Private enforcement against state aid awards in Ukraine

Private enforcement in national courts

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

Private complaints against the award of state aid can be heard by administrative courts. Complaints can be filed by anyone whose rights or legitimate interests have been breached or jeopardised by the award of unlawful state aid.

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

Private enforcement action can be brought under existing civil, commercial and administrative laws.

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

This depends on the facts of the case. Potentially, the defendant can be either an aid provider (eg, if it failed to notify unlawful aid), an aid beneficiary (eg, in case of misused aid) or even the AMC (eg, if it incorrectly assessed compatibility of the new state measure).

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?

To our knowledge, since the state aid rules became effective in August 2017, the Ukrainian courts have not been petitioned to enforce compliance with the state aid rules. At the same time, in December 2018, the AMC ordered municipal transport company to repay nearly €13 million of allegedly illegal aid, including because the municipality breached standstill obligation similar to the one under article 108(3) TFEU. This recovery decision is being challenged in the court.

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?

There is no mechanism that allows the Ukrainian courts to refer a question on state aid to the European Commission. However, as already mentioned in response to question 4 and 5, while interpreting the state aid legislation, Ukraine is obliged to apply relevant jurisprudence of the CJEU, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

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

This depends on the court that reviews the case. In administrative courts the burden of proof rests with the defendant (ie, an aid provider that allegedly unlawfully granted the existing state aid or the AMC if the compatibility of the new state aid was allegedly wrongly assessed). In commercial courts the procedure is based on the adversarial principle, which means it is the complainant that has to prove its case.

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?

Under the Association Agreement, while interpreting the state aid legislation, the Ukrainian courts are bound by the relevant jurisprudence of the CJEU, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union. However, we are not aware of any similar cases in Ukraine. Therefore, it remains to be seen how compliant they will be with regard to the Deutsche Lufthansa case law.

There is no provision of the Ukrainian law preventing an individual from bringing state aid proceedings in the national courts concurrently with an investigation by the AMC.

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

Generally, economic evidence can be taken into account, but in practice the national courts are reluctant to accept it.

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

Under the general rule the pretrial proceedings in the administrative and commercial courts should last no longer than two months and the court should consider the case on the merits within one month. A case should be considered on appeal within two months. However, the time frames for pretrial proceedings may be extended for up to one month and, in practice, the statutory limits may be exceeded.

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

Under the State Aid Law, an interested party can ask the AMC for interim measures. In particular, a competitor can submit a formal complaint to the AMC and, in parallel, ask the authority to suspend the state aid measure if it affects or may affect competition.

For commercial and administrative courts, a general test for granting interim measures is that failure to do so will significantly hinder or make impossible the enforcement of a final decision or the effective protection of the claimant’s rights and interests. An additional ground for granting an interim measure by administrative court is prima facie evidence of an unlawful action or decision by the defendant and violation of the claimant’s rights and interests by the action or decision in question. The court can grant interim relief upon the application of the interested party or by its own motion. A court order on interim measures may be challenged on appeal.

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

To our knowledge, there is no case law on this in Ukraine, as only one state aid-related case is being reviewed by the national court. Moreover, this case relates to the judicial review of the AMC’s decision to recover allegedly incompatible aid. At the same time, under the Association Agreement, the Ukrainian courts should be bound by the relevant jurisprudence of the CJEU, as well as relevant secondary legislation, frameworks, guidelines and other administrative acts in force in the European Union.

What are the conditions for competitors to obtain damages for award of unlawful state aid or a breach of the standstill obligation in article 108(3) TFEU? Can competitors claim damages from the state or the beneficiary? How do national courts calculate damages?

There are no specific conditions for competitors to obtain damages for the award of unlawful state aid. Commercial and administrative courts have their own general mechanisms of calculating damages, which are relatively similar.