Case C-214/07, Commission v France

>> Court articulates criteria absolute impossibility of giving effect to decision

Decision 2004/343 classified as a State aid scheme a scheme of tax exemptions provided for in three provisions of the French General Tax Code. These provisions exempted companies created to take over the activities of industrial firms in difficulty from corporation tax for a period of two years.

Those newly created companies could also benefit, with the agreement of the competent local authorities, from exemption from business tax and property tax for a period of two years.


In the present case, the Commission contended that France, in failing to recover sums accorded to companies taking over the activities of firms in difficulty, had failed to implement the decision within the prescribed time period.

The Commission therefore sought a declaration that France infringed Arts 5 and 6 of that decision, Article 249(4) EC and Article 10 EC.

France’s defence was that its authorities had done all that they could to recover the aid concerned, and that to ask them to recover the aid any faster would be to demand the impossible. It argued that this was particularly the case where the companies which received the aid had subsequently ceased to trade, or had sold their assets.

The Court of Justice reiterated hat the only defence available to a Member State in opposing an application by the Commission under Art. 88(2) EC for a declaration that it had failed to fulfil its obligations was to plea that it was absolutely impossible for it properly to implement the decision (see
Case C-177/06 Commission v Spain [2007]).

The Court held that, in the event of difficulties, the Commission and the Member State must, pursuant to the principle of genuine cooperation as laid down in Art. 10 EC, work together in good faith with a view to overcoming those difficulties whilst fully observing the Treaty provisions and, in particular, the provisions on State aid.

The condition that it be absolutely impossible to implement a decision was not fulfilled where the defendant Member State merely informed the Commission of the legal, political or practical difficulties involved in implementing the decision, without taking any real steps to recover the aid from the undertakings concerned, and without proposing to the Commission any alternative arrangements for implementing the decision which could have enabled those difficulties to be overcome.

Nor could a Member State simply make general and abstract statements without referring to specific individual cases, analysed in the light of all the steps actually taken to implement the decision.

The Court held that, as regards recipients which had ceased their activity and transferred their asset, it was for the national authorities to check whether the financial conditions of the transfer complied with market conditions. The national authorities might take into consideration, in particular, the form of the transfer, for example, public tendering, deemed to ensured that a sale took place under market conditions (see
Case C-277/00 Germany v Commission [2004]).

France claimed, in its exchanges with the Commission, an absolute impossibility of implementation vis-à-vis 204 undertakings which had ceased their activity. However, according to the Court, it provided no evidence that it had taken any concrete steps to examine the situation of each of them and to determine whether or not it necessitated recovery pursuant to the criteria set out above.

The Court held that France did not provide evidence even of having taken advantage of the Commission’s acceptance, in the context of cooperation under Art. 10 EC, of a review restricted only to the most significant asset transfers

It followed that there was no absolute impossibility of implementation and that the complaint based on an infringement of Art. 5 of the decision was well-founded. The Court argued it did not need to examine the head of claim based on Art. 6 of the decision and seeking a declaration that France had failed to inform the Commission of the measures taken and to be taken in order to implement the decision, since the Member State did not in fact implement the decision within the prescribed period.

Text of Judgment