Articles

National judges must in certain circumstances set aside final judgments in order to prevent illegal State aid

National judges must in certain circumstances set aside final judgments in order to prevent illegal State aid

National judges must in certain circumstances set aside final judgments in order to prevent illegal State aid

01.12.2015 NL law

On 11 November 2015, the Court of Justice ruled that national judges should, in certain circumstances, depart from a final judgment in order to prevent the granting of illegal State aid. This means that the national rules that oblige judges to respect the final decision reached in earlier proceedings between the same parties (also known as res judicata), cannot provide absolute certainty to parties that conduct business with EU Member State entities.

Facts

The case concerned wood supply agreements between the Klausner Group and the German Forestry Administration of the Land Nordrhein-Westfalen ("Land"). The Land decided to rescind the contracts in 2009 after issues arose between the parties. The Klausner Group sued the Land, and in 2012 ultimately won a declaratory judgment by the Higher Regional Court of Hamm ruling that the supply agreements should remain in force. This judgment became final.

In a subsequent set of proceedings the Klausner Group sought damages from the Land. The Land, in its turn, argued that EU law would preclude the execution of the wood supply contracts because they would amount to illegal State aid. In this case, the Court sided with the Land and found that the contracts would indeed amount to State aid. However, the Court considered that it could not rule against the final judgment of the Higher Court. Within this context, the Court requested a preliminary ruling from the Court of Justice on how to solve this conflict between legal norms.

The Court of Justice judgment

The Court of Justice emphasized that national judges should interpret national law in conformity with EU law. This means that rules of national law must not be framed in a way that makes it impossible or excessively difficult to exercise the rights conferred by EU law (principle of effectiveness).

Subsequently, the Court of Justice considered: "[…] that both the State authorities and the recipients of State aid would be able to circumvent the prohibition laid down in the third sentence of Article 108(3) TFEU by obtaining, without relying on EU law on State aid, a declaratory judgment whose effect would enable them, definitively, to continue to implement the aid in question over a number of years."

The judgment thus concludes that the principle of res judicata, in this case, given that the final judgment did not examine the conformity of the contracts with State aid rules, is contrary to the principle of effectiveness as it would prevent national courts from applying the State aid rules.

Conclusion

Although the supremacy of EU law as such is not new, this ruling shows that it remains a topic to be considered in national proceedings. As a consequence of this ruling it is clear that a final judgment (that does not explicitly concern legal issues relating to State aid) does not provide undertakings with full legal certainty. This is relevant since State aid rules are often invoked by the government. Parties that conclude contracts with government entities should be aware of this development, and consider developing contractual provisions that serve to protect them in case the State aid rules are raised.

This article was published in the Competition Law Newsletter of December 2015. Other articles in this newsletter:

Team

Related news

03.08.2022 EU law
Gotta catch ‘em all? Upward referral of ‘killer acquisitions’ upheld

Short Reads - Companies involved in intended or completed M&A transactions falling below EU and national merger notification thresholds should beware that their deals may still catch the European Commission’s eye. The General Court has upheld the Commission’s decision to accept a national referral request regarding Illumina’s acquisition of Grail: a transaction not triggering any of the notification thresholds within the EEA.

Read more

06.07.2022 NL law
Highest Dutch court: the postman may still ring twice?

Short Reads - The Dutch Minister of Economic Affairs and Climate Policy was wrong to unblock the ACM’s prohibited merger between postal operators PostNL and Sandd on grounds of public interest. According to the Trade and Industry Appeals Tribunal (CBb), the Minister cannot substitute the ACM’s assessment for its own when considering public interest reasons. Since the Minister did do so in this particular case, the CBb annulled the Minister’s merger clearance.

Read more

28.07.2022 NL law
Purely commercial interest also a legitimate interest? Council of State leaves the question unanswered.

Short Reads - On 27 July 2022, the Council of State confirmed that the Dutch Data Protection Authority wrongly imposed a €575,000 fine on VoetbalTV. But the Council did not answer the question whether the AP rightly or wrongly believes that a purely commercial interest cannot be a legitimate interest within the meaning of the General Data Protection Regulation.

Read more

06.07.2022 NL law
Foreign Subsidies Regulation crosses the finish line

Short Reads - On 30 June 2022, the European Parliament and the European Council reached agreement on the final text of the Foreign Subsidies Regulation. Adding to the regulatory burdens, this Regulation creates a notification obligation for companies that receive subsidies from non-EU governments in transactions or public procurement procedures. 

Read more

28.07.2022 NL law
Zuiver commercieel belang ook gerechtvaardigd belang: Raad van State laat zich er niet over uit

Short Reads - Op 27 juli 2022 heeft de Raad van State bevestigd dat de Autoriteit Persoonsgegevens onterecht een boete van € 575.000 aan VoetbalTV heeft opgelegd. De hoop bestond dat de Afdeling antwoord zou geven op de vraag of de AP terecht of onterecht meent dat een zuiver commercieel belang géén gerechtvaardigd belang kan zijn in de zin van de Algemene Verordening Gegevensbescherming. Het antwoord op deze vraag blijft echter uit.  

Read more

06.07.2022 NL law
Take note(s): Qualcomm’s EUR 1 billion dominance abuse fine quashed

Short Reads - The General Court annulled the Commission’s EUR 1 billion fine imposed on Qualcomm for abuse of dominance on the LTE chipsets market. In addition to finding fault with the Commission’s foreclosure analysis of Qualcomm’s alleged exclusivity payments, the General Court found that the Commission’s procedural irregularities alone would have sufficed to set the Commission’s decision aside.

Read more