State aid in Netherlands

Overview

Outline your jurisdiction’s state aid policy and track record of compliance and enforcement. What is the general attitude towards subsidies in your system?

In general, national authorities are well aware of state aid law and the implications that unlawful state aid can have. However, it can be difficult for employees of municipalities, provinces and other relevant government authorities to find the right information on European law and policies. Therefore, the representative organisations of local and regional authorities in the Netherlands established Europa Decentraal in 2002 (https://europadecentraal.nl). Europa Decentraal is the local and regional authorities’ primary knowledge centre for questions concerning state aid law.

In 2017 and 2018, the number of notifications and the use of the General Block Exemption Regulation (GBER) by local authorities greatly increased (up to 292 in 2018). This can mainly be attributed to the benefits of the State Aid Modernisation package as implemented by the European Commission since 2013.

In recent years, the amount of (non-crisis) state aid in the Netherlands has been around 0.3 per cent of GDP. This is below the European Union average of 0.76 per cent of EU GDP. The prime objectives of state aid in the Netherlands are environmental protection and energy saving. Grants are the most important aid instrument.

Public enforcement in respect of illegal state aid in the Netherlands is carried out by the European Commission. In addition, public enforcement may be carried out by the central government on the basis of the Act on Compliance with European Legislation by Public Entities (Wet NErpe), which entered into force on 13 June 2012. In practice, the government does not (often) use its powers under the Wet NErpe to instruct a public entity to comply with state aid rules. The third instrument for public enforcement of state aid law is the Act for the recovery of state aid, which entered into force on 1 July 2018. This act contains general rules for the recovery of state aid following a negative Commission decision and solves certain difficulties under national law in respect of the recovery of state aid (such as the legal basis for recovery of illegal aid, recovery of interest and limitation periods).

In general, the Netherlands has a good track record of compliance with state aid law. The number of formal investigation procedures initiated by the European Commission in respect of state aid measures by the Netherlands is limited. Since 2000, 49 formal procedures have been initiated by the European Commission, of which there were only three in 2012, one in 2013, two in 2014, none in 2015 or 2016, one in 2017 and none in 2018 (European Commission’s website, Competition, State Aid Cases).

The latest formal investigation procedures against the Netherlands concern tax rulings granted by the Netherlands to various multinationals. In January 2019, the European Commission opened an in-depth investigation to examine whether tax rulings granted to Nike may have given the company an unfair advantage over its competitors, in breach of EU state aid rules (SA.51284). The Commission investigation will focus on whether the Netherlands’ tax rulings endorsing royalty payments may have unduly reduced the taxable base in the Netherlands of Nike European Operations Netherlands BV and Converse Netherlands BV since 2006. A comparable investigation is also being carried out concerning agreements between IKEA and the Dutch Tax Authorities (SA.46470). The Netherlands has already been reprimanded for state aid to American coffee giant Starbucks in 2015 (SA.38374), but the country has appealed the Commission’s decision before the General Court of the European Union (T-760/15). At the core of the dispute lies the question: does the method used to calculate the taxable profit in the Netherlands of Starbucks Manufacturing BV result in a credible arm’s-length remuneration for cross-border supplies and services? The hearing before the General Court of the European Union took place on 2 July 2018. The Court will deliver judgment in the course of 2019.

In 2018, the Commission took 12 final decisions in state aid cases with respect to the Netherlands. In seven cases, the Commission decided not to raise objections on the basis of article 107(3) Treaty on the Functioning of the European Union (TFEU) and in five cases the Commission decided that the measure did not constitute aid within the meaning of article 107(1) TFEU (three after the aid measure was formally notified and two after a complaint had been submitted to the Commission) (European Commission’s website, Competition, State Aid Cases).

