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Policy and track record
Outline your jurisdiction’s state aid policy and track record of compliance and enforcement. What is the general attitude towards subsidies in your system?
France has a long-standing tradition of state interventionism, which results in a wide variety and diversity of issues and state aid-related cases.
The French state not only regularly intervenes as an investor, but also as a lender, guarantor and creditor in the context of minority or majority shareholdings, as well as a provider of direct and indirect subsidies.
In recent years, the French administration has had to deal with several high-profile cases in relation to rescue and restructuring aid, such as those involving Areva in the nuclear power sector (see Cases SA44727 and SA46077), the Société Nationale Corse Méditerranée (SNCM) in the maritime transport sector (see Cases T-1/15, T-74/14, T-454/13 and T-366/13), Dexia in the banking sector (see Cases SA49064 and SA49039), Électricité de France (EDF) in the electricity market (see Case T-747/15) and SNCF Mobilités (formerly Société Nationale des Chemins de fer Français (SNCF)) in the road transport market (see Case C-127/16P).
When the French state acts as an investor, lender, creditor or guarantor, the question at stake is whether it complies with the private market investor principle. In the SNCF Mobilités case, the conditions for restructuring aid in favour of a private delivery and express package and pallet transport company (Sernam), then wholly owned by SNCF, was to sell Sernam’s assets en bloc. On 7 March 2018, the EU Court of Justice (ECJ) (Case C-127/16P) notably confirmed the 2015 EU General Court’s finding that, in the specific circumstances of the case, the private investor test is not applicable to the implementation of a compensatory measure. The compensatory logic of the sale of Sernam’s assets en bloc indeed differs from the logic of a private operator seeking to maximise its profits or, as in this case, minimise its losses.
In the EDF case, the French state had waived corporation tax due by EDF - then wholly publicly owned - within the context of the restructuring of EDF’s balance sheet and the increasing of its capital. On 16 January 2018, the EU General Court (Case T-747/15) ruled that the European Commission had not erred in law in finding that the private investor test was not applicable, given that neither EDF nor France submitted evidence to establish that the French state had acted in its capacity as shareholder and had carried out a dedicated evaluation of the profitability of the investment that would be made by conferring such an advantage on EDF, as a private investor would have done.
In the SNCM case, the French state had adopted capital injection and privatisation measures in favour of SNCM. Those measures included the disposal of SNCM at a negative price of €158 million (recapitalisation), an additional capital contribution of €8.75 million and a current account advance of €38.5 million to finance any social plan put in place by the buyers. On 6 July 2017, the EU General Court (Cases T-74/14 and T-1/15) considered that the European Commission had properly applied the private investor test and was entitled to conclude that a prudent private investor would not have gone ahead with such measures.
In the context of the restructuring of the Areva group, the European Commission conditionally cleared on 10 January 2017 (Case SA44727) a capital injection from the French state subject to a set of divestments, one of which was to the French incumbent electricity provider, EDF, which is also partially owned by the French state. The European Commission considered that subject to this divestment and its approval from an EU merger control perspective and another regulatory condition, the restructuring plan proposed by the French state was credible to restore the viability and competitiveness of the business in the long term.
The financing of public services is also a recurring question, as is the definition and appraisal of services of general economic interest (SGEI).
The French administration’s risk-exposure awareness has increased notably in the light of the important discussions and litigation of the 1990s. These precedents led the French administration to take state aid law into consideration at a very early stage and increase its level of compliance, thereby reducing its risk exposure.
In recent years, the French administration has increased the number of notified regimes and individual aid, notably in the R&D, agriculture, renewable energy, media and cinematographic sectors, as part of a trend towards a more compliant political approach to state aid rules.
Nonetheless, there are still risks and cases where the French state breaches EU state aid rules, and the French courts are now becoming increasingly aware of their ability to sanction the illegality of non-notified aid.
In addition, it is worth mentioning that the monitoring of state aid recovery and of compliance with commitments undertaken before the European Commission is now more strictly enforced. The European Commission does not hesitate to apply the Deggendorf case.
Which national authorities monitor compliance with state aid rules and have primary responsibility for dealing with the European Commission on state aid matters?
The General Secretariat for European Affairs (SGAE) is an inter-ministerial entity that coordinates all state aid notifications to the European Commission. Each ministry in France has a contact point who is in charge of handling state aid matters entering in the field of competence of the ministry.
