Private enforcement in national courtsRelevant courts and standing
Which courts will hear private complaints against the award of state aid? Who has standing to bring an action?
The main principles are governed by EU state aid law directly. Against this EU state aid law background, any competent court will have to hear private complaints against the award of state aid (unlawful aid, ie, not notified to the European Commission or implemented before the latter’s approval and unlawful and incompatible aid following a negative decision by the European Commission).
The general powers of the national courts concerning the direct effect of article 108(3) TFEU are as follows.
Proceedings before the Council of State
Any administrative act of a non-legislative nature can be reviewed by the Council of State (action for annulment). The action can be lodged by any party demonstrating an interest (such interest must be personal, present, certain, direct and legitimate). The time limit for submitting the action is two months from the notification, publication or full knowledge of the act. Until now, state aid cases before the Council of State have involved challenges by beneficiaries against a recovery decision, and against a decision rejecting a tender on state aid grounds. So far, no actions have been brought by competitors before the Council of State against a decision granting state aid in breach of article 108(3) TFEU. It may be that the procedure before the Council of State, which is quite lengthy, is not convenient for a claimant that is a competitor of a beneficiary of unlawfully granted state aid. Complainants also have the possibility of requesting, in parallel with the action for annulment, the suspension of the challenged act (the decision granting state aid, for instance). A decision by the Council of State is then delivered within 45 days. The pleas invoked in a request for suspension must be ‘serious and likely to justify the annulment’ and there must be a risk of serious and irreparable harm (the latter condition is very difficult to fulfil since pecuniary damage is only deemed to be irreparable if it leads a claimant to bankruptcy). If it is not possible for the claimant to wait 45 days, it can make use of the extreme urgency procedure. The risk of damage from an immediate implementation of the challenged act must be imminent or, at least, likely before the expiry of the 45 days; in addition, the claimant must have taken all steps to prevent the damage and must have lodged the request with the Court as soon as possible. The case may then be registered immediately (within one or a few hours). A decision can be delivered on the day of the request. It should be noted that, to the best of our knowledge, neither the suspension procedure nor the extreme urgency procedure has been used in state aid matters.
Proceedings before civil courts
Actions may be brought before the civil courts (and the commercial courts) regarding litigation between private parties, or between the latter and the state, when there is no intention to request the annulment of a particular state measure (the sole administrative court in Belgium is the Council of State described above). Civil courts have jurisdiction to rule on the state’s liability. The commercial courts have jurisdiction over litigation between professionals in the course of their business, and over any litigation concerning business acts.
Actions for damages brought against a competitor should be brought before the commercial courts. Where the claimant is not a commercial operator, such an action can also be brought before the civil courts.
Judgments of the commercial courts can be appealed before the commercial division of the court of appeal and further appealed, on points of law only, before the Supreme Court.
Procedure before the Constitutional Court
The Constitutional Court is competent to review the constitutionality of certain legislative acts. It can review the compatibility of laws (from the federal Parliament), decrees (legislative acts of the Flemish region, of the Walloon region and of the French- and German-speaking communities) and ordinances (legislative acts of the Brussels region) with:
- the rules establishing the division of powers between the state, the communities and the regions found in the Constitution and in special laws;
- the fundamental rights and liberties guaranteed in section II of the Constitution (articles 8 to 32 of the Constitution);
- the principle of legality of taxation as laid down in article 170 of the Constitution;
- the principle of non-discrimination in fiscal matters as laid down in article 172 of the Constitution; and
- the protection for non-citizens as expressed in article 191 of the Constitution.
A violation of EU state aid rules constitutes a violation of such fundamental rights. Thus, in some state aid cases, the Constitutional Court has found that the relevant laws breached articles 10 and 11 of the Constitution (the principle of non-discrimination) in parallel with state aid rules. Prior to the extension of the Constitutional Court’s competences in 2004, only the violation of the principle of non-discrimination (and not the other fundamental rights mentioned in Section II of the Constitution) could be directly invoked before the Constitutional Court (then named the Court of Arbitration). Before 2004, claimants invoked the violation of this principle read in conjunction with the state aid rules. Following the extension of the court’s competences, these rules remain an indirect ground of review. Regulations having the force of law, which are subject to constitutional control, include both substantive and formal rules adopted as laws, decrees and ordinances as mentioned above.
All other regulations, such as royal decrees, decisions by governments, communities and regions, ministerial decrees, regulations and decisions of provinces and municipalities, as well as court judgments, fall outside the jurisdiction of the Constitutional Court. A case may be brought before the Constitutional Court by virtue of a direct action or through a preliminary reference by another court. The claimants in such actions are not necessarily competitors of the beneficiary.
