Private enforcement against state aid awards in Netherlands

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.