The SGAE also works with the permanent representation of France before the European Union in Brussels on all state aid matters.
Which bodies are primarily in charge of granting aid and receiving aid applications?
In France, there are several bodies at national and infra-national levels that are in charge of granting aid and receiving aid applications. Some of them play a particularly significant role, among which the following should be mentioned:
- At national level, the General Commission for Territorial Equality (CGET) plays a paramount role in the implementation of the main regimes grounded on the Block Exemption Regulation No. 651/2014. The CGET is notably the coordinating authority for the European Structural and Investment Funds in France, working closely with responsible regions and ministries in this regard.
- The Directorate General for Undertakings (DGE) of the Ministry for Economic Affairs and Finance grants aid through the network of Regional Directorates for Enterprises, Competition Policy, Consumer Affairs, Labour and Employment. Other bodies placed under the supervision of the Ministry for Economic Affairs and Finance, such as BpiFrance Financing, finance and support small and medium-sized enterprises (SMEs) in R&D and innovation. BpiFrance notably supports the French state and regions in the management of European Regional Development Fund fundings.
- Specific instruments such as fiscal aid are granted by the General Directorate for Public Finance.
- Environmental aid is granted by the Directorate General for Energy and Climate, placed under the supervision of the Ministry of Ecology, Sustainable Development and Energy. Under the supervision of the same ministry, the Environment and Energy Management Agency plays a significant role in implementing public policies in this field and granting aid to candidate recipients.
- The Ministry of Agriculture, Agrifood and Forestry manages European Agricultural Fund for Rural Development funds within the framework of two national programmes, alongside 27 regional programmes managed by French regions.
- In the transport sector, the Directorate General for Civil Aviation and the Directorate General for Infrastructure, Transport and the Sea are the primary bodies in charge of granting aid and receiving aid applications.
- Within the Ministry of Culture and Communication, the French Cinematography Centre (CNC) and the General Directorate of Media and Cultural Industries are responsible for state aid matters.
At infra-national level, it is worth underlining that a considerable volume of aid in France is granted directly by municipalities, departments and regions.
General procedural and substantive framework
Describe the general procedural and substantive framework.
The granting of state aid is mainly governed by public law.
Identify and describe the main national legislation implementing European state aid rules.
Apart from exempted and notified regimes that directly refer to EU state aid rules, many decrees, articles of the General Code of Local Authorities (CGCT) and circulars also refer to them.
Article L1511-1-1 of the CGCT provides that the state is responsible for successfully submitting the notification of the aid or schemes that local authorities wish to implement. It also entrusts local authorities with the responsibility for recovering unlawfully granted state aid, either because they were not notified or because they have been declared incompatible with the common market by the European Commission. The same article states the financial consequences that may result from belated or incomplete execution of a recovery order and highlights the obligations to which local authorities are bound for the implementation of their own schemes.
Useful tools such as the vade mecum on state aid, published by the Ministry for Economic Affairs and Finance on an annual basis, as well as the ministerial circular of 26 April 2017 on the competition rules applying to public funding of economic activities and the training kit on state aid rules published online on the CGET website (www.europe-en-france.gouv.fr/Centre-de-ressources/Aides-d-etat), also describe the regulatory framework and provide relevant guidelines to public agents for the purpose of managing state aid rules within their respective fields of competence.
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?
All schemes are available online on the CGET website: www.europe-en-france.gouv.fr/Centre-de-ressources/Aides-d-etat.
On the basis of the General Block Exemption Regulation (GBER), the French state has adopted 13 exempted framework schemes concerning:
- local infrastructure (SA40206);
- training (SA40207);
- employment of disadvantaged workers and of workers with disabilities (SA40208);
- environment and energy (SA40405);
- measures to remedy the damage caused by certain natural disasters (SA40424);
- SMEs (SA40453);
- culture and heritage conservation (SA42681);
- sport and multifunctional recreational infrastructure (SA48740);
- SMEs in relation to European Territorial Cooperation projects (SA40646);
- regional development (SA39252);
- rescuing and restructuring SMEs in difficulty (SA41259);
- SMEs’ access to funding (SA40390); and
- research, development and innovation (SA40391).
These schemes came into force in December 2014 or January 2015 and are applicable until 31 December 2020.
Besides the exempted framework schemes, the French state also notified a number of schemes for the implementation of individual aid pursuing the same purposes as the exempted framework schemes with the European Commission. The main sectors concerned are agriculture, air transport, renewable energy, R&D and culture.