In two cases, the claimants were municipalities seeking to withdraw the tax exemption granted to a beneficiary of aid. In other cases, the claimants have been parties unwilling to pay taxes under a regime that could constitute state aid.
In one case, the claimant was a professional association representing insurance companies against a measure that would benefit a competitor of the members of that association.Available grounds
What are the available grounds for bringing a private enforcement action?
As described above, there are several available grounds for bringing a private enforcement action, including article 108(3) TFEU directly, tort (article 1382 of the Civil Code), constitutional fundamental rights and contractual provisions.Defence of an action
Who defends an action challenging the legality of state aid? How may defendants defeat a challenge?
Before administrative courts, it is the state that will defend the aid measure being challenged. Before civil courts, it could be either the state or the beneficiary, depending on how the applicant has formulated his or her application.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?
Belgian national courts have been petitioned to enforce compliance with state aid rules or the standstill obligation under article 108(3) TFEU, although such actions are still not very frequent, despite an increasing trend. An action by a competitor does not automatically have a suspensory effect, but the competitor can request the suspension or even the provisional recovery of the aid granted in violation of the standstill obligation. The pleas invoked in a request for suspension must be ‘serious and likely to justify the annulment’ and there must be a risk of serious and irreparable harm (the latter condition is very difficult to fulfil since pecuniary damage is only deemed to be irreparable if it leads a claimant to bankruptcy - see question 20).
There is no significant cost risk in case of an unsuccessful challenge. According to a law of 21 April 2007, a party that loses its case risks having to settle the ‘procedure indemnity’, a compensation covering both procedural costs and lawyers’ costs, granted by the court to the winning party. The amounts are lump sums, capped to maxima (basic amounts from €180 to €18,000 and maximum amounts from €360 to €36,000 for cases valued at more than €1 million) according to the value of the cases (when the case cannot be evaluated in pecuniary sums, the basic amount is fixed at €1,440 with a maximum of €12,000).
In Belgium, the Breda case (President of Brussels Commercial Court, 13 February 1995, Breda Fucine Meridionali v Manoir Industries, JTDE, 1995, p72) constitutes an exemplary decision that refers to all the consequences, with regard to the beneficiary of unlawful aid, of the violation of article 108(3) TFEU. The claimant successfully obtained a ‘cease and desist’ order against an Italian company regarding its participation in a tender process with the benefit of unlawful aid in Italy. However, damages were not sought in this case. Another action, brought by Hays against La Poste in 2000, was finally not ruled upon by the Court of Appeal (President of Commercial Court of Brussels, 15 September 2000 and Court of Appeal of Brussels of 7 December 2001, Hays v La Poste (Assurmail service) and Key Mail, unreported), because the Commission’s decision finding a breach of article 102 TFEU was sufficient for the service allegedly subsidised to be discontinued.
On 4 May 2018, the First Instance Tribunal of Brussels ordered the suspension of 20 per cent of the subsidies granted by the Brussels region to Agence Bruxelles-Propreté (ABP). ABP has a de facto monopoly for the collection of household waste, and receives subsidies for this activity. The collection of non-household waste is, on the other hand, open to competition and certain competitors brought an action before the First Instance Tribunal of Brussels claiming ABP was cross-subsidising its non-household waste activity, which constituted unlawful aid. The Tribunal agreed with the complainants and ordered the suspension of 20 per cent of the subsidies received by ABP, corresponding approximately to its non-household waste activity. ABP does not keep separate accounts for the two activities, and in addition denied access to its accounts during the procedure. Unfortunately, the Tribunal did not go as far as requesting the recovery of the unlawful aid for the previous years, which it would have been entitled to do under article 108(3) TFEU. This shows the reluctance of judges to draw all the necessary conclusions of the violation of article 108(3) TFEU.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?
Belgian courts can directly apply article 29 of Regulation 2015/1589 providing for the amicus curiae conditions in state aid matters. There is no need for a specific national rule of procedure. According to this provision, Belgian courts can ask the Commission:
- to transmit to them relevant information in its possession (whether a procedure is ongoing, whether a decision has been taken, data, statistics, etc); and
- for an opinion concerning the application of EU state aid rules (on all economic, factual or legal matters arising in the context of the national proceedings).
The amicus curiae provisions also allow the Commission, where the coherent application of state aid rules so requires, acting on its own initiative, to submit written observations to Belgian courts. The Commission may, with the permission of the court, also make oral observations and, to prepare its observations, it may request the court to transmit documents at its disposal.