Private enforcement in respect of illegal state aid is dealt with by both administrative and civil courts. This includes:

• request for an injunction made by a competitor threatened with injury by such aid against the authority that granted the unlawful aid (for example, a decision prohibiting the grant of any further aid and the recovery of support given);
• action by a competitor against the authority that granted unlawful aid for annulment of the act implementing the aid;
• action against the authority that granted aid for annulment of the decision to collect a levy imposed on an undertaking where the levy is used to finance unlawful aid; and
• action by the authority that granted aid against the recipient to recover aid granted contrary to article 108(3) of the TFEU or to recover aid that, on the basis of a Commission decision, is not compatible with the internal market.

In the past three years, over 150 cases have been brought before national courts in which applicants have claimed that unlawful state aid measures were involved. The argument has been put forward particularly by applicants (both competitors as well as individuals) in cases concerning municipal real estate development. A recent development is that the authorities themselves invoke state aid law in national proceedings to annul an agreement, obtain higher payments under an existing contract with a private party or to revoke granted subsidies.

Which national authorities monitor compliance with state aid rules and have primary responsibility for dealing with the European Commission on state aid matters?

Various authorities and administrative bodies are responsible for ensuring compliance with state aid rules. However, it is only the state (ie, the ministry concerned) that can formally be party to state aid proceedings before the Commission. Other public bodies may be involved as interested parties.

To enhance compliance with state aid rules, there is close cooperation between ministries and regional and local authorities. The rules for cooperation are laid down in an agreement on the coordination of notification of new aid measures and annual reporting. This agreement was updated in October 2017 (Stcrt. 2017, 60151). By this agreement the Interdepartmental Committee on State Aid Matters was established.

The Ministry of the Interior (more specifically the Coordination Point State Aid of this Ministry) coordinates state aid matters for regional and local authorities and takes care of the notification of state aid measures granted by them. On behalf of the Ministry, Europa Decentraal (see question 1) coordinates the notification of exempted aid measures to the European Commission via the State Aid Notification Interactive System, and the reporting of state aid to the European Commission via the State Aid Reporting Interactive System.

The Ministry of Economic Affairs coordinates the annual reports to the European Commission for all ministries.

Under Wet NErpe (see question 1) the competent minister - generally the Minister of the Interior - may instruct a public entity to comply with European legislation, including state aid rules, and may impose (periodic payment) penalties if the public entity does not follow these instructions. Addressees of these instructions, but also beneficiaries, can appeal against a decision of the Minister of Interior at the Administrative Jurisdiction Division of the Council of State.

Which bodies are primarily in charge of granting aid and receiving aid applications?

There are no specific bodies primarily in charge of granting aid and receiving aid applications. On the basis of the distribution of competences under national law, measures that involve state aid may be adopted by the central government, regional and local authorities, independent administrative bodies and bodies governed by public law.

Describe the general procedural and substantive framework.

State aid measures are mainly governed by administrative law, since the grant of subsidies is the most important aid instrument in the Netherlands.

The General Administrative Law Act (GALA) contains general rules for decisions of public authorities and sets out the general framework for legal protection against such decisions. It includes provisions concerning the preparation and notification of decisions and the duty to state reasons for them. For example, decisions must be prepared with due care, powers may not be used for purposes other than those for which they were conferred by the legislature, and the interests concerned must be balanced in a proportionate manner.

Division 4.2 of the GALA contains specific rules in respect of the granting of subsidies. This division deals with the subsidy grant, the obligations of the subsidy recipient, the determination of the definitive subsidy amount, the withdrawal and amendment of a subsidy, and payment and recovery. Since July 2018, article 4:35(3) of the GALA provides that a subsidy shall be refused if there are good grounds for assuming that it is incompatible with the state aid rules.

State aid measures are governed by the Civil Code and the Code of Civil Procedure where it concerns granting of state aid using civil law instruments, for example, a sales agreement or a loan agreement.

Identify and describe the main national legislation implementing European state aid rules.

There is no specific national legislation implementing European state aid rules, apart from the Act for the recovery of state aid mentioned in question 1. This Act provides a legal basis for the recovery of illegal aid and the recovery of interest and lays down limitation periods. The recovery of illegal aid is handled by the administrative body that granted the aid.

