award of state aid? Who has standing to bring an action?

Competitors can bring actions either against the beneficiaries of a state aid measure, or against the public authorities dispensing the unlawful aid. Even if the two actions are of different types - judicial for the former and administrative for the latter - it is usually necessary for both of these actions to submit a preliminary request to the administration before any litigation process. To be admissible, the claimants must show that they are directly and individually concerned by the aid, and in particular that the aid has substantially affected their competitive position (Case Alex SCI v European Commission, Order of the Court C-696/17P).

Before the judicial judge, the claimant will usually bring an action in extra-contractual civil liability on the grounds of article 1240 (formerly 1382) of the Civil Code, since such possibility has been recognised by the French judicial supreme court in its Ducros ruling (Case No. 97-15.684 of 15 June 1999, and Richard Ducros v Ste constructions metalliques Finsider Sud), in accordance with the ECJ SFEI case (Case C-39/94). This action aims to compensate for the harm caused by unlawful aid and unfair competition practices to competitors by the granting of damages.

Before the administrative judge, a full remedy action will usually be exercised by competitors in order to obtain the suspension or recovery of the unlawful aid, as well as the award of damages to the public authorities that granted the unlawful aid so as to compensate for the harm suffered.

What are the available grounds for bringing a private enforcement action?

Article 1240 of the Civil Code may constitute the grounds for an action before the civil courts for unfair competition. A fault, damage and a causal link must be demonstrated for such an action to succeed (see the Ducros case mentioned above).

Before administrative courts, the competitor will usually lodge a request for a full remedy action or an action for annulment for breach of article 108(3) TFEU, which is of direct effect.

Who defends an action challenging the legality of state aid? How may defendants defeat a challenge?

The natural defendant is the state before administrative courts. It is nonetheless usually the beneficiary that must defend the legality of the measure before the judicial judge.

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?

Since the administrative courts are competent as regards the qualification of state aid within the meaning of article 107(1) TFEU, they regularly have to hear private actions lodged by competitors against an aid beneficiary.

Moreover, to ensure compliance with EU state aid rules, the administrative judge is also competent to draw any conclusions from an absence of notification of a measure later qualified as state aid.

Despite an increasing number of actions brought by non-beneficiary competitors before national courts (eg, in the national proceedings relating to the SNCM cases (Cases T-1/15, T-74/14, T-454/13 and T-366/13), the CELF cases (see questions 30 and 31), and the Public transport services in the Ile-de-France case (Case SA26763)), the preconditions to demonstrate the existence of a causal link and of actual damage limit the chances of success.

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?

Under article 267 TFEU, national courts have the possibility or the obligation to ask the ECJ for preliminary rulings on any aspect of European law, including state aid. In France, 14 preliminary rulings on state aid were referred to the ECJ between 2009 and early 2019.

For example, the Council of State asked the ECJ about the qualification of a financing mechanism put in place by the French legislation in order to help undertakings that produce wind-generated electricity by offsetting the additional costs arising from the obligation to purchase the electricity generated by wind turbines. The ECJ considered in its judgment Association Vent de Colère! (Case C-262/12) that the French mechanism must be regarded as an intervention by the state through state resources. A related request for a preliminary ruling has recently been addressed by the ECJ, which considered that the French regulatory framework establishing an obligation to purchase the electricity generated by plants that use solar radiation energy at a price higher than the market price, such obligation being financed by all final consumers of electricity, qualifies as an intervention by the state or through state resources. Predictably, the ECJ also recalled that national courts are to take all necessary measures to remedy the breach of the suspension obligation pursuant to article 108(3) TFEU, notably as regards the validity of measures giving effect to the aid (Case C-515/16 Enedis and see for all necessary measures Council of State Ryanair No. 408789). Also, the Council of State recently asked the ECJ about the assessment of the alteration to existing aid (within the meaning of article 108(3) TFEU) which would require a new notification to be made. The ECJ stated that an increase in the revenue from taxes financing several authorised aid schemes, when compared to projections notified to the European Commission constitutes an alteration to existing aid, unless that increase remains below the 20 per cent threshold laid down in article 4(1) of Regulation 794/2004. This threshold must be assessed in relation to the revenue earmarked for the aid schemes concerned and not to the aid actually allocated (Case Carrefour Hypermarchés and Others C-510/16 later applied by Council of State No. 376193).

Besides preliminary rulings, French courts also have the option to refer specific questions concerning state aid rules to the European Commission. The referrals usually take the form of a request for information sent to the European Commission, but the courts may also ask for the opinion of the European Commission on any economic, factual or legal matter concerning state aid.

Pursuant to article 29(2) of EU Regulation No. 2015/1589 of 13 July 2015 laying down detailed rules for the application of article 108 TFEU (the Procedural Regulation), the European Commission may, on its own initiative, submit written observations to the national courts that are responsible for applying state aid rules where the coherent application of article 107(1) or article 108 TFEU so requires. On this ground, the European Commission has for instance intervened before the French administrative courts to request the full implementation of its 2014 decision (Case SA22614) by which it had ordered the recovery of the incompatible state aid granted to airlines Ryanair (and its subsidiary Airport Marketing Services (AMS)) and Transavia for using several French airports (Bordeaux Administrative Court of Appeal, Case No. 15BX01807 of 10 December 2015, CCI Pau v Ryanair & AMS). Similarly, the European Commission has also intervened before the French administrative courts to request the full implementation of its 2013 decision (Case SA22843) by which it ordered the recovery of the state aid granted to shipping companies SNCM and CMN, declared to be incompatible with the internal market (Marseille Administrative Court of Appeal, Case No. 12MA02987 of 23 March 2016, Société Corsica Ferries v Collectivité territoriale de Corse).