This is of course without prejudice to the possibility or obligation for the national court to ask the Court of Justice of the European Union (CJEU) for a preliminary ruling regarding the interpretation or the validity of EU law in accordance with article 267 TFEU.
Although national courts can stay proceedings while waiting for the Commission’s opinion, they remain under the obligation to protect individual rights under article 108(3) TFEU, which can include interim measures.
To our knowledge, the Commission has not intervened as an amicus curiae before a Belgian court. On the other hand, Belgian courts have used the procedure under article 267 TFEU on several occasions (see for example, recent Cases C-318/18 Oracle Belgium and C-76/15 Vervloet a.o.; see also Cases C-19/11 Libert e.a.; C-89/10 Q-Beef et Bosschaert; C-393/04 Air Liquide Industries Belgium; C-261/01 van Calster et Cleeren; C-262/01 Openbaar slachthuis; C-256/97 DM Transport; and C-44/93 Namur-Les assurances du crédit/Office national du ducroire et État belge).Burden of proof
Which party bears the burden of proof? How easy is it to discharge?
It is the claimant that bears the burden of proof under Belgian procedural rules. The claimant must therefore establish the existence of the contested aid and produce evidence thereof. Courts are empowered to request the production of documents but these must be specifically determined in the request (no discovery or disclosure procedure - the new disclosure procedure for antitrust damages actions does not apply in state aid matters). Proof can be provided by any means.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?
A competitor should bring state aid proceedings before a national court when the Commission is already investigating the case, if it believes it meets the requirements to request interim relief. While the Commission itself is competent to order the suspension or the provisional recovery of state aid granted in violation of the standstill obligation, national courts may be more willing to hear the competitor’s case. That said, granting interim relief against the aid measure is subject to very strict legal requirements before national courts as well. In the event that the request for interim relief concerns the EU act itself (request for the suspension of the recovery order on the basis of the alleged invalidity of the Commission’s decision), the conditions are even stricter for the national court (see Joined Cases C-143/88 and C-92/89 Zuckerfabrik Süderdithmarschen a.o. and Case C-465/93 Atlanta a.o.; see also Case 314/85 Foto-Frost, obliging a national court to refer the matter to the CJEU if it raises the invalidity of an EU act).
In addition to the above added value, national courts are obliged to take into account the preliminary assessment of the European Commission in its decision to open a formal investigation, pursuant to the CJEU’s judgment in Case C-284/12 Deutsche Lufthansa. In this judgment the CJEU found that:
a national court hearing an application for the cessation of the implementation of that measure and the recovery of payments already made is required to adopt all the necessary measures with a view to drawing the appropriate conclusions from an infringement of the obligation to suspend the implementation of that measure. To that end, the national court may decide to suspend the implementation of the measure in question and order the recovery of payments already made. It may also decide to order provisional measures in order to safeguard both the interests of the parties concerned and the effectiveness of the European Commission’s decision to initiate the formal examination procedure. Where the national court entertains doubts as to whether the measure at issue constitutes State aid within the meaning of Article 107(1) TFEU or as to the validity or interpretation of the decision to initiate the formal examination procedure, it may seek clarification from the European Commission and, in accordance with the second and third paragraphs of Article 267 TFEU, it may or must refer a question to the Court of Justice of the European Union for a preliminary ruling.
What is the role of economic evidence in the decision-making process?
As national courts are competent to assess whether a measure constitutes state aid under EU law, economic evidence can play an important role, in particular when ruling on whether the state acted as a private operator pursuant to the market economy investor principle.Timeframe
What is the usual time frame for court proceedings at first instance and on appeal?
The time frame for court proceedings is generally long in Belgium, especially in Brussels, although requests for interim measures are faster.Interim relief
What are the conditions and procedures for grant of interim relief against unlawfully granted aid?
A request for interim measures can be made before the Council of State (in parallel with a request for suspension, which in turn will require a request for annulment). It is technically possible for the Belgian state to seek interim measures from the civil judge requiring the beneficiary of unlawful aid to pay a bank guarantee for the aid in question before the final judgment.
The conditions for this type of interim measure are urgency, the existence of a prima facie case and the risk of serious and immediate harm. However, it is apparent from the case law that the ‘urgency’ criterion is a very difficult one to satisfy.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?
National courts can only rule on the existence of aid, and on whether it is unlawful (ie, whether it has been notified to the European Commission and not implemented before its approval by the European Commission). The assessment of the compatibility of an aid measure is an exclusive competence of the European Commission.