Moreover, in the Guidelines on lawmaking it is emphasised that proposed measures should be assessed in light of the state aid rules.

Programmes

What are the most significant national schemes in place governing the application and the granting of aid, that have been approved by the Commission or that qualify for block exemptions?

The approved and block-exempted schemes are issued on national and regional level. Aid schemes primarily concern environmental protection, the agricultural sector, SMEs and regional aid. For instance, the three northern provinces (Friesland, Noord-Holland and Groningen) established a regulation in 2017 that allows for subsidies in respect of the conservation and development of the Wadden Sea area. Another example is a regulation by the Ministry of Economic Affairs to subsidise wind farms at sea.

In practice, local authorities frequently use the aid scheme for the maintenance of historic monuments. The Commission has approved this scheme, since it falls within the scope of the GBER (SA.40475). Another scheme that is approved by the Commission under the GBER concerns nature and landscape management by private landowners and land users and the possibilities for local governments to compensate them for their work (SA.44848).

Furthermore, for most ministries, specific Subsidy Framework Acts explicitly provide rules about the granting of subsidies. For instance, the Ministry of Economic Affairs has issued a regulation on the granting of national subsidies in the area of economic affairs. This regulation has been specified further with regard to technology, SMEs and environmental economic policies. The regulation and decision elaborate on the rules to qualify for block exemptions under the GBER. The Ministry of the Interior has issued similar regulations.

Are there any specific rules in place on the implementation of the General Block Exemption Regulation (GBER)?

No specific legislation is in force apart from the general obligations for the authorities to act in a transparent manner, as laid down in the GALA. On the basis of the distribution of competences under national law, each public entity has a responsibility to implement the rules laid down in the GBER. The website of Europa Decentraal provides guidance on the implementation of the GBER.

Public ownership and Services of General Economic Interest (SGEI)

Do state aid implications concerning public undertakings, public holdings in company capital and public-private partnerships play a significant role in your country?

State aid implications of government participations in public undertakings and public-private partnerships generally have not given rise to major controversies in the Netherlands. A 2013 report on the participation policy of the national government explicitly indicates that compliance with state aid rules is part of the assessment criteria.

In principle, the state aims to hold ownership of undertakings that are considered of vital importance to the national economy only. Hence, the list of state-owned companies is limited.

Are there any specific national rules on SGEI? Is the concept of SGEI well developed in your jurisdiction?

There are no specific national rules on SGEI. Regional and local authorities are becoming more and more familiar with the concept of SGEI. The Ministry of the Interior published a guidance paper on SGEI in July 2014, describing the current rules laid down in the 2012 SGEI package of the European Commission. Several provinces and larger cities have their own guidance paper, decree or (standard) order in respect of SGEI.

In December 2018 The Hague Court of Appeal rendered judgment in a case about an SGEI (ECLI:NL:GHDHA:2018:3331). It was the first time a case about an SGEI reached a Dutch court of appeal. A test for the examination of the health of an unborn child was classified by the minister as an SGEI. The Court of Appeal ruled that a market failure should be deemed to exist since market parties do not provide consumers the same test for an affordable price. Therefore, the minister did not make a manifest error of assessment by classifying the test as an SGEI.

Considerations for aid recipients

Is there a legal right for businesses to obtain state aid or is the granting of aid completely within the authorities’ discretion?

There is no legal right for businesses to obtain state aid. The granting of aid is, in principle, within the authorities’ discretion. However, this discretion may be restricted when a specific Subsidy Framework Act or aid scheme applies. In that case, the authority has to verify whether the conditions under which aid can be granted are satisfied. On the basis of the GALA, decisions of administrative authorities must furthermore respect certain general legal principles, including the principle of equal treatment.

What are the main criteria the national authorities will consider before making an award?