For example, a significant number of recently implemented state aid schemes concern the cinematographic sector, where the CNC is particularly active, and promote the production of audiovisual works.
State aid schemes are listed online on the CGET website: www.europe-en-france.gouv.fr/Centre-de-ressources/Aides-d-etat/Regimes-d-aides.
Finally, there are many national schemes adopted pursuant to the EU De Minimis Regulation. The General Tax Code notably contains tax exemption provisions for the takeover of firms in difficulty, young innovative firms, newspaper companies, independent record dealers, independent booksellers, artistic professions, etc. A national record of de minimis aid is available online on the CGET website : www.europe-en-france.gouv.fr/Centre-de-ressources/Aides-d-Etat/Les-aides-de-minimis.
General Block Exemption Regulation
Are there any specific rules in place on the implementation of the General Block Exemption Regulation (GBER)?
Specific rules such as transparency rules regarding the implementation of the GBER can be found on the respective websites of the national bodies in charge of granting state aid (eg, www.collectivites-locales.gouv.fr, www.cget.gouv.fr and www.ademe.fr).
The SGAE, the CGET and the DGE have also published guidelines on the implementation of new transparency rules (applying as of 1 September 2016), available on the CGET website: www.europe-en-france.gouv.fr/Centre-de-ressources/Aides-d-etat/Regimes-d-aides.
Public undertakings, public holdings in company capital and public-private partnerships
Public ownership and Services of General Economic Interest (SGEI)
Public undertakings, public holdings in company capital and public-private partnerships
Do state aid implications concerning public undertakings, public holdings in company capital and public-private partnerships play a significant role in your country?
Historically, the French state has always acted as a shareholder of companies active in a wide variety of economic sectors.
The portfolio of state shareholdings is primarily managed by the French state’s shareholdings agency. This agency, along with the Caisse des Dépôts et Consignations and public investment bank Bpi France, are the main stakeholders acting on behalf of the French state in the management of state-owned companies. In total, 81 entities fall within the scope of the French state’s shareholdings agency, including 13 listed companies. The French state shareholding portfolio notably covers the following sectors: energy (notably through Areva, EDF and Engie), automotive (through PSA and Renault), aerospace and defence (notably through Airbus Group, Safran and Thales), audiovisual and telecom (notably through France Télévisions, Radio France and Orange), finance (notably through Dexia) and transport (notably through SNCF and RATP, and Aéroports de Paris).
The role of the state as a shareholder and its doctrine of intervention has been subject to wide debate in France in recent years, and was formalised in 2014 by the Ministry of Economic Affairs and Finance in a guideline document that sets out the main orientation of this public policy and highlights the need to comply with state aid rules.
More recently, the current French government notably announced its intention to revamp the state’s doctrine of intervention as a shareholder in 2018. Such a project has notably been debated before the French Parliament within the context of the adoption of the 2018 Finance Act.
Recent French cases involving the private market investor principle include the SNCF Mobilités case (Case C-127/16P of 7 March 2018), the EDF case (Case T-747/15 of 16 January 2018) and the SNCM case (Cases T-74/14 and T-1/15 of 6 July 2017) mentioned above (see question 1).
Are there any specific national rules on SGEI? Is the concept of SGEI well developed in your jurisdiction?
As part of its longstanding tradition of state intervention, SGEI holds an important role at all levels in France.
The local authorities managing SGEIs can rely on numerous guidelines, such as the online guide published by the SGAE in August 2013, to ensure that the financing and management of SGEIs respect state aid rules.
In any event, the French authorities rely on the Altmark principles to justify the financing of public services obligations at a national level in various sectors.
For example, the Altmark principles were used by the French state before the European Commission to support the financing of public transport services in Ile-de-France (Case SA26763). In this case, the European Commission nevertheless held on 2 February 2017 that the first and fourth Altmark criteria (imposition of public service obligations clearly defined and benchmarking analysis in the absence of competitive tender process) were not satisfied and consequently considered that the regional subsidies scheme at stake had conferred a competitive advantage on the beneficiary transport companies. The European Commission eventually considered the state aid scheme compatible with the common market, though unlawfully implemented for lack of prior notification pursuant to article 108(3) of the Treaty on the Functioning of the European Union (TFEU). Appeals are currently pending before the EU General Court.
