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

08.08.2019 BE law
Regulating online platforms: piece of the puzzle

Articles - The new Regulation no. 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services, applicable as of 12 July 2020, is another piece of the puzzle regulating online platforms, this time focussing on the supply side of the platforms.

Read more

01.08.2019 NL law
Call of duty: Commission must state reasons when straying from its guidelines

Short Reads - The European Commission has lost a second battle concerning its EUR 15 million fine imposed upon interdealer broker ICAP, this time before the European Court of Justice. The Court upheld the previous judgment of the General Court on the basis of the Commission's failure to state reasons concerning its fining methodology of cartel facilitator ICAP. This may lead to more reasoned Commission decisions in the future - deterrence of cartel behaviour does not justify keeping the methodology for setting the fines as a 'black box'.

Read more

01.08.2019 NL law
General court dismisses all five appeals in the optical disk drives cartel

Short Reads - The General Court recently upheld a Commission decision finding that suppliers of optical disk drives colluded in bids for sales to Dell and HP by engaging in a network of parallel bilateral contacts over a multi-year period. The General Court rejected applicants' arguments regarding the Commission's fining methodology, including that the Commission ought to have provided reasons for not departing from the general methodology set out in its 2006 Guidelines.

Read more

22.07.2019 NL law
HagaZiekenhuis beboet voor datalek

Short Reads - Enkele maanden geleden vierden we de eerste verjaardag van de Algemene Verordening Gegevensbescherming (AVG) met een uitgebreide beschouwing  over de belangrijkste  ontwikkelingen uit  het eerste jaar van de verordening. We concludeerden daarin onder meer dat de door sommigen voorspelde hoge bestuurlijke boetes voor overtredingen van de AVG tot dan toe  - zowel in Nederland als in de andere EU-lidstaten - grotendeels waren uitgebleven.

Read more

01.08.2019 NL law
Brand owners beware: Commission tough on cross-border sales restrictions

Short Reads - The European Commission recently imposed a EUR 6.2 million fine on Hello Kitty owner Sanrio for preventing its licensees from selling licensed merchandising products across the entire EEA. Sanrio is the second licensor (after Nike) to be fined for imposing territorial sales restrictions on its non-exclusive licensees for licensed merchandise. A third investigation into allegedly similar practices by Universal Studios is ongoing. The case confirms the Commission's determination to tackle these practices, regardless of type or form.

Read more

17.07.2019 BE law
EU Single-Use Plastics Directive is now in force: brief recap

Articles - Plastic is a significant and growing global concern. A recent study commissioned by WWF and carried out by the University of Newcastle, Australia, suggests that people are consuming around 2,000 tiny pieces of plastic every week (which is approximately 5 grams of plastic, the weight of a credit card).  In this context, the EU adopted a new directive aiming at tackling marine litter generated from 10 single-use plastic products and from abandoned fishing gear and oxo-degradable plastics. This is called the Single-Use Plastics Directive and has entered into force this month, on 2 July 2019.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring