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?

There is no Swedish legislation specifically regulating private enforcement in national courts; the introduction of such rules was considered at the time of the SAA but was ultimately deemed not necessary.

Three types of possible recourse need to be distinguished.

First, the legal act underlying the aid measure may be challenged. Such a challenge will typically be lodged before the administrative courts. Standing is regulated in administrative law and varies depending on the type of measure challenged. The Administrative Court of Appeal has explicitly confirmed that the competitor of an aid beneficiary has standing to challenge an aid decision by a public authority on the grounds that it breaches EU state aid rules.

Second, a private party may request a court to order that aid that has not been notified or upon which the Commission has yet to pronounce be suspended and that its implementation cease, pending the Commission’s decision as to the legality of the aid. The Supreme Court has stated that, in the absence of a designated court competent to hear such actions, such an action may be lodged before the competent civil courts.

Last, a claim for damages as a result of illegal state aid may be lodged with the competent civil court by a party suffering injury from the grant of the aid.

Standing is determined on the basis of the Swedish law procedural rules applicable to the relevant court procedure and varies depending on, inter alia, the type of decision at issue.

Available grounds

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

The basic grounds for an action will be that aid has been granted in breach of articles 107(1) and 108(3) TFEU. This may in turn constitute a breach of, for example, Swedish administrative law, which may constitute the grounds for annulment. Hence, for instance, where aid has been granted by way of a decision by a municipality and is subsequently found illegal under state aid rules, the court will - on the basis of that illegality - annul the decision on the basis of Chapter 13 of the Municipalities Act (illegality of a decision adopted by the municipality).

It may also be noted that in addition to the state aid rules, Swedish administrative law prohibits local authorities from granting support to particular businesses without having particular reasons for such support. Therefore, if the challenged support is granted by a local authority, these rules may provide further grounds for annulment.

Defence of an action

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

The actions described above will all be directed against the public authority that has granted the aid, which will thus be the defendant.

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?

There have been a limited number of enforcement actions before Swedish courts since the country joined the EU in 1995.

In a number of those cases, the administrative courts have made an in-depth review of the legality of state aid measures decided by municipalities and regional authorities. In a number of these, the measure has been deemed aid granted in breach of article 108(3) TFEU, and as a result the administrative measure challenged has been declared illegal as a matter of administrative law. For example, in a 2018 case, an energy producer challenged a rate of taxation imposed on its hydroelectric activities that was higher than that applied to other forms of energy production. The administrative court held that the higher tax level constituted state aid, that it had been applied without notification to the Commission and thus was in breach of article 108(3) TFEU, and that therefore the tax applicable to the claimant should be the lower rate applied to other types of production. Interestingly, around the same time a different Administrative Court of Appeal drew the contrary conclusion in respect of a reduced rate of taxation for wind power. In addition, actions are regularly lodged against the local authorities’ sales of land, extension of loan guarantees and similar.

Furthermore, third parties have brought actions for damages against the state and public authorities on the grounds that illegal state aid had been granted. To date, no damages have to our knowledge been awarded as a result of such actions.

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?

A Swedish court is competent to refer a question to the Commission on the application of EU state aid law. In case of such a referral the court will most likely stay the proceedings awaiting the Commission’s response. The SAA expressly provides that the court may ex officio take into account written observations by the Commission pursuant to article 29 of the Procedural Regulation, even if the parties have not invoked them in the procedure.

Burden of proof

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

Private enforcement follows the general rules of procedure before Swedish courts. This means that in general terms each party bears the burden of proof for its allegations. Thus, the party alleging the grant of illegal state aid has the burden of proof for the claim; the Supreme Administrative Court has found this allocation of the burden of proof to comply with the EU law requirements of equivalence and effectiveness.

A party’s ability to obtain evidence from the other party to the case or third parties varies depending on whether the procedure takes place before the administrative or civil courts.

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?

The question has yet to arise before the Swedish courts.

Economic evidence

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

The parties are free to invoke any evidence deemed necessary, including economic evidence, and the court is free to rely on all evidence put before it.

Timeframe

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

The time frame of a case is highly dependent on the nature and complexity of the case; given the limited number of cases that have been tried, it is difficult to speculate on the ‘normal’ duration of these cases.

Interim relief

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

In the case of a challenge of the legal act underlying the aid, interim measures may be provided in accordance with article 28 of the Administrative Procedural Act or Chapter 15, article 3 of the Procedural Act.

As noted above, a particular procedure is available before the civil courts by which a party may request the suspension of the application of aid pending the Commission’s decision.

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?

As noted above, a challenge against an aid measure takes the form of an administrative law action against the legality of the decision to award aid. If the decision is found in breach of state aid rules, it is illegal and as a result void. Hence, as seen in recent cases, a finding that a guarantee constitutes non- notified aid will result in the court finding it void.

Damages

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?

The claiming party must prove that it has sustained a financial loss owing to unlawful state aid or a breach of the standstill obligation in article 108(3) TFEU. We are unaware of any cases where damages have been awarded on these grounds, or that have clearly delineated the circle of persons able to claim damages.