Similarly, in the Livret A case (Case SA41147), the European Commission assessed the compensation granted to La Banque Postale for the provision of an SGEI of banking accessibility under article 106 (2) TFEU and the rules on the provision of SGEIs. In reply to the French state’s argument according to which the measures at stake qualified as public service compensation, the European Commission considered that the fourth Altmark criterion was not satisfied. On 24 October 2017, the European Commission eventually considered the compensation awarded to La Banque Postale compatible with the common market, though unlawfully implemented for lack of prior notification pursuant to article 108(3) TFEU.
Member states’ scope of discretion in defining SGEIs was also discussed at length in the SNCM case (Cases T-454/13 and T-366/13). On 1 March 2017, the EU General Court upheld the European Commission’s findings that compensations awarded to shipping company SNCM for both maritime transport services provided throughout the whole year (‘basic service’) and services provided during peak periods (‘additional service’) did not meet the fourth Altmark criterion and that the compensations awarded for the additional service did not meet the first Altmark criterion either. Consequently, the EU General Court confirmed that France must recover €220 million in aid granted to SNCM in respect of maritime transport services it provided between Marseille and Corsica.
Also in the maritime sector, the French state was recently ordered by the European Commission to abolish corporate tax exemptions granted to French ports (Case SA38398). On 27 July 2017, the European Commission held that the corporate tax exemptions at stake conferred a competitive advantage on French ports, notably for lack of any established link between such exemption and potential public service tasks undertaken by the ports and of any statutory guarantee as to the absence of overcompensation (appeals are currently pending before the EU General Court).
Considerations for aid recipients
Legal right to state aid
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 such legal right or uniform procedure for state aid to be granted; this mainly depends on the nature of the aid (eg, fiscal, budgetary or banking aid, job creation aid, agricultural aid). The dispenser of aid may have limited, conditional or discretionary powers to grant aid. When the state aid granting authority has limited powers - given that precise and detailed conditions for the allocation of aid have been defined - it has to grant the aid to those recipients that meet the said conditions. It frequently occurs in fiscal matters, for example. Outside such context, public authorities have discretionary powers to grant state aid, and candidate recipients have no right to claim them.
Main award criteria
What are the main criteria the national authorities will consider before making an award?
The French authorities take a wide range of considerations into account when assessing the opportunity to grant aid to a candidate recipient. Major criteria may be innovation, job creation or saving, support for regional development and SMEs, rescue and restructuring of companies, particularly when it relates to strategic sectors (eg, Areva in the energy sector), agriculture and environmental protection.
Strategic considerations and best practice
What are the main strategic considerations and best practices for successful applications for aid?
There is a wide range of possible intervention in a company’s life cycle that may involve state aid. Strategic considerations such as growth potential, job creation and innovation are taken into account when requesting aid for the creation of a company or its development. A set of tools is available to public authorities to assess the relevance of a project, and a reference database for aid applicants has been made available under the direction of the DGE (www.aides-entreprises.fr).
Challenging refusal to grant aid
How may unsuccessful applicants challenge national authorities’ refusal to grant aid?
The decision of a state entity to refuse the allocation of aid is usually an administrative decision and is therefore subject to judicial review, usually on grounds of ultra vires or more rarely by way of a full remedy action (eg, in those few cases where the unlawful refusal to grant aid, the provision of erroneous information or misleading representations led to the denial of the aid or to the diminution of the amounts granted).
Prior to bringing an action before the judge, claimants must lodge a pre-litigation request before the decision maker or its supervisor. An action for annulment of the decision may then be lodged before the administrative courts of first instance, then on appeal before the administrative court of appeal and ultimately before the Council of State, which is the administrative supreme court in France.
Involvement in EU investigation and notification process
To what extent is the aid recipient involved in the EU investigation and notification process?
In practice, the public authority (either national, regional or local) proceeds to a first analysis of the nature and compatibility of the measure with state aid rules. This should in theory be supplemented by the lead ministry, followed by the SGAE. The SGAE centralises such matters so as to enable a uniform and sound approach to state measures from a state aid law perspective. In case of doubt as to the compatibility of the contemplated measure, the SGAE recommends a notification to the European Commission.
