Case C‑305/09, Commission v Italy

Court of Justice stresses limited reasons not to recover State Aid
Only when “absolutely impossible”

This case concerned an Italian aid scheme which allowed any undertaking liable to corporate income tax in Italy and in business on 2 October 2003 to reduce its taxable income by the amount of the expenses directly incurred with respect to its participation in trade fairs abroad. For undertakings whose business cycle followed the calendar year, that reduction affected the determination of their 2004 taxable income.

The Commission decided, having found the aid scheme in question to be incompatible, that it was necessary to recover from the beneficiaries the aid already made available (Decision 2005/919)

In order to implement that decision, the Italian authorities adopted a number of measures and informed the Commission accordingly. However, since it considered that the recovery of the aid had not progressed despite the legislative action, the Commission decided to bring the present action.

The Court reiterated that the Member State to which a decision requiring recovery of unlawful aid was addressed was obliged under Art. 249 EC (now Art. 288 TFEU) to take all measures necessary to ensured implementation of that decision (Case C‑232/05 Commission v France (2006)). The Member State must actually recover the sums owed (see Case C-304/09 Commission v Italy [2010).

Pursuant to the second subparagraph of Art. 2(1) of Decision 2005/919, Italy was to recover the aid in question from the beneficiaries at the earliest opportunity. The Court noted that several years after Decision 2005/919 was notified to Italy and after the expiry of all the deadlines fixed by that decision, some of the unlawful aid had not yet been recovered by Italy. Such a situation was, according to the Court, clearly irreconcilable with that Member State’s obligation actually to recover the sums owed and constituted a breach of the duty to implement Decision 2005/919 immediately and effectively.

That founding was not affected by the fact that about 90% of the capital of the unlawful aid had been recovered up to the day of the hearing in the present case.

As regards the arguments submitted by Italy in its defence, the Court held that the only defence available to a Member State in infringement proceedings brought by the Commission under Art. 88(2) EC was to plead that it was absolutely impossible for it properly to implement the decision at issue (see, in particular, Case C‑177/06 Commission v Spain [2007]; Case C‑214/07 Commission v France [2008]).

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 (see, in particular Joined Cases C‑485/03 to C‑490/03 Commission vSpain [2006]).

The Court held that the fact that Italy found it necessary to verify the individual situation of each company concerned, to conduct a screening to identify persons in receipt of benefits covered by the Commission’s decision, could not justify non‑implementation of that decision (see Case C-99/02 Commission v Italy [2004]).

The Court held, as regards, moreover, the Commission’s argument concerning the right to adopt, by the national courts, suspension measures in the course of the process of recovery of the aid, that such measures might be granted, provided that certain conditions stated in the case-law were met (see, in particular, Joined Cases C-143/88 and C‑92/89 Zuckerfabrik Süderdithmarschen and Zuckerfabrik Soest [1991] and Case C-465/93 Atlanta Fruchthandelsgesellschaft and Others (I) [1995]).

The Court stressed that national courts were required, under Art. 14(3) of Regulation 659/1999, to ensure that the decision ordering the recovery of the unlawful aid was fully effective and achieved an outcome consistent with the objective pursued by that decision. In fact, annulment of a national measure implementing a Commission decision ordering recovery of unlawful aid, which impeded the immediate and effective implementation of that decision, was irreconcilable with the requirements arising from Art. 14(3) of Regulation 659/1999 (see Case C‑210/09 Scott and Kimberly Clark [2010]).

The Court concluded that, by failing to adopt, within the prescribed time‑limits, all necessary measures to recover from the beneficiaries all the aid granted under the aid scheme declared unlawful and incompatible with the common market by Decision 2005/919, Italy had failed to fulfill its obligations under Art. 2 of that decision.