Over the past few years, most (non-crisis) aid was granted for environmental protection (including energy saving). This totalled more than €1.1 billion in 2017. Other important amounts were granted to the agricultural sector and for R&D. Other types of aid, including employment aid and rescue and restructuring aid, are not awarded very often. In 2017, the amount of state aid (excluding railways) granted by the Dutch authorities amounted to approximately €2.3 billion (State Aid scoreboard 2018 of the European Commission, published 24 January 2019).

What are the main strategic considerations and best practices for successful applications for aid?

Ministries offer general advice in respect of aid and the authorities and bodies granting aid may be able to provide more specific advice. The main strategic considerations and best practices for successful applications include a thorough analysis of the rules and regulations that allow for aid, including their scope, and a timely application. It is advisable to collect as much relevant information as possible and, to the extent possible, discuss a request for aid beforehand with the granting authority or body. It is also advisable to start preparing a request for aid at an early stage. It is better not to start a project before a decision with respect to the request has been taken.

How may unsuccessful applicants challenge national authorities’ refusal to grant aid?

When an applicant has been unsuccessful in applying for aid and a government authority refuses to grant aid, it may be possible to challenge the authority’s decision. Such proceedings initially involve a preliminary administrative procedure (usually an objection procedure) under the GALA. This procedure gives the authority the possibility to reconsider its own decision. When the preliminary administrative procedure is unsuccessful, the applicant may subsequently challenge the refusal (to reconsider) before an administrative court.

To what extent is the aid recipient involved in the EU investigation and notification process?

The extent to which the aid recipient is involved in the EU investigation and notification process depends on the circumstances. The notification will be drafted by the authority, but the aid recipient may be invited to provide input. The degree of involvement of the aid recipient depends very much of the circumstances of the individual case. It should be noted that since the last reform of Regulation 2015/1589, the Commission may address questions directly to aid beneficiaries if the member state concerned agrees. This may already have happened in a limited number of cases.

Strategic considerations for competitors

To which national bodies should competitors address complaints about state aid? Do these bodies have enforcement powers, and do they cooperate with authorities in other member states?

There is no specific national body to which competitors may address complaints about state aid. However, under the Wet NErpe, the competent minister may instruct a public entity to comply with European legislation, including state aid rules, and may impose (periodic payment) penalties if the public entity does not follow such instructions. A competitor may therefore address complaints about (proposed) state aid to the competent minister and ask the minister to take action.

A competitor that qualifies as an interested party may also challenge the decision taken by the administrative authority in a preliminary administrative procedure before this body (and subsequently before the court).

It is not possible to file a complaint about state aid to the Dutch Competition Authority (Authority for Consumers and Markets, ACM), which is entrusted with the public enforcement of the competition law rules in the Netherlands (not including the state aid rules).

How can competitors find out about possible illegal or incompatible aid from official sources? What publicity is given to the granting of aid?

A decision by an administrative authority to grant aid has to be published pursuant to the provisions of the GALA. According to these provisions, an administrative decision that is addressed to one or more interested parties must be notified by being sent or issued to them, including the applicant. There is no obligation to publish such a decision in a government gazette. Decisions that are not addressed to one or more interested parties must be notified by means of a notice of the decision, or the substance thereof, placed in an official government publication, newspaper or free local paper, or in any other suitable way.

The transparency provisions in the GBER have been implemented by means of a national state aid website, which can be reached via the website of the Directorate-General of Competition.

Give details of any legislation that gives competitors access to documents on state aid granted to beneficiaries.

Access to information and documents of an administrative body can be obtained by means of a request under the Government Information Act. The administrative body is obliged to comply with the request unless certain specific circumstances apply - for example, if the requested information contains confidential business data. If a request under the Government Information Act is denied, the decision of the administrative body may be challenged before the administrative body itself (objection procedure), and subsequently before the court (appeal procedure).

What other publicly available sources can help competitors obtain information about possible illegal or incompatible aid?

