It is obvious why beneficiaries may wish to challenge Commission decisions that State aid is incompatible with the Common market. It may be less obvious why they may want to challenge decisions that it is compatible. But one situation that can readily arise is where the deal done between the Commission and the Member State results in a deterioration of the beneficiaries’ position compared to what they had previously had under an existing aid scheme or is much less favourable than they would have had under the aid as originally notified. Can a beneficiary challenge such a decision on the EU courts?
Last week (27 February) the ECJ gave judgment in two parallel cases where these issues arose (Case C-132/12P Stichting Woonpunt v Commission and Case C-133/12P Stichting Woonlinie v Commission). Both concerned Dutch bodies known as Wocos – essentially Dutch equivalents of housing associations. (The point dealt with in the Woonlinie case was also dealt with in the Woonpunt case, so it is only necessary to look at Woonpunt.)
The decision that the Wocos wanted to challenge dealt with two separate matters. First, it looked at an existing aid scheme which the Commission had decided to look at. It noted the Dutch authorities’ commitments to amend the scheme in various ways and on that basis decided the scheme was compatible. Second, it looked at a new notified aid scheme, which the Dutch authorities had again agreed to amend in the course of post-notification discussions: the Commission decided it could declare that scheme as amended to be compatible without opening a detailed investigation.
The Wocos’ challenge was knocked out as inadmissible by the General Court.
The ECJ, however, held that their challenge to the decision in relation to the existing aid scheme was admissible.
The starting point is Article 263 TFEU. Non-privileged applicants (i.e. anyone apart from a Member State or an EU institution) can challenge a decision if they are (a) the addressee (b) directly and individually concerned or (c) directly concerned by a “regulatory act”. Since State aid decisions are addressed to Member States, only (b) and (c) are of any relevance here.
As to the “regulatory act”, the ECJ pointed out that the General Court failed to look at that limb at all. However, one of the conditions for a “regulatory act” is that it is one that does not require implementing measures: which this act did, since it required the Dutch government to adopt various legislative changes. That point has a history of disposing of attempts to rely on this limb in the State aid context, and did so again here.
However, an error by the General Court that did matter was that it regarded the Wocos as not being individually concerned. The ECJ said that that was wrong: the Wocos were a limited class of entities in Dutch law: their number and identity at the time of the decision was readily ascertainable. They were a “closed class”.
Moreover, the Wocos had an interest in challenging the decision. That was because it necessitated an unfavourable change to their pre-existing position under the existing aid scheme.
Of course, decisions relating to existing aid schemes are relatively unusual. So the ECJ’s approach to the question of challenging the decision in relation to the notified new aid scheme is perhaps of more general interest.
There, the decision was unfavourable to the Wocos. The problem was, as the General Court had identified, that they could not show an adverse alteration in their position as a result of the decision: that was because there was no previous situation in which they had enjoyed the benefit of the unamended aid (they had, as an old-fashioned property lawyer might say, nothing but a spes). A further problem was that the basis of their challenge was violation of their procedural rights: but there they faced and could not overcome the obstacle that they were not seeking to argue that the Commission should have opened an investigation, and under existing case-law a procedural challenge was not admissible unless combined with a “merits” plea of that kind.
The result is unsatisfactory. It leaves beneficiaries who genuinely feel that Commission insisted on too much amendment before finding a notified aid compatible without any obvious remedy. But this result is not untypical of the complex and over-technical case-law that has now built up on this topic (see paragraphs 19.27 to 19.42 of Kelyn Bacon’s book).