Which party bears the burden of proof? How easy is it to discharge?

As a general rule, the claimant has to bear the burden of proof in both administrative and civil matters. As explained above, the preconditions to demonstrate the existence of a fault, a causal link and actual damage limit the chances of success (see questions 21 and 23).

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?

French courts apply the Deutsche Lufthansa (Case C-284/12) and SFEI (Case C-39/94) case law, according to which national courts are required to adopt all the necessary measures in view of drawing the appropriate conclusions from an infringement of article 108(3) TFUE. Necessary measures may notably consist of suspending the implementation of the litigious aid and ordering the recovery of payments already made. For instance, in the French proceedings relating to public transport services in Île-de-France (Case SA26763), the administrative courts had (prior to the European Commission’s 2017 decision) ordered the dispenser to repeal the decisions on which the state aid was based and recover the amounts granted to the beneficiary transport companies (appeals are pending before both the French administrative supreme court and the EU General Court).

Lodging an additional claim before national courts - while the European Commission is already seized of the case - notably enables the claimant to obtain interim relief through emergency proceedings: national courts may indeed order upcoming payments to be suspended or past payments to be placed, together with interest, in an escrow account (eg, Council of State, Case No. 329819 of 28 July 2009, Sociétés Air France, Régional et Britair).

What is the role of economic evidence in the decision-making process?

French judges generally take economic evidence into account.

What is the usual time frame for court proceedings at first instance and on appeal?

The time frame varies significantly in consideration of each case’s circumstances and strategic procedural options.

On average, first-instance proceedings may last 18 months, an appeal may last one to two years and a supreme court referral in administrative proceedings may last one year. A judicial review may be shorter in first-instance proceedings.

What are the conditions and procedures for grant of interim relief against unlawfully granted aid?

Interim relief against unlawful aid measures may be granted by administrative courts if the decision granting aid has not yet been completely implemented. The decision is adopted by the interim relief judge and is by nature provisional.

Article L521-1 of the Administrative Justice Code sets the conditions for obtaining the suspension of a decision granting aid, specifying that the French judge adopts a restrictive approach to such requirements. As regards the form of the petition, the request must refer to the unlawful decision and be ancillary to an application for the annulment of the decision or a modification of the decision. Moreover, the claimant must prove urgency, characterised by serious and immediate harm, and a serious doubt as to the legality of the decision.

French law does not provide for potential compensation of the beneficiary in case of contradiction between the judgment of the court of first instance granting interim relief and the judgment on the merits.

What are the legal consequences if a national court establishes the presence of illegal aid? What happens in case of (illegal) state guarantees?

Besides the exceptional circumstances required by the Residex case law (Case C-275/10) for a recovery order to prove inappropriate, French courts also resort to the CELF case law (Case C-199/06) for ordering the recovery of illegal interest only - instead of full recovery - if the European Commission has considered the state aid at stake compatible with the common market though unlawfully implemented (eg, Council of State, Case No. 274923 of 19 December 2008, CELF).

As to recent case law involving French state guarantees, the SNCF Mobilités case, recently examined by the ECJ (Case C-127/16P), notably concerned guarantees of liabilities granted by SNCF to the transferee of Sernam, a private delivery and express package and pallet transport company, at that time wholly owned by SNCF and whose assets were to be sold en bloc pursuant to the European Commission’s previous decisions in this case (SA12522).

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?

A competitor can obtain damages, either from the beneficiaries of a state aid measure or from the public authorities dispensing the unlawful aid, through two different actions.

Against the beneficiary, an action in extra-contractual liability on the grounds of article 1240 of the Civil Code is possible before the civil courts, since the acceptance by a company of unlawful aid constitutes a fault of the company placed in a more favourable situation than its competitors. A fault, damage and a causal link must be demonstrated for such an action to succeed.

Against the public authorities that have granted unlawful aid, a full remedy action can be exercised in order to obtain compensation for the harm suffered by the competitor. The injury must present a direct causal link with the fault imputed to the public authority, being specified that administrative judges adopt a restrictive approach of such requirement. The French proceedings relating to the Public transport services in the Île-de-France case (Case SA26763) also illustrate the difficulties for a non-beneficiary claimant to establish direct and certain damage arising from unlawful aid granted to its competitors. Nevertheless, pursuant to a claim for damages brought by the international distribution and publishing company SIDE against the French state in compensation for the harm suffered owing to the grant of unlawful aid to one of its competitors, the French book exportation cooperative (CELF), the Council of State recalled that lower courts have the power to order investigatory measures to establish a causal link between the granting of aid and damage (Council of State, Case No. 382427 of 13 January 2017, SIDE v CELF).