Case C-331/09, Commission v. Poland

Poland infringing Article 288 TFEU by not recovering state aid within prescribed period  

By its application, the Commission sought a declaration from the Court that, by failing to comply with its obligations under Decision 2008/344 of 23 October 2007, Poland had failed to comply with the provisions of the fourth paragraph of Article 249 EC (now Article 288  TFEU) and Articles 3, 4 and 5 of that decision.

By that decision, Commission had declared that the measures taken by Poland in favour of the Technologie Buczek Group (‘TBG’) constituted State aid incompatible with the common market.

TBG operated in the steel production sector as a manufacturer of tubes and was composed of Technologie Buczek SA (‘TB’), which owned several subsidiaries, two of which, according to the Commission, were also beneficiaries of the aid in question, namely Buczek Automotive sp. z.o.o. (‘BA’) and Huta Buczek sp. z.o.o (‘HB’).

The aid at issue received by TBG consisted in the non-enforcement of public debt held by several public creditors, in particular the social security authority, Sosnowiec municipality, where TBG’s head office was situated, and the State Fund for the Rehabilitation of Disabled Persons.

When in October 2009,  the Commission, taking the view that Poland had still not properly implemented Decision 2008/344, decided to bring the present action.  The Commission argued that Articles 3 and 4 of the Commission’s decision provided for a period of four months from the date of its notification to recover the aid at issue, while, after more than 21 months after the date of reception of that decision by Poland, no aid had been repaid by HB and BA and, in any event, the Commission had not been informed, in accordance with Article 5 of that decision, of the steps taken by that Member State.

As a subsidiary point, the Commission relied on the fact that TB had repaid only part of the total amount to be recovered from TBG. Finally, it submitted that Poland had not pleaded exceptional circumstances which would have prevented it from properly implementing that decision.

As far as concerns the effective implementation of Decision 2008/344, the Commission, relying in particular on Case 106/77 Simmenthal [1978] and Case C-119/05 Lucchini [2007]     submitted that it was Polish insolvency law which had caused the substantial delay in the recovery of the aid at issue and had therefore prevented the immediate implementation of that decision.

Poland inter alia took the the view that the Commission did not prescribe a period for the implementation of Decision 2008/344. Since the period of four months, calculated from the date of its notification, could not be binding, the expiry of such a period could not be regarded as constituting a time-limit for the implementation of that decision.

The Court of Justice reiterated that the relevant date for the assessment of a failure to fulfil obligations brought pursuant to Article 88(2) EC could be, contrary to the Republic of Poland’s assertions and because that provision did not provide for a pre-litigation phase in contrast to Article 226 EC and therefore the Commission did not issue a reasoned opinion allowing Member States a certain period within which to comply with its decision, when the former provision was applied the reference period, only that provided for in the decision failure to implement which was denied or, where appropriate, that subsequently fixed by the Commission (Case C-378/98 Commission v Belgium [2001]; Case C-499/99 Commission v Spain [2002]; Case C-207/05 Commission v Italy [2006]; and Case C-232/05 Commission v France [2006]).

In the present case, Article 4(2) of Decision 2008/344 imposed a period of four months from the date of notification thereof in order to enable Poland to take the measures necessary to recover the aid at issue. Therefore, according to the Court, that period, in the absence of a new period fixed by the Commission, must be regarded as relevant for the assessment of the failure to fulfil obligations complained of.

The Court reiterated that recovery of unlawful aid was the logical consequence of the finding that it was unlawful. That consequence could not depend on the form in which the aid was granted (see, Case C-183/91 Commission v Greece [1993];Commission v Portugal [2000]; and Case C-507/08 Commission v Slovakia [2010]).

Consequently, the Member State to which a decision requiring recovery of illegal aid was addressed was obliged under Article 249 EC to take all measures necessary to ensure implementation of that decision (see Case C-209/00 Commission v Germany [2002]; Case C-404/00 and Commission v Spain [2003].

The Court reiterated that this must result in the actual recovery of the sums owed (see, to that effect, Case C-415/03 Commission v Greece [2005]  and Commission v France [2006]).

Furthermore, the Court stressed that the obligation on a Member State to abolish aid found by the Commission to be incompatible with the common market was to restore the previous situation on the European Union market (Case C-350/93 Commission v Italy [1995], and Case C-75/97 Belgium v Commission [1999]). The Court argued that as long as the aid was not recovered, the beneficiary of the aid was able to keep funds deriving from the aid declared incompatible and to benefit from the resulting unfair competitive advantage (C-232/05, Commission v France [2006]).

The Court held that, thus, a Member State which, pursuant to a decision of the Commission, was obliged to recover unlawful aid was free to choose the means of fulfilling that obligation, provided that the measures chosen did not adversely affect the scope and effectiveness of Union law. A Member State could fulfil such an obligation to recover only if the measures adopted by it were appropriate for the purpose of establishing the normal conditions of competition which were distorted by the grant of the unlawful aid the recovery of which had been ordered by a Commission decision (Case C-209/00 Commission v Germany [2002]; and Case C-210/09 Scott and Kimberly Clark [2010]).

Furthermore, in accordance with Article 14(3) of Regulation 659/99, recovery of unlawful aid imposed by a Commission decision was to be effected without delay and in accordance with the procedures under the national law of the Member State concerned, provided that they allowed the immediate and effective execution of the Commission decision.

However, it must be recalled that, as follows from the case-law on bankrupt undertakings that have received aid, the restoration of the previous situation and the elimination of the distortion of competition resulting from the unlawfully paid aid may, in principle, be achieved by registration of the liability relating to the repayment of the aid in question in the schedule of liabilities (Case 52/84 Commission v Belgium [1986]; Case C-142/87 Belgium v Commission (‘Tubemeuse’) [1990]; and Case C-277/00 Commission v Germany [2004]).

The Court found that Poland had not provided the documents enabling the Commission to conclude that TBG was insolvent and had definitively and completely ceased its activity, so that the mere registration of the debts relating to the repayment of the aid in the schedule of liabilities of those companies in the group could suffice in order to comply with Decision 2008/344. As regards BA and HB, the case-law on bankrupt undertakings which had received aid was not applicable so that the registration of those debts after the expiry of the period mentioned above did not constitute proper implementation by Poland of its obligations under Articles 4 and 5 of Decision 2008/344.

The Court reiterated that the condition that it be absolutely impossible to implement a decision was not fulfilled where the defendant Member State merely informed of 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 (Joined Cases 485/03 to C-490/03 Commission v Spain [2006], and Case C-214/07 Commission v France [2006].

Poland, although it had pleaded ‘serious difficulties’, ‘problems’ and ‘major obstacles’ encountered in implementing Decision 2008/344, itself explained, in its written submissions, that it did not regard the existing problems as making impossible recovery of the aid at issue.

The Court reiterated that apprehension of internal difficulties in the course of implementing a decision on State aid could not justify a failure by a Member State to comply with its obligations under Community law (Case C-52/95 Commission v France [1995]; Case C-265/95 Commission v France [1997]; and Case C-441/06 Commission v France [2007]).

It follows from the foregoing that it must be held that, on the expiry of the period prescribed in Article 4(2) of Decision 2008/344 , the actions undertaken by the Polish authorities did not lead to an effective recovery of the aid at issue and, consequently, the normal conditions of competition have not been restored.

The Court held that by failing to take, within the period prescribed, all the measures necessary to ensure the implementation of Decision 2008/344, Poland has failed to fulfil its obligations under the fourth paragraph of Article 249 EC and Articles 3 and 4 of that decision.