Competitors may be able to obtain information about illegal or incompatible aid from publicly available annual reports and from the financial statements that public limited companies, private limited companies, cooperative associations and mutual benefit associations are obliged to register with the Dutch Chamber of Commerce. However, it may prove very difficult to derive from these annual reports and financial statements that illegal or incompatible aid was granted. Minutes of meetings of municipal councils and other governmental bodies that may allocate financial resources to undertakings may also constitute an important source of information.

Apart from complaints to the national authorities and petitions to national and EU courts, how else may complainants counter illegal or incompatible aid?

There are few possibilities to counter illegal or incompatible aid, apart from complaints to the national authorities and applications to national and EU courts. Competitors may address third parties and point out the illegality of a proposed aid measure. This includes, in particular, addressing a financial institution that intends to grant a loan on the basis of an illegal state guarantee. Past experience indicates that these types of alternative strategies are not applied very often.

Private enforcement in national courts

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

Actions against aid measures that are granted through administrative acts should first be brought before an administrative court. In cases that are outside the jurisdiction of administrative courts, it is in principle possible to bring an action before a civil court based on tort or another rule of civil law. In that connection, general principles of administrative law may play a role in assessing whether the public body concerned has complied with its civil law obligations. Civil courts have exclusive jurisdiction in cases where aid measures are granted through non-administrative acts or where aid measures are laid down in policy rules or in generally binding provisions.

Standing before the administrative court applicants must qualify as an interested party. The applicant must be directly affected by the decision to qualify as an interested party. A competitor of the aid recipient will be considered an interested party if it can prove that its competitive position has been or will be affected by the state aid measures.

Second, the applicant must satisfy the ‘Schutznorm’. The administrative court will not annul the administrative act when the invoked legal provision is clearly not intended to protect the party’s interests. For example, in cases concerning municipal real estate development courts generally reject state aid claims made by individuals or interest groups (not competitors) because the Schutznorm is not satisfied.

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

Article 108(3) TFEU is an independent standard for assessment in administrative proceedings. If a claim is based on this article, the court must assess in full whether the measure concerned constitutes state aid within the meaning of article 107(1) TFEU. Actions in administrative proceedings can also be based on alleged non-observance of general principles of proper administration.

The grounds for a civil private enforcement action cannot be based solely on EU legislation. A civil action needs to be based on articles 107(1) and 108(3) TFEU in conjunction with Dutch national legislation. A party has several options to bring an action to a civil court:

• wrongful act (article 6:162 of the Dutch Civil Code (DCC));
• nullity of the state aid measure (article 3:40 of the DCC);
• undue payment (if the third party has paid a levy that is used for financing the illegal state aid measure) (article 6:203 of the DCC); or
• unjustified enrichment (article 6:212 of the DCC).

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

In administrative proceedings, the action challenging the legality of state aid is brought against the administrative body that has granted the aid. This body acts as defendant. The aid recipient may participate in the proceedings as an interested party.

In civil proceedings, the action challenging the legality of state aid is defended by the relevant government body with legal personality (eg, the municipality), of which the administrative body (eg, the Municipal Executive, consisting of the mayor and aldermen) is part. Generally, the beneficiary of the alleged aid measure can request to join the legal proceedings brought against the relevant government body.

Defendants may defeat a challenge by arguing that the claimant has provided insufficient evidence that a certain measure constitutes aid, or by providing sufficient evidence that a certain measure does not constitute aid. The burden of proof (initially) lies with the claimant.

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 do not enforce (or examine) state aid rules ex officio. A claimant needs to explicitly invoke state aid law. The state aid rules are regularly and increasingly referred to in national court proceedings. The rules are invoked by private litigants and by national authorities themselves, who both increasingly rely on state aid rules in national proceedings in order to annul an agreement or to revoke granted subsidies. The success rate for private actions however is still rather limited, especially because the claimant (initially) bears the burden of proof and it may be difficult in borderline cases to demonstrate that a state measure meets all the criteria laid down in article 107(1) TFEU. National courts tend to refer to relevant case law of the EU courts when assessing a state measure in the light of state aid law.

