The European Court of Justice (the ECJ) ruled on 12 February 2008 that un-notified state aid, which is subsequently declared compatible with the common market by the European Commission (the Commission), does not need to be recovered - although the recipient must pay interest on the aid.

In 2006, the French Conseil d'Etat made a reference to the ECJ asking whether it was lawful for a member state not to recover un-notified aid which has subsequently been declared to be compatible with the common market by the Commission.

Background

The reference was made in relation to an action brought before the French courts requesting the relevant French authorities to stop payment of aid to the Centre d'exportation du livre francais (CELF) and to recover aid already granted.

The aid in question, however, is not just subject to proceedings in France. There have already been no less than three Commission investigations in relation to the aid and two judgments from the Court of First Instance (CFI), which incidentally annulled the Commission's first two decisions. The judgment of the CFI on the Commission's third decision to declare the aid compatible is still pending.

Advocate General opinion

In May 2007, Advocate General Mazak handed down his opinion on the reference. Interestingly he found that un-notified aid must be recovered in respect of any period prior to the adoption of the final clearance decision by the Commission, even if it is subsequently declared compatible. Such a position would introduce a deterrent for failing to notify aid in order to avoid any delays in granting the aid.

ECJ ruling

The ECJ, however, disagreed with the Advocate General's opinion. It found that within the framework of its domestic law a member state may, but importantly does not have to, order recovery of un-notified aid. This ability to recover is without prejudice to the right to re-grant the aid.

Importantly though, the court has ruled that member states must order the recipient of the aid to pay interest on aid that has been granted (but not approved) for the period from grant to the date on which it is declared compatible with the common market.

Whilst the judgement is not as much of a deterrent as the Advocate General had proposed, it should still serve to encourage private sector bodies in receipt of state aid to take steps to verify that the state aid rules have been complied with by the relevant public sector body granting the aid.