The role played by the candidate recipient within the context of the notification process is restricted by EU case law. Indeed, as a general rule, within the context of state aid review procedure, interested parties other than the member state concerned do not have the right to consult the documents in the European Commission’s administrative file. There is a general presumption that, in principle, disclosure of documents in the administrative file undermines protection of the objectives of investigation activities. Thus, the European Commission may, pursuant to the third indent of article 4(2) of EU Regulation No. 1049/2001 of 30 May 2001 regarding public access to European Parliament, Council and Commission documents, refuse access to all documents relating to the state aid review procedure. Interested parties may nevertheless demonstrate that a given document disclosure is not covered by that presumption, or that there is a higher public interest justifying the disclosure of the document concerned by virtue of article 4(2) of Regulation No. 1049/2001 (Case C-139/07P European Commission v Technische Glaswerke Ilmenau GmbH; Cases T-494/08 to T-500/08 and T-509/08 Ryanair v Commission).
The French state has also recently formulated a restrictive approach in its comments to the European Commission’s 2016-2017 Consultation on the Code of Best Practice on the conduct of State aid control proceedings (see http://ec.europa.eu/competition/consultations/2016_cbp/index_en.html). The French authorities indeed explained that they only involve companies or their counsel when it proves necessary for a full understanding of the case by the European Commission or for the proper conduct of the proceedings. Since proposed state aid is, subject to compatibility, granted at the member state’s discretion, the French authorities argued that the involvement of companies cannot be formulated as a prerequisite or an obligation under the Code of Best Practice.
Strategic considerations for competitors
Complaints about state aid
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 are no such entities in France. The courts are the appropriate forum.
Dealing with illegal or incompatible aid
How can competitors find out about possible illegal or incompatible aid from official sources? What publicity is given to the granting of aid?
In the context of the transparency requirements adopted by the European Commission, information about notified state aid schemes and individual aid (implemented as of 1 July 2016) are provided on a dedicated website: www.europe-en-france.gouv.fr (see question 6).
In addition, information about offers of aid over €500,000, €60,000 or €30,000 (depending on the sector concerned, granted as of 1 July 2016) are provided on the European Commission’s dedicated platform: Transparency Award Module.
Further, all information about state aid in France is submitted to the European Commission by the French state under its annual reporting obligation resulting from Regulation No. 794/2004. The European Commission is in charge of the publication of such information on the state aid scoreboard and the Eurostat website.
Give details of any legislation that gives competitors access to documents on state aid granted to beneficiaries.
Under the provisions of French Act No. 78-753 of 17 July 1978, everyone has the right to access public documents held by a public authority in the course of its public service mission, whatever its form or medium (deliberations, contracts, etc). A competitor can thereby access any document relating to an act of a public authority that it suspects of being a potential state aid measure.
In order to ensure the proper implementation of this right of access, the aforementioned French Act also created a Commission for Access to Administrative Documents (CADA). CADA can be used by any person whose request for document access is rejected or not answered within one month by the public authority at stake, and CADA’s opinion on the matter constitutes a pre-contentious path of appeal.
Although CADA does not have jurisdiction in relation to documents drawn up by an EU institution - in which case EU Regulation No. 1049/2001 on public access to EU institution documents applies - it is competent to decide whether documents issued by the French government can be disclosed, even if such documents were prepared for an EU institution.
CADA runs a case-by-case analysis and notably applies the ECJ’s case law on access to documents within the context of state aid review proceedings (see question 14). In a recent case where CADA issued a positive opinion recommending the disclosure of a document drawn up by the French government for the European Commission within the framework of state aid review proceedings, CADA notably assessed whether the requested disclosure could jeopardise French foreign policy and commercial and industrial confidentiality, pursuant to articles L311-5 and L311-6 of the Code on Relations between the Public and the Administration, which list grounds for non-disclosure and for restricting certain documents’ recipients (CADA, Opinion No. 20155251 of 7 January 2016).
Additionally, competitors may take advantage of the transparency obligations imposed on dispensers and beneficiaries by specific French provisions, such as the following:
- French Act No. 2000-321 of 12 April 2000 on the rights of citizens in their dealings with administrative authorities (article 10), its implementing Decree No. 2001-495 of 6 June 2001, and Decree No. 2017-779 of 5 May 2017 relating to electronic access to key information on grant agreements, provide that key information relating to public subsidies exceeding €23,000 are to be made accessible online (such information may be gathered and published through a publicly available inter-ministerial online portal).