The cost risk involved if a challenge is unsuccessful is limited. In administrative proceedings a private party may not be ordered to pay the costs of the public defendant, but the public defendant may be ordered to pay the legal costs of the applicant if it loses the appeal in whole or in part. In civil cases, the losing party must bear the legal costs of both parties as fixed by the court, which are substantially lower than the actual legal costs.

An action brought by a competitor has no suspensory effect.

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?

Article 29(1) of Council Regulation (EU) 2015/1589 gives national courts the possibility to ask the European Commission for information about a complaint filed with the Commission in a case of alleged state aid or for its opinion on questions concerning the application of state aid rules.

According to the GALA, administrative courts are obliged to supplement the facts of the case on their own initiative. This also includes referring a question on state aid to the Commission. However, this is not a common practice in the Netherlands. One recent example is a case brought before the Court for Trade and Industry. In this case the State Secretary for Economic Affairs had rejected a subsidy because it would constitute state aid and the European Commission (allegedly) had not approved the relevant aid scheme. The court asked the European Commission questions about the notification of the aid scheme (ECLI:NL:CBB:2017:412).

Civil courts may also refer a question on state aid to the Commission, and stay proceedings upon request of one of the parties involved. Given the ‘passive role’ of the civil court, the civil court will generally not refer a question to the Commission without a party’s request to do so. In February 2015, the Court of Appeal of Den Bosch addressed the Commission to obtain information about a complaint filed with the Commission (ECLI:NL:GHSHE:2015:540). The case concerned alleged state aid to a waste management company owned by several municipalities.

On the basis of article 29(2) of Council Regulation (EU) 2015/1589 the European Commission may submit written observations to a national court in state aid proceedings and make oral observations, with permission of the national court. To date, the Commission has not yet intervened as an amicus curiae in state aid proceedings before a Dutch court.

The possibility for national courts to refer a question on state aid to the Commission is without prejudice to the possibility (or obligation) to refer a question on state aid for a preliminary ruling to the Court of Justice of the European Union on the basis of article 267 TFEU.

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

In both administrative and civil proceedings, the claiming party bears the burden of proof and must demonstrate the existence of (illegal) state aid. It may be difficult to show that illegal state aid has been granted, in particular to demonstrate that a certain measure confers an advantage. In practice, administrative court may adopt a more active role concerning the collection of evidence (compared to civil courts).

A discovery procedure does not exist under Dutch law, yet parties are obliged to provide complete and truthful facts. Moreover, access to information and documents of an administrative body can be obtained by means of a request under the Government Information Act. In civil proceedings a request for information can be made by one of the parties based on article 843a of the Dutch Code of Civil Procedure, which provides for a limited form of disclosure.

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?

A competitor can bring state aid proceedings to a national court when the Commission is already investigating the case. In July 2015, the Court of Noord Nederland ruled that when the Commission is already investigating the case this does not prevent a national court from protecting the rights of a claimant before a national court (ECLI:NL:RBNNE:2015:3300). The Court also mentioned that it is the obligation of national courts to take measures that can prevent or remedy the unlawful implementation of state aid measures in the period until the Commission has rendered its decision. This is in line with the Deutsche Lufthansa case law. In the case before the Court of Noord Nederland, the Commission had not yet opened a formal investigation procedure. Therefore, the Court was not under an obligation to follow the Commission’s preliminary decision.

Before this case law, there were a few examples of Dutch courts (including the Supreme Court itself) not applying the standstill obligation despite the fact that the Commission had already opened a (formal) investigation. Since the Deutsche Lufthansa case, there have been no examples of Dutch courts deviating from a Commission decision to initiate a formal investigation.

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

In both administrative and civil proceedings, there are in principle no restrictions regarding the type of evidence that parties may submit. Economic evidence is therefore generally accepted and, where appropriate, relied on by national courts.

Judges may appoint (economic) experts and they increasingly tend to do so in proceedings concerning state aid (in particular to determine the (existence of an) ‘advantage’).

