Private enforcement in national courts

Relevant courts and standing

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

In the framework of procedures for the awarding of aid, article 76 of Law No. 39/2015 on the Common Administrative Procedure establishes that interested parties may submit comments and provide documents or evidence (see also articles 53e and 82). These comments will be taken into account by the competent body when drafting the award decision. In addition, interested parties may claim procedural errors at any time.

Regarding the concept of interested party, article 4 of Law No. 39/2015 establishes that the following will be considered interested parties in the administrative proceeding:

  • those that promote it (the recipient undertaking);
  • those that did not initiate the proceeding but have rights that can be affected by the decision (such as competitors); and
  • those whose legitimate interests, individual or collective, may be affected by the decision.

 

Any natural or legal persons having the status of interested party may bring an administrative action before the hierarchical superior administrative body to the granting authority. Furthermore, under article 19.1a of Law No. 29/1998 of 13 July 1998 on the contentious-administrative courts (Law No. 29/1998), natural or legal persons with a legitimate interest or right can appeal the resulting decision before the contentious-administrative courts if the administrative action is dismissed.

Competitors may bring actions for damages against the granting authority. However, in certain circumstances, competitors may choose to claim action for damages directly against the beneficiary. In its judgment of 11 July 1996 (Syndicat Français de l’Express international), the European Court of Justice (ECJ) concluded that, because article 108(3) TFEU does not impose any direct obligation on the beneficiary, there is no sufficient basis in EU law for such actions. However, this does not prevent a competitor from lodging a claim for damages against the beneficiary of the aid based on Law No. 3/1991 of 10 January 1991, the Unfair Competition Act (UCA), for receiving state aid without prior notification to the European Commission (the Commission) in breach of article 108(3) TFEU.

The purpose of the UCA is to protect competition in the interests of all those involved in the market, and to this end the UCA prohibits unfair conduct. The legal basis for action against the aid beneficiary is found in article 15 of the UCA, which regulates unfair conduct in cases of breach of laws on regulations, such as illegal state aid gained through breach of article 108(3) TFEU.

Finally, competitors harmed by illegal or unnotified aid can also bring an action before the competent national courts in case of aid that has not been notified or approved by the Commission invoking article 108(3) TFEU and the relevant case law conferring direct effect to that provision of EU law.

Available grounds

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

Unfair competition and article 108(3) TFEU.

Defence of an action

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

The granting authority. However, the beneficiary may submit allegations if or when afforded the condition of interested party.

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?

National courts have indeed been petitioned to enforce compliance with EU state aid rules and the standstill obligation under article 108(3) TFEU. Some of these matters have reached Supreme Court level (see judgment of the Supreme Court, Appeal No. 7349/1992, 22 February 1999).

As for compliance with the standstill obligation under article 108(3) TFEU, courts have a good track record of enforcing Commission decisions (eg, Order of the Supreme Court of 10 July 2018, Appeal No. 545/2009; judgments of the Supreme Court of 16 July 2012 Appeal No. 6539/2011, 18 October 2012 Appeal No. 6163/2011 and 6 May 2013 Appeal No. 1484/2012; and Order of the National High Court of 12 January 2015, Appeal No. 188/2010).

Article 22 of Law No. 39/2015 establishes that the course of the legal period set to resolve a proceeding and notify the administrative decision may be suspended when a preliminary ruling by a court is needed to issue the decision (eg, see Order of the Supreme Court of 10 March 2016, Appeal No. 951/2014; Order of Contentious-Administrative Court of Madrid of 26 January 2016, Appeal No. 247/2014; or Order of the Contentious-Administrative Court of Ferrol of 12 April 2013, Appeal No. 52/2011).

The cost risk to be assumed if a challenge is unsuccessful is the payment of the costs for the proceeding.

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?

Regulation (EU) No. 734/2013, amending Regulation (EC) No. 659/1999 laying down detailed rules for the application of article 93 of the EC Treaty, stipulates that the courts of member states may ask the Commission to give them its opinion on questions concerning the application of state aid rules (see article 23-bis 1).

As a matter of practice, Spanish courts sometimes question the Commission on matters such as the existence of aid and the fact of its notification, and the Commission’s response is used in proceedings.