- The aforementioned French Act No. 2000-321 of 12 April 2000 (article 10) and its implementing ministerial ruling of 11 October 2006 also require beneficiaries to provide to public dispensers a financial report certifying that all expenditures made were in accordance with the purpose of the public subsidy. Beneficiaries’ budget, financial accounts, financial reports on subsidies and subsidy agreements are also subject to the general public’s right to access public documents.
- Pursuant to the General Code of Local Authorities (CGCT), local authorities’ budgets must notably indicate public subsidies granted (see in particular article L2313-1), and local elected officials benefit from a general right of access to information on the matters decided upon by local institutions, which include state aid matters.
What other publicly available sources can help competitors obtain information about possible illegal or incompatible aid?
Other ways to counter illegal or incompatible aid
Apart from complaints to the national authorities and petitions to national and EU courts, how else may complainants counter illegal or incompatible aid?
Competitors may address any interested third parties in order to point out the illegality of a state aid measure and threaten them to bring an action before national or EU courts, provided that the allegations are not manifestly unfounded. Otherwise, such conduct could potentially lead to the beneficiary company being awarded damages for unfair business practices.
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?
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.
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.
Defence of an action
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.
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?
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, in order 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.
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?
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, 10 preliminary rulings on state aid were referred to the ECJ between 2009 and early 2018.
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).
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).
Burden of proof
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).
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?
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 Ile-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.
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?
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 Ile-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 in order 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).
State actions to recover incompatible aid
What is the relevant legislation for the recovery of incompatible aid and who enforces it?
Because the European Commission checks the proper implementation of the recovery of incompatible aid by member states, French law provides specific rules for aid recovery. A failure to recover unlawful aid may trigger the state’s responsibility, as was the case for the aid granted to SNCM by the French state (Case C-63/14).
Two authorities may be responsible for recovering aid granted: at national level, the Ministry for Economic Affairs and Finance (the Treasury), and at local level, the local authority that has granted the unlawful aid.
Recovery at national level is governed by Decree No. 2012-1246 of 7 November 2012, which covers the auditing of public budgets and accounts and the recovery of public debts in general. In certain cases, other ministries may be responsible for aid recovery. In this regard, French administrative courts recently considered that the suspensory effect of appeals lodged against recovery orders issued pursuant to an European Commission decision - provided by article 117 of the aforementioned decree - was not necessary to ensure effective judicial protection under EU law, such protection being fully ensured through judicial review before EU courts. The European Commission’s decision is thus enforceable failing an EU General Court decision ordering its suspension (Bordeaux Administrative Court of Appeal, Case No. 15BX01807 of 10 December 2015, CCI Pau v Ryanair & AMS).
Article L1511-1-1 of the CGCT provides that in the absence of recovery by the local authority concerned, and after a notice remains without effect for a month after notification, the state representative will proceed to recovery on its own motion and by any means.
Legal basis for recovery
What is the legal basis for recovery? Are there any grounds for recovery that are purely based on national law?
Under national law, the non-fulfilment of some conditions (such as failure in terms of employment or environmental objectives) could serve as a basis for recovery of aid by the granting authority.
Under EU law, the European Commission’s decision declaring the aid unlawful and incompatible, and consequently ordering its recovery by the state, usually serves as grounds for recovery by the relevant authority.
Commission-instigated infringement procedures
Has the Commission ever opened infringement procedures before the CJEU because of non-recovery of aid under article 108(2) TFEU?
The European Commission has already opened infringement proceedings against the French state for non-compliance with an European Commission decision ordering the recovery of state aid declared unlawful and incompatible, for instance in the following recent cases:
- By failing to comply, within the prescribed time limits, with European Commission Decision No. 2005/239/EC of 14 July 2004 concerning state aid measures applied by France to assist fish farmers and fishermen, namely by failing to recover from the recipients the aid at stake declared unlawful and incompatible with the common market, the French state has been found by the ECJ to be in breach of article 288(4) TFEU and of the European Commission’s decision (Case C-549/09 of 20 October 2011).
- Similarly, by failing to take all measures necessary to recover from shipping company SNCM state aid declared illegal and incompatible with the internal market by European Commission Decision No. 2013/435/EU of 2 May 2013 (SA22843) within the periods prescribed, by failing to cancel all payments of aid referred to in that decision within the periods prescribed, and by failing to inform the European Commission of the measures taken to comply with that decision within the period prescribed, the French state has been found by the ECJ to be in breach of article 288(4) TFEU and of the European Commission’s decision (Case C-63/14 of 9 July 2015).