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

In 2018, 62 per cent of civil cases were decided at first instance within a period of one year, and 90 per cent within a period of two years. On appeal, 39 per cent of cases were decided within a period of one year and 78 per cent within a period of two years.

In 2018, 81 per cent of administrative law cases at first instance were decided within a year. On appeal, 50 per cent of the cases were decided within one year (Annual Report Council for the Judiciary).

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

Interim relief against unlawful aid can be granted by an administrative court or a civil court, depending on the legal basis for the aid involved.

In interim injunction proceedings before the administrative court, interim relief will be granted if the claimant is an interested party and it is the court’s preliminary assessment that the administrative decision is illegal. If the court has doubt whether the decision is legal, interim relief may be granted after a balance of interests. Interim injunction proceedings require urgency and a pending objection or appeal procedure. A request for interim measures in administrative proceedings can be made pending administrative review proceedings or a main appeal on the merits.

In interim injunction proceedings before the civil court, interim relief is only granted if the plaintiff has an urgent interest that outweighs the interests of other parties involved. There must be a matter of urgency and the court must take into account what it considers to be the likely outcome of main proceedings on the merits. The interim injunction has a provisional character and ceases to exist from the moment a final decision concerning the dispute has been taken. It is not necessary for a principal claim to be pending before the civil court, but the civil court is obliged to abstain from ruling if administrative proceedings are possible.

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

In its judgment in relation to the Residex case, which followed the judgment of the Court of Justice of 8 December 2011, the Supreme Court in the Netherlands made clear that the legal consequences, if a national court establishes the presence of illegal aid, depend on what is necessary to restore the competitive situation that existed before the illegal aid was granted (ECLI:NL:HR:2013:BY0539). In the case of (illegal) state guarantees, this may lead to the nullity of the guarantees if this contributes to restoring the competitive situation to the situation that existed before the state aid.

In November 2018, the Court of Appeal Arnhem-Leeuwarden decided that the legal consequences of illegal state aid in a sales agreement - given the particular circumstances of the case - must be that the entire agreement is null and void, taking into account the effet utile of the standstill obligation laid down in article 108(3) TFEU (ECLI:NL:GHARL:2018:9636).

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?

In administrative proceedings, the administrative court is allowed to order compensation for damages. Compensation is granted if there is unlawful state aid and if there is a causal relationship between the aid and the damage suffered.

To claim damages in civil proceedings, it must be established that the administrative body has conducted a wrongful act for which it can be held liable. Four criteria must be satisfied:

• the administrative body must have acted unlawfully;
• the breached measure must have been intended to protect the applicant;
• there must be a causal relationship between the breach and the damages suffered; and
• the wrongful act must be attributable to the administrative body.

We are not aware of a single case in which an undertaking has (successfully) claimed damages in connection with the granting of unlawful aid to a competitor.

State actions to recover incompatible aid

What is the relevant legislation for the recovery of incompatible aid and who enforces it?

The Act for the recovery of state aid, which entered into force on 1 July 2018, contains the general rules for the recovery of state aid and resolves certain difficulties under national law in respect of the recovery of state aid. The Act provides a legal basis for the recovery of illegal aid following a decision by the Commission and the recovery of interest and lays down limitation periods. The recovery of illegal aid is handled by the administrative body that granted the aid.

Case law of administrative courts shows that article 4(49)(1)(b) of the GALA can also be applied to subsidies that constitute illegal state aid. According to this provision, ‘an administrative authority may withdraw a decision determining the definitive subsidy amount or amend it to the detriment of the recipient if the definitive subsidy amount was determined incorrectly and the subsidy recipient knew this or should have known this.’

Furthermore, for most ministries, specific Subsidy Framework Acts explicitly state that a subsidy can be refused, lowered or withdrawn where the subsidy is contrary to state aid rules.

What is the legal basis for recovery? Are there any grounds for recovery that are purely based on national law?

