Private enforcement against state aid awards in Denmark

Private enforcement in national courts

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

In principle, all Danish courts will hear private complaints against the award of state aid. Proceedings can generally be instituted in the district courts. If the case may have implications for rulings in other cases or is of special interest to the public, and if a party requests so, the Danish High Court as the court of first instance may try the case. Unless otherwise agreed between the parties, cases where the application of the DAC (which contains the Danish state aid rules) has significant importance may also be instituted in the Danish Maritime and Commercial Court.

Any natural or legal person with a direct interest in or adequate affiliation to a case can commence court proceedings regarding actual and adequately specific matters. This may comprise competitors.

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

The main grounds for bringing a private enforcement action are article 108(3) TFEU and section 11a of the DAC. This section does not require that trade between member states of the European Union be affected. Public law and the law of non-contractual damages may also be invoked.

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

Normally, an action challenging the legality of state aid will be directed at the authority that granted the aid in question. Provided they have sufficient interest in the case, other parties, such as the aid recipient or other authorities, may intervene in favour of the defendant.

Defendants may defeat a challenge by convincing the court that state aid was not granted or that state aid was granted in compliance with EU or national state aid law. How this can be accomplished depends on the specific case.

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?

Danish case law on private enforcement of EU state aid rules is scarce.

In a judgment of 25 January 2016, the Danish Western High Court found that a loan guarantee given by a municipality to two heating companies without consideration constituted state aid under article 107 TFEU and that the municipality’s decision to guarantee the loan without consideration was thus invalid. Consequently, the municipality was entitled to claim guarantee commission going forward.

In another judgment of 23 November 2016, the Danish Supreme Court found that the Danish state was not obligated to pay damages to two ship’s mates for a loss allegedly suffered because their tax-free net salary under the Danish Seafarers Tax Act was not increased as a result of general tax relief. They claimed, inter alia, that the Danish state had infringed EU state aid law. The Supreme Court found that the Danish state had not infringed EU state aid law.

An action brought by a competitor against a state aid measure before the courts will normally not have suspensory effect.

When called upon to apply EU state aid rules to a case pending before it, a national court will be expected to rule in accordance with the case law of the EU courts.

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?

The Procedural Regulation (Council Regulation (EU) 2015/1589) has direct effect in Denmark. Under article 29 of the Regulation, national courts may ask the Commission to transmit to them information in its possession or its opinion on questions concerning the application of state aid rules.

To our knowledge, referrals are not common. The national courts will generally only refer questions to the ECJ if they find it necessary.

To our knowledge, the Commission has not submitted amicus curiae observations in Danish cases under article 29(2) of the Procedural Regulation.

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

Danish courts have freedom to consider evidence. Who bears the burden of proof is generally decided on a case-by-case basis. Generally, the party claiming the existence of (illegal) state aid bears the burden of proof. However, in a case where a party contests a recovery decision, that party will generally bear the burden of proof. Whether the burden of proof will be difficult to lift depends on the specific circumstances of the case, but state aid cases may generally be more complex than many other cases.

Under court proceedings, the court may order disclosure of evidence, provided that the conditions in the Danish Administration of Justice Act are fulfilled. The taking of evidence without a trial is also possible if the court allows it.

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?

To our knowledge, there has not been a Danish case addressing the Deutsche Lufthansa case law specifically.

The national courts are expected to comply with the case law of the EU courts in cases concerning EU state aid law. Thus, if the Commission’s preliminary assessment in a decision to initiate the formal examination procedure is that the measure at issue constitutes state aid, a national court will be expected to refrain from taking decisions in a case pending before it that conflict with a decision of the Commission, even if the Commission’s decision is provisional and could possibly be overturned in its final decision.

Whether a competitor should bring state aid proceedings to a national court when the Commission is already investigating the case depends on the specific facts of the case. Normally, it might be wise to await the Commission’s final decision. However, case-specific considerations related to, for example, limitation periods, the evidence situation, or specific interests of the claimant may indicate otherwise (eg, when a competitor is seeking damages).

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

Danish courts may take economic evidence into account, and there are several examples of Danish courts having done so. For example, the parties may obtain an expert report from an economic expert appointed by the court. The parties can also obtain expert statements from relevant institutions or organisations.

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

As a minimum, probably approximately two years per instance. The length of proceedings depends on the individual case, including whether an expert report is obtained and whether the proceedings are suspended.

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

Under Chapter 40 of the Danish Administration of Justice Act, Danish courts may grant interim relief in cases where the public authority acts as a private operator - for example, through an agreement with an aid recipient. In cases where a public authority does not act as a private operator but in its capacity as a public authority, the court may - as an exception - assign suspensory effect to commencement of legal proceedings. This is not common.

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

The legal consequences of a court decision establishing the presence of aid that is unlawful under the national state aid rules contained in the DAC will depend on the specific case and the claim brought before the court.

In accordance with settled case law of the ECJ, where a national court is confronted with unlawfully granted aid under the EU state aid rules, it must draw all legal consequences from this unlawfulness under national law. The national court must, therefore, in principle order the full recovery of unlawful state aid from the beneficiary.

If a Danish court has established that a state guarantee infringes the EU state aid rules, the court will be expected to apply the principles established in EU case law. In accordance with ECJ case law, it is for the national courts to draw the consequences of a finding of unlawful state aid for the validity of a transaction under national law. A national court is required to ensure that the aid is recovered and, to that end, the court can cancel the guarantee - in particular where, in the absence of less onerous procedural measures, that cancellation is such as to lead to or facilitate the restoration of the competitive situation that existed before that guarantee was provided. However, as stated in ECJ case law, EU law does not impose any specific conclusion that the national courts must necessarily draw with regard to the validity of the acts relating to the implementation of the aid.

In its judgment of 25 January 2016, the Danish Western High Court found that a loan guarantee granted by a municipality to two heating companies without consideration constituted state aid under article 107 TFEU. The High Court held that the municipality’s decisions to grant the guarantees without remuneration were null, and that the municipality was entitled to require remuneration for the guarantees.

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 claiming damages must substantiate, inter alia, that a culpable or wrongful act has been committed (through the granting of unlawful state aid or breach of the standstill obligation), that the competitor has suffered a certain loss, that there is a causal connection between the culpable or wrongful act and the loss, and that the loss was foreseeable.

Generally, a party having suffered a loss may usually claim damages in an amount corresponding to the loss suffered by that party owing to the culpable or wrongful act. Thus, the injured party shall be compensated so that the party will be placed in a position corresponding to the position that the party would have been in had the culpable or wrongful act not occurred. This implies a comparison between the actual course of events and a hypothetical course of events, where the latter is the likely course of events absent the culpable or wrongful acts (‘but-for analyses’). The damages are quantified as the economic difference between these two courses of events. Quantification of damages in a state aid case is likely to be difficult. Danish courts often reduce damages claims on a discretionary basis.

A competitor may in principle claim damages from either the state or the beneficiary, provided the general conditions for liability presented above are fulfilled. Generally, it can be expected that a claim for damages against the state will have a higher chance of succeeding, as it may be difficult to fulfil the general conditions for liability presented above in a case against the beneficiary.