Private enforcement against state aid awards in Ireland

Private enforcement in national courts

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

In practice, the court that hears most private complaints against the award of state aid is the High Court of Ireland. This is a court of universal jurisdiction. Appeals from the High Court lie to the Court of Appeal, with the possibility of further appeal, in some cases, to the Supreme Court. There is the possibility that one of these courts may refer questions of EU law to the Court of Justice of the European Union (CJEU) by way of a preliminary reference (see question 24). However, an argument may be made before any Irish court that assistance amounts to illegal state aid because all courts are under a duty to comply with, and enforce, EU law.

It is worth recalling that the Irish Supreme Court has commented as follows in Dellway Investments Limited and others v National Asset Management Agency, Ireland and the Attorney General [2011] IESC 4:

13. Article 108 [of the TFEU] lays down procedures for the review by the Commission of state aid. Firstly, the Commission is required, in cooperation with member states, to ‘keep under constant review all systems of aid existing in those states’ (existing aid). Secondly, Article 108(3) obliges member states to inform the Commission of any plans to grant new state aid. It is a fundamental feature of this scheme that the Commission has the exclusive function of ruling on the compatibility of aid, whether existing or new, with the internal market.

14. The courts of the member states are obliged to support the Commission in the exercise of its functions. Most importantly, they must give effect to the standstill provision of Article 108(3) and are obliged to make orders, where appropriate, restraining the state from implementing aid where the state in question has failed to notify the Commission or, where notice has been given, without awaiting the Commission decision on compatibility. Aid granted in contravention of Article 108(3) is described as ‘unlawful aid’ (see Commission Notice 2009/C 85/01 of 9 April 2009 on enforcement of state aid law by national courts, especially paragraph 28). The national court may also be obliged to make orders for the recovery of unlawful aid, a matter which does not arise in the present case. In addition, it is common case that the state duly notified the Commission of its intention to grant the aid in the present case. There is no suggestion of any deficiency in that notification.

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

The most likely basis for the claim will be articles 107 to 109 of the Treaty on the Functioning of the European Union (TFEU) or any relevant measure adopted thereunder. A party seeking to strike down assistance as illegal state aid might well seek a declaration from the Irish court that the assistance amounted to state aid or that any assistance provided should be given only in strict compliance with any European Commission approval (Dellway Investments Limited and others v National Asset Management Agency, Ireland and the Attorney General [2011] IESC 4). It is possible to seek an injunction (eg, to prevent any action that would be contrary to EU law (eg, the provision of illegal state aid)).

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

Such claims will ordinarily be defended by the state (ie, Ireland). The Attorney General is automatically joined as a defendant in any proceedings against the state. Typically, the body that received or provided the aid will also be a defendant (eg, the National Asset Management Agency in Dellway Investments Limited and others v National Asset Management Agency, Ireland and the Attorney General [2011] IESC 4).

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?

Bearing in mind that Ireland has been a member state of the EU for over 45 years, there have been very few cases on state aid before the Irish courts. However, in these relatively few cases, the courts have been willing to comply with EU state aid law and order compliance. It is very likely that the Irish courts will be guided by EU law and jurisprudence on compliance and enforcement.

The Irish courts have also been mindful of the relatively limited role of member state courts in this area and have not been willing to stray outside their limited role. For example, Cooke J in the High Court case of Shannon LNG Limited & another v Commission for Energy Regulation & others [2013] IEHC 568 said:

133. It must be borne in mind that in any event a national court has no function in deciding whether an alleged state aid is compatible or incompatible with the internal market: that is an exclusive competence of the European Commission. It is true that where there is prima facie evidence of the proposed grant of an aid which has not been notified to the European Commission as required by Article 108(3), a national court has jurisdiction based upon paragraph 4 of that Article to injunct its implementation. In the present case, however, quite apart from the fact that no actual aid has been identified as about to be granted and that the new regime will not in any event be introduced until at least October 2014 . . . the court has evidence before it that the applicants’ contentions under this heading are the subject of a complaint (case No. SA 33518) made to the Commission in 2011, which is currently under consideration by it. It would therefore be unnecessary and possibly improper for this court to make any determination in respect of these contentions given that if there is any substance to them, the applicants’ position will be fully protected by appropriate decision of the European Commission.