As of 1 July 2018, the Act for the recovery of state aid provides the legal basis for recovery of illegal state aid. In addition, the GALA and a number of Subsidy Framework Acts provide for special provisions on recovery in the case of subsidies. Also, the General Tax Act contains certain provisions for a situation where too little tax was imposed, and authorises the tax inspector to impose additional tax if a ‘new fact’ occurs.

Has the Commission ever opened infringement procedures before the CJEU because of non-recovery of aid under article 108(2) TFEU?

There has been only one infringement procedure against the Netherlands because of non-recovery of aid (Case C-401/07). The Commission held that the Dutch state did not recover the unlawful aid quickly enough and for that reason started the infringement procedure. In response, the Dutch state pledged that it would amend the rules by which it would ensure that the recovery of unlawful aid would take place more quickly. As a result, the Commission decided to withdraw the case.

How is recovery implemented?

The administrative body that has granted the aid has to render a unilateral decision for the recovery of the aid in accordance with the Act for the recovery of state aid. The recovery includes the interest. The purpose of the recovery is to restore the situation to what it was before the illegal aid was granted. There is no need for the public authority to go to court.

Can a public body rely on article 108(3) TFEU?

Article 108(3) is directly applicable in national proceedings. If a public body has granted state aid to an undertaking, but subsequently finds out (or takes the position) that the aid is unlawful, it can rely on article 108(3) TFEU before a national court. On a number of occasions, public bodies have argued that unlawful aid had been granted to annul an agreement or to revoke granted subsidies. There is an ongoing discussion about the civil effects of the invoked illegality of contracts in light of article 108(3) TFEU. There is a judgment of a district court stating that unlawful state aid does not necessarily lead to the nullity of the contract and that it may be sufficient that the amount of the aid under the contract is recovered (with the remainder of the contract staying in place). However, this judgment was annulled in the second instance by the Court of Appeal because the selling price for the real estate object concerned contained state aid, the entire agreement had to be considered null and void and consequently the sales agreement had to be rescinded (ECLI:NL:GHARL:2018:9636).

On which grounds can a beneficiary defend itself against a recovery order? How may beneficiaries of aid challenge recovery actions by the state?

Beneficiaries of aid can challenge a unilateral administrative decision to recover aid before the competent administrative court (the Court for Trade and Industry or the competent tax court). No appeal is possible against judgments of the Court for Trade and Industry.

Is there a possibility to obtain interim relief against a recovery order? How may aid recipients receive damages for recovery of incompatible aid?

In general, it is possible to obtain interim relief against a recovery order in accordance with the General Administrative Law Act. However, in light of the principle of effectiveness and the primacy of EU law, interim relief against a recovery order will normally not be granted if it is clear that the aid was illegal. Aid recipients will normally not receive damages for recovery of incompatible aid as this would undermine the state aid rules.

Update and trends

Are there any emerging trends or hot topics relating to state aid control in your jurisdiction? What are the priorities of the national authorities? Are there any current proposals to change the legislation? Are there any recent important cases in the field of fiscal aid (taxes), infrastructure, or energy? Any sector enquires?

Three trends relating to state aid control can be particularly identified in the jurisdiction of the Netherlands.

Regional and local authorities are generally well aware of state aid law and the implications that unlawful state aid can have. As a consequence, they increasingly rely on state aid rules in national proceedings to annul an agreement or to revoke granted subsidies.

On 1 July 2018, the Act for the recovery of state aid entered into force. This act provides a legal basis for the recovery of state aid following a negative Commission decision and resolves certain difficulties under national law in respect of the recovery of state aid.

The latest formal investigation procedures that the European Commission initiated against the Netherlands all concern tax rulings granted by the Netherlands to various multinationals (Starbucks, IKEA and Nike). In these procedures, the European Commission investigates whether the Dutch authorities have given the companies concerned an unfair advantage over their competitors, in breach of EU state aid rules. The investigations by the European Commission have led the Dutch government to aim for greater transparency regarding fiscal rulings.