Spanish courts also request the ECJ to issue preliminary rulings when applying EU state aid law when required. For instance, the ECJ was asked by the Supreme Court whether the absence of effective taxation of certain commercial establishments for environmental damage caused by large sales areas constitutes state aid in a proceeding between the National Association of Large Distribution Companies and the regional governments of Aragon (Joined Cases C-236/16 and C-237/16), Cataluña (judgment of the ECJ of 26 April 2018, Case C-233/16) and Asturias (judgment of the ECJ of 26 April 2018, Joined Cases C-234/16 and C-235/16). In these cases, the ECJ ruled that the taxation was not compatible with state aid rules in Cataluña. However, the Court declared this system compatible in Aragon and Asturias.

On 7 November 2019, the ECJ delivered a judgment on a request for a preliminary ruling by the Supreme Court (judgment of the ECJ of 7 November 2019, Joined Cases C-105/18 to C-113/18). The request was made in proceedings between several hydroelectricity producers and the Spanish government, with regard to the lawfulness of a Spanish tax on the use of inland waters for the production of electricity. The ECJ ruled that this taxation was compatible with state aid rules.

In contrast, the ECJ dismissed a request for a preliminary ruling from the Spanish Central Tax Authority (TEAC) concerning the deduction of goodwill resulting from the acquisition by Banco Santander of all shares in a holding company governed by German law (judgment of the ECJ of 21 January 2020, Case C-274/14). The ECJ considered that the TEAC did not qualify as a court or tribunal for the purposes of article 267 TFEU, deeming the request inadmissible.

Burden of proof

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

The acts of the public administration are presumed to be valid. Article 217 of the Civil Procedure Law establishes that the burden of proof corresponds to the claimant (ie, the party asking the Spanish court to consider the illegality of the state aid).

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?

Article 22 of Law No. 39/2015 establishes that the course of the legal period set to resolve a proceeding and notify the administrative decision may be suspended when a prior and mandatory pronouncement of an organ of the EU must be obtained. Spanish courts comply with the Deutsche Lufthansa case law (judgment of the ECJ of 21 November 2013, Case-284/12) in the sense that national courts have to remedy the consequences of the infringement to avoid unlawful aid from remaining at the free disposal of the beneficiary before the Commission has adopted a final decision, actively implementing measures that go beyond merely maintaining the proceedings until the final decision is adopted. However, in some cases, courts have opted to dismiss action for nullity with regard to an administrative act under investigation by the Commission for constituting unlawful aid. For instance, the National High Court dismissed an action for annulment by Fred Olsen concerning an administrative act granting alleged unlawful aid to the competitor shipping company Transmediterránea and a claim for damages (judgment of 11 April 2000, Appeal No 1251/1997). In parallel, the Commission had initiated formal proceedings to investigate this aid. However, the National High Court concluded that the Commission’s investigation was not final and, thus, it is this institution that must examine if there has been a violation of state aid rules. Likewise, the National High Court considered that a preliminary ruling was not necessary in this regard.

Economic evidence

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

The following means of proof are acceptable before courts: questioning the parties, public documents, private documents, expert opinions, taking of evidence by the court and questioning witnesses.

Economic evidence, such as economic reports from experts or private documents with real accounts and charts of benefits, are important before the courts in state aid proceedings.

Time frame

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

First-instance proceedings usually take one to three years; appeals usually take a minimum of two years.

Interim relief

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

Article 129 of Law No. 29/1998 allows any claimant to request either the suspension of the administrative act granting the aid or any other measures deemed necessary to ensure the effectiveness of the final judgment. The court may decide to grant the interim measure when the execution of the contested act or the application of the contested provision could eliminate the legitimate purpose of the appeal, after assessing the possibility that the effectiveness of the final judgment will be put at risk if interim relief is not granted, the balance between public and private interests at stake and the probability of the existence of the right that deserves judicial protection. In any case, interim measures must not lead to the seizure of goods or assets belonging to the public administration.

The assessment of interim measure requests is carried out in a separate proceeding. A hearing with the opposing party will take place within 10 days of the date on which the interim measure is requested, and the decision will be made within the following five days (article 131). Once granted, the interim measures will be in force until a final judgment is issued (see also article 132) but can be modified or revoked during the course of the procedure.

