Case C‑184/11, Commission v Spain

Spain ordered to pay a lump sum of €30 million for having failed to adopt all the measures necessary to recover unlawful State aid granted by provinces of Basque Country.


>> In the 1990’s, Álava, Vizcaya and Guipúzcoa (the three provinces of the Basque Country) granted State aid to certain undertakings in the form of a reduction in the tax base and a 45% tax credit for investments. In 2001, the Commission found that aid to be incompatible with the internal market and ordered Spain to take all necessary measures to recover the aid from the recipients. Finding that not all the aid had been recovered, in 2003 the Commission brought actions for failure to fulfil obligations before the Court of Justice. By judgment of 14 December 2006, the Court held that Spain had failed to fulfil its obligation to adopt all the measures necessary to comply with the Commission decisions (C-485/03, Commission v Spain). 

Since it considered that Spain had not fully complied with the 2006 judgment, in 2011 the Commission decided to bring a new action for failure to fulfil obligations. The Commission was of the view that the amounts not yet recovered when the action was brought represented approximately 87% of the total of the unlawful aid to be recovered. Subsequently, the Commission found that Spain had fully complied with the 2006 judgment during the proceedings before the Court, so it withdrew its application for an order for a periodic penalty payment while maintaining its application for an order for payment of a lump sum.

The Court first of all held that in order to determine whether Spain adopted all the necessary measures to comply with the judgment in Commission v Spain EU:C:2006:777, it must be ascertained whether the amounts of the unlawful aid at issue were repaid by the recipient undertakings.The Court reiterated that the reference date for the assessment of whether there had been a failure to fulfil obligations was the date of expiry of the period prescribed in the reasoned opinion issued under Article 228(2) EC (see Case C‑304/02 Commission v France).

Since the FEU Treaty abolished the reasoned opinion stage in infringement proceedings under Article 260(2) TFEU, the reference date for assessing whether there had been an infringement for the purpose of Article 260 TFEU was the date of expiry of the period prescribed in the letter of formal notice issued in accordance with the first subparagraph of Article 260(2) (Case C‑610/10 Commission v Spain and Case C‑576/11 Commission v Luxembourg).The Court however held that where the proceedings for failure to fulfil obligations had been brought on the basis of Article 228(2) EC and a reasoned opinion had been issued before the date of entry into force of the Treaty of Lisbon, namely 1 December 2009, the reference date was the date of expiry of the period prescribed in the reasoned opinion (see Case C‑533/11 Commission v Belgium).

It followed that, given that, in the present case, the Commission issued the reasoned opinion on 26 June 2008, the reference date for the assessment of whether there had been a failure to fulfil obligations was the date of expiry of the period prescribed in that reasoned opinion, namely 27 August 2008.

The Court held that although Spain had put forward various arguments in connection with the amount of the unlawful aid at issue to be recovered or which had actually been recovered, it was clear from the written statements given in response to the questions put by the Court and the details given at the hearing that Spain accepted that, although all those arguments were admissible and well founded, a substantial part of the aid to be recovered in order to comply with the judgment in Commission v Spain had not been recovered at the expiry of the period prescribed by the Commission in the reasoned opinion.

According to the Court, Spain could not therefore reasonably argue that, within that period, it took all the measures necessary in order successfully to recover the unlawful aid at issue. The Court thus found that, by failing to take, by the date on which the period prescribed in the reasoned opinion issued by the Commission on 26 June 2008 expired, all the measures necessary to comply with the judgment in Commission v Spain, Spain had failed to fulfil its obligations under Article 260(1) TFEU.

The Court found that it was for the Court, in each case, in the light of the circumstances of the case before it and the degree of persuasion and deterrence which appeared to it to be required, to determine the financial penalties appropriate, such as an order for payment of a lump sum, in particular for preventing similar infringements of EU law from recurring (see: Case C‑121/07 Commission v France, and Case C‑279/11 Commission v Ireland).

The Court reiterated that an order to pay a lump sum was based essentially on the assessment of the effects on public and private interests of the failure of the Member State concerned to comply with its obligations, in particular where the breach had  persisted for a long period after the judgment initially establishing it was delivered (Case C‑241/11 Commission v Czech Republic).

The Court held that the imposition of a lump sum payment must depend in each individual case on all the relevant factors relating both to the characteristics of the infringement established and to the conduct of the Member State involved in the procedure initiated under Article 260 TFEU. The Court added that that provision conferred a wide discretion on the Court in deciding whether or not to impose such a penalty.

The Court reiterated that the Member State concerned must actually recover the sums owed, belated recovery after the prescribed time-limits have expired not satisfying the requirements of the EC Treaty (see Case C‑496/09 Commission v Italy). The Court held that if a Member State encountered unforeseen or unforeseeable difficulties or perceives consequences overlooked by the Commission, it must submit those problems for consideration by the Commission together with proposals for suitable amendments to the decision in question (Case C‑354/10 Commission v Greece EU and Case C‑411/12 Commission v Italy), which had not occurred in the present case. The Court find that the infringement of which Spain was accused lasted for a considerable period which in any event had no relation to the difficulties in recovering the aid paid under schemes that had been declared unlawful and incompatible with the internal market.

The Court added that in the present case, the unlawful aid in question was particularly harmful to competition because of its large amount and the unusually large number of recipients regardless of the economic sector of the recipients.  The Court held that where a Member State repeatedly engaged in unlawful conduct in such a manner in a specific sector governed by EU rules, this might be an indication that effective prevention of future repetition of similar infringements of EU law might require the adoption of a dissuasive measure, such as a lump sum payment  The Court therefore considered that it was justifiable in the present case to order Spain to pay a lump sum.


Text of Judgment