The legal consequences of the presence of unlawful aid will depend on what the applicant has requested. The EU Courts’ case law imposes that the measures of the national courts must make it possible to restore the competitive situation existing prior to the payment of the aid. As explained above, the consequences could include suspension of the grant of the aid, provisional or definitive recovery of aid already granted or damages.
Pursuant to the judgment in Case C-275/10 Residex, while EU law does not impose specific consequences that the national courts must draw with regard to an infringement of article 108(3) TFEU, the measures of the national courts must make it possible to restore the competitive situation existing prior to the payment of the aid. Therefore, it is for the national courts to determine whether cancellation of a guarantee may, given the specific circumstances of the dispute, be a more effective means of achieving that restoration than other means.
National courts can therefore cancel a state guarantee if they consider it constitutes unlawful aid. It is for the national court to decide whether there is any less onerous procedural measure to restore the competitive situation, such as increasing the premium paid for the guarantee, or the interest rate for the corresponding loan.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?
Damages claims by competitors, third parties or beneficiaries against the granting authority before the national courts
Damages can be sought from the Belgian state for non-compliance with EU law in the following two ways.
First, under national liability law, a person has to make good in full any damage caused by his or her fault (article 1382 of the Belgian Civil Code) or by his or her negligence (article 1383 of the Belgian Civil Code). The Belgian state and its organs can also be held liable for fault or negligence under these provisions. Unlike French law, for instance, Belgian law therefore allows in principle the granting of damages in cases of state liability according to the same conditions that apply to individuals. It is necessary to prove a fault, the resulting damage and a causal link. These provisions can therefore be used to engage the state’s responsibility (including the legislature and even the judiciary in certain circumstances) for adopting an act that breaches EU law. Harm can include the breach of a legitimate interest.
Second, damages can also be sought from the Belgian state under EU law liability principles, in line with the principles set out in CJEU cases (Joined Cases C-6/90 and C-9/90 Francovich and Bonifaci and Joined Cases C-46/93 and C-48/93 Brasserie du Pêcheur-Factortame III). Under this case law, the liability of the state will be engaged where: (i) the rule of law infringed is intended to confer rights on individuals; (ii) the breach is sufficiently serious; and (iii) there is a direct causal link between the breach of the obligation resting on the state and the damage sustained by the injured parties. As regards the second condition, where the state has a large margin of discretion in implementing a policy, the CJEU has considered that the state’s liability can only be engaged where the state has manifestly and gravely disregarded the limits on its discretion. This second condition can therefore be much harder to satisfy than the test under civil liability, where a simple breach is sufficient evidence of damage. However, this is not the case in the field of state aid, as no margin of discretion is left to the member states on the application of article 108(3) TFEU. By definition, therefore, a violation of article 108(3) TFEU should always be regarded as a serious breach, likely to engage the state’s liability within the meaning of the case law mentioned above. Concerning state aid rules, the CJEU’s case law may therefore seem more favourable than (or at least equivalent to, since any breach of the law by the state is regarded as a fault on behalf of the state) the traditional national liability system based on ‘fault, damage and causal link’ (article 1382 of the Civil Code).
Damages claims by the beneficiary (against the granting authority) before the national courts are based on the same principles. However, the damage for the beneficiary cannot be the aid’s recovery. This is not a damage, only the logical consequence of the restoration of undistorted competition following the granting of unlawful aid. The damage must be inherently different in nature and in scope: the beneficiary should show specific damage (eg, postponement of a decision to de-localise following the promise of an unlawful aid - the loss from the non-delocalisation could be a damage; the beneficiary would probably have to share the damage owing to his or her obligations of diligence with regard to the state’s decisions).
Damages claims by competitors or third parties against the beneficiary before the national courts
This type of action is based on the principles of actions for unfair competition. Under EU case law, the beneficiary, by claiming any benefit from the violation of article 108(3) TFEU, commits an act of unfair competition under national legislation (Case C-39/94 SFEI and others v La Poste and others). The competitor of such a beneficiary has the right to stop this act of unfair competition by having recourse to an efficient litigation procedure that leads to a definitive decision, even though the latter is adopted by virtue of an interim relief procedure (specific procedure for a ‘cease and desist’ order). The question of the liability of the beneficiary of unlawful aid must be brought before the civil courts under article 1382 of the Civil Code. The relevant courts will have to determine whether the beneficiary benefited from the aid in full knowledge of its unlawful character, or whether the beneficiary ought to have been aware of this unlawfulness, as well as the amount of damages to be granted to the competitors. This would appear to be a difficult test to satisfy.
In both types of claims described above, damages are calculated according to methodologies similar to antitrust cases (loss of revenue, reduction of turnover, etc) but, as explained above, they cannot include the aid and interest to be recovered.