In recent years, the Spanish Supreme Court has granted interim relief under article 108(3) TFEU in several cases after the Commission initiated an in-depth investigation of the relevant aid (see the rulings of 16 July 2012, Appeal No. 6539/2011; 18 October 2012, Appeal No. 6163/2011; 6 May 2013, Appeal No. 1484/2012 and 22 February 2019, Appeal No. 6020/2018).  The Supreme Court confirmed that the authorities of the member state concerned are empowered, within the framework of the legal provisions, to agree on provisional safeguard measures to ensure effective compliance with the subsequent Commission Decision (judgment of the Supreme Court of 29 January 2020, Appeal No. 7010/2018). However, the justification for interim relief must be analysed on a case-by-case basis, and there is also a recent precedent (10 July 2015, Appeal No. 660/2014) in which the Supreme Court denied the suspension requested by the Spanish government on the basis that the existence of an ongoing investigation by the Commission is not, by itself, reason to suspend the national proceedings.

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?

National courts have powers only in the case of non-compliance with article 108(3) TFEU. Thus, before analysing the case, the judge must first establish whether the measure in question actually constitutes illegal state aid; that is, the judge must determine whether the measure falls within the concept of aid embedded in article 107(1) TFEU and, in that case, whether it was subject to the standstill obligation.

National judges must guarantee that all consequences arising from an infringement of article 108(3) TFEU are to be extracted in accordance with national law: the nullity of national acts granting illegal state aid and the return of illegal aid, unless there are exceptional circumstances that imply that the return is not accurate (see ECJ judgment of 11 July 1996, Syndicat Français de l’Express international). For instance, the Superior Court of Justice (judgment of 14 July 2015, Appeal No. 73/2015) confirmed the annulment of a state guarantee that had not complied with state aid rules, even though it affected a third party (Banco Mare Nostrum, SA). The court ruled that the administrative act revoking the state guarantee was lawful irrespective of the effects such declaration of illegality could have on the bank, as the authority cannot take into account the existence of private agreements in order to revoke illegal state aid. 

Additionally, the Contentious-Administrative Court of Valencia annulled a state guarantee issued by a public entity dependent on the Valencian regional government in favour of the Valencia Club de Fútbol Foundation for an amount of €75 million, owing to the fact that it had not been subject to the mandatory authorisation regime before the Commission. In the ruling, the Court did not take into account third-party interests involved in its decision to revoke the unlawful state aid (judgment of 8 March 2013, Appeal No. 239/2010). 

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?

Competitors may claim damages from the state (the granting authority). For competitors to claim damages against the granting authority, the following conditions must be met: (1) the damage should be effective and economically appreciable; and (2) the injury should be a consequence of the normal functioning of public authorities (except in cases of force majeure). Damages are awarded to a claimant for actual loss and for loss of profit. However, the Supreme Court has recently declared that the damage stemming from unlawful aid cannot be considered effective if the decision by the Commission has been appealed and is still pending (judgment of the Supreme Court of 8 February 2019, Appeal No. 617/2017). Notwithstanding the foregoing, such a situation is extremely rare as the claimant seeking damages was, in fact, the actual beneficiary of the unlawful aid (Real Madrid Club de Fútbol). The Spanish football club claimed that as a result of the illegal aid it had paid a higher amount of corporate tax than it should have paid if the state aid had not existed and, thus, claimed compensation for the damage caused. The Supreme Court rejected the appeal considering that it was not possible to observe the existence of an effective damage at the time of the appeal (as the issue was still pending resolution from the General Court).

In fact, the General Court handed down its judgment upholding the appeal by the Spanish football team against the decision of the Commission, considering that the Commission had not shown to the requisite legal standard that the measure at issue conferred an advantage on its beneficiaries (judgment of 22 May 2019, Case T-791/16). This judgment from the General Court was overruled by the Court of Justice on 4 Mach 2020, Case C-362/19, so all clubs implicated in that scheme (ie, FC Barcelona, Real Madrid, Osasuna and Athletic) will have to return the tax benefits they received.

Law stated date

Correct on

Give the date on which the information above is accurate.

5 March 2021