Implementation of recovery
How is recovery implemented?
If the state aid has to be recovered by the French Treasury, a recovery order is issued by one of its legal agents and addressed to the beneficiary of the unlawful aid requiring repayment of the said aid.
At local level, the prefect is usually in charge of the recovery on behalf of the granting local authority. Any other local authority can also order the recovery of unlawful aid, for instance a regional chamber of commerce and industry (see the aforementioned Ryanair case before the Bordeaux Administrative Court of Appeal (Case No. 15BX01807)).
Article 108(3) TFEU
Can a public body rely on article 108(3) TFEU?
To the best of our knowledge, there are no French case laws similar to the ECJ preliminary ruling in the Klausner Holz case (Case C-505/14 of 11 November 2015), according to which, where a national court finds that contracts concluded between a public entity and a private undertaking constitute state aid within the meaning of article 107 TFEU and that such contracts have been unlawfully implemented for lack of prior notification pursuant to article 108(3) TFEU, but considers itself prevented from satisfying its obligation to draw all the consequences from that breach because of a judgment of a national court confirming that the contracts at issue remained in force is res judicata, without it having examined their possible categorisation as state aid, that court must examine the possibility of ordering a measure such as temporary suspension of the contracts at issue until the adoption of the European Commission decision closing the procedure, thereby enabling that court to satisfy its obligations under article 108(3) TFEU without actually ruling on the validity of the contracts at stake.
Defence against recovery order
On which grounds can a beneficiary defend itself against a recovery order? How may beneficiaries of aid challenge recovery actions by the state?
When a decision declaring aid unlawful and requiring recovery by the state is challenged by the aid beneficiaries before the EU General Court or the ECJ, the adoption or execution of a recovery order can be prevented for the duration of the procedure by the beneficiaries. Indeed, the aid beneficiaries can sequester the minimum amount of the aid declared incompatible until the final judgment is issued by the courts (eg, Case C-81/10P France Télécom v Commission).
If a recovery order has already been adopted by the state, beneficiaries of aid can challenge recovery actions before the administrative judge. Prior to the litigation process, a preliminary request must be addressed to the relevant authority.
Nevertheless, the Council of State recently made clear that neither the state nor aid beneficiaries could rely upon the principles of legal certainty and of the protection of legitimate expectations to evade their obligations to take all necessary measures to implement the European Commission’s decision or to challenge the implementing measures - ordered by the administrative courts - implied by the annulment of the administrative act that had set up the aid (Council of State, Case No. 409693 of 20 December 2017, Association Vent de colère!).
Interim relief against recovery order
Is there a possibility to obtain interim relief against a recovery order? How may aid recipients receive damages for recovery of incompatible aid?
In principle, there is no need for interim relief against a recovery order as any action that disputes the recovery order has a suspensory effect according to EU law and prevents the state from any recovery action. However, the relevance of such suspensory effect has been challenged since the Scott judgment (Case C-232/05). French administrative courts recently applied the Scott case law and considered that the suspensory effect of appeals lodged against recovery orders issued pursuant to an European Commission decision is not necessary to ensure effective judicial protection under EU law, such protection being fully ensured through judicial review before EU courts. The European Commission’s decision is thus enforceable failing an EU General Court decision ordering its suspension (Bordeaux Administrative Court of Appeal, Case No. 15BX01807 of 10 December 2015, CCI Pau v Ryanair & AMS). Thus, third-party claims introduced against recovery orders do not have an automatic suspensory effect.
Moreover, aid recipients can bring compensation claims for damage caused by the unlawful nature of the aid by triggering before the French administrative courts the state’s liability for having breached its duty of prior notification pursuant to article 108(3) TFEU. Nevertheless, administrative courts also take into account the lack of vigilance by the beneficiaries, which should have paid particular attention to the conformity of the aid themselves, and consequently reduce their right to compensation accordingly (eg, the Borotra case: Paris Administrative Court of Appeal, Case No. 04PA01092 of 23 January 2006, Groupe Salmon Arc-en-ciel).
In addition, the Council of State recently made clear that the damages allegedly resulting from the recovery of unlawfully granted aid, including interest, do not constitute compensable losses for the beneficiary, even if the state has belatedly taken the necessary steps to recover the amounts at stake (Council of State, Case No. 386627 of 7 June 2017, Le Muselet Valentin).