The limited role of member state courts (including the Irish courts) was also recognised by the Supreme Court in Dellway Investments Limited and others v National Asset Management Agency, Ireland and the Attorney General [2011] IESC 4:

14. The courts of the member states are obliged to support the Commission in the exercise of its functions. Most importantly, they must give effect to the standstill provision of Article 108(3) and are obliged to make orders, where appropriate, restraining the state from implementing aid where the state in question has failed to notify the Commission or, where notice has been given, without awaiting the Commission decision on compatibility. Aid granted in contravention of Article 108(3) is described as ‘unlawful aid’ (see Commission Notice 2009/C 85/01 of 9 April 2009 on enforcement of state aid law by national courts, especially paragraph 28). The national court may also be obliged to make orders for the recovery of unlawful aid, a matter which does not arise in the present case…

The Irish courts will pay due regard to any clearance decision of the European Commission in regard to state aid (eg, Quinn Insurance Limited (in administration) v Assurance Companies Act 1909 [2011] IEHC 382), but will nonetheless exercise their jurisdiction where it is proper to do so.

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?

It is possible for Irish courts and certain tribunals to refer certain questions to the CJEU under article 267 TFEU. The CJEU has jurisdiction to give preliminary rulings concerning:

• the interpretation of the treaties; and
• the validity and interpretation of acts of the institutions, bodies, offices or agencies of the EU.

A state aid question will typically fall under the former heading. State aid issues typically arise, insofar as they do, before the Irish High Court and it has shown a willingness to refer EU law questions generally to the CJEU on EU matters generally. Equally, if a state aid issue arises in the Supreme Court (ie, the final court of appeal in Ireland), then it may even be obliged to bring the matter before the CJEU. If a state aid issue is raised in an Irish court and the conditions for the application of article 267 are met, then it is very likely that the Irish court will refer the matter to the CJEU.

It is also believed to be possible to stay proceedings before the national court and for the court or the parties to inquire of the Commission about the latter’s views; or the Commission might, where appropriate and possible, offer its views by way of an amicus curiae type brief or intervention.

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

In Irish courts, it is the party that asserts that the assistance is state aid and that it is either lawful or unlawful aid who bears the burden of proof. It must be proven on the basis of the ‘balance of probabilities’ (ie, the civil rather than the criminal standard of proof). It should be relatively easy in theory, provided all the facts are available, to demonstrate that the assistance is, or is not, aid but sometimes it is not always clear as to whether something amounts to aid. As Cooke J said in paragraph 123 of his judgment in Shannon LNG Limited & another v Commission for Energy Regulation & others [2013] IEHC 568:

[w]hile the principle of the hierarchy of norms means that the legislative measures considered in this judgment cannot be regarded as curtailing the inherent scope of the primary competition rules of the [TFEU], it is nevertheless the practical reality that a party to litigation who seeks to assert that a commercial practice authorised or directed under the legislation infringes . . . the state aid rules, faces a difficult onus of proof.

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?

There is no established practice in Ireland on this issue. If the Commission is investigating the matter, then ordinarily it is best to leave it to the Commission. The downside (but not in all circumstances) of opening a second track in Ireland is that the Irish court may well refer questions to the CJEU for a preliminary ruling thereby complicating and delaying matters. The upside (usually) of opening a second front in Ireland is that occasionally the European Commission can be somewhat political in its approach and decision-making so courts will have theadvantage or disadvantege of being less political in approach, depending on one’s perspective.

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

The Irish courts are generally willing to accept economic evidence. However, the decision is ultimately one for the courts and not any economist giving evidence to the court or assisting the judge. The Irish courts are adversarial rather than inquisitive and, typically, they do not use assessors so the evidence will be submitted by expert witnesses called by the parties, capable of cross-examination by the other side, and the matter will ultimately be decided upon by the court.

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

If court proceedings are urgent in nature (eg, an application for an injunction), then proceedings can be instituted and concluded very quickly (eg, in a matter of hours, days or weeks if needed). If proceedings involve more long-term proceedings, then there could be much slower proceedings over a number of years. State aid matters are generally not short or quick cases.

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

The conditions for the granting of an interlocutory injunction (the closest analogy) are usually as follows:

• there is a fair question to be determined at the trial of the action;
• damages will not be an adequate remedy for the plaintiff if he or she is successful at the trial; and
• the balance of convenience favours the granting of the injunction rather than refusal of the injunction.

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

The situation in Ireland is no clearer in regard to the Residex case law than it is elsewhere and given the absence of case law in Ireland, it is likely that the Irish courts will follow the then prevailing EU thinking on the issue and given the uncertainty of the law, it is quite possible that the matter could be referred to the CJEU.

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 practice yet established by the Irish courts in this regard. One would assume that the Irish courts will approach the matter on the basis of any EU or other member state precedent or practice.