November 30
2020
Anjum Shabbir
Anjum Shabbir
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27th October 2020
Banking & Finance Competition & State Aid Institutional law

Analysis: “Spanish Supreme Court judgment on ‘incentive effect’ of a regional aid measure under the General Block Exemption Regulation and the importance of cooperating with the EU institutions” by Juan Jorge Piernas López

By judgment of 21 May 2020, the Spanish Supreme Court (Contentious-Administrative Chamber), annulled an agreement of the Spanish Executive Committee of the Government for Economic Affairs (Comisión Delegada del Gobierno para Asuntos Económicos) for having incorrectly interpreted the ‘incentive effect’ of a regional aid measure under the 2008 General Block Exemption Regulation (GBER). The judgment under review is analysed by the same author in more detail in the upcoming issue 4/2020 of the European State Aid Law Quarterly (EStAL) journal.

In particular, the contested measure ordered the recovery of the aid granted (over 8.5 million euros) plus interest (over 0.7 million euros) because the beneficiary had allegedly initiated the project for which the aid was granted before submitting an application for the aid at stake to the Spanish authorities, in breach of, inter alia, Article 8.2 of Commission Regulation 800/2008, the GBER previously in force. This provision has been included in similar terms in Article 6.2 of the General Block Exemption Regulation currently in force.

The appellant company had indeed carried out certain earthworks on the plot of land where the investment was going to take place before receiving the communication of the Spanish authorities on the eligibility of the investment project at stake. The question was whether the works at issue constituted the beginning of the construction works envisaged in the investment project under, inter alia, Article 8.2 of the 2008 GBER or whether they could be regarded as mere preparatory activities, and therefore fall outside the scope of that provision.

The Spanish Supreme Court concluded that the earthmoving work carried out by the appellant company had to be considered as preparatory work, and therefore that the appellant company had not started the investment project before submitting an application for the aid at stake to the Spanish authorities. To this extent, the Supreme Court underlined, among other considerations, that the amount designated to the earthmoving works at stake was ‘insignificant’ when compared to the total budget of the investment project (0.65% of the total budget of the investment).

The judgment includes a dissenting opinion by one of the Supreme Court Magistrates who held, in essence, that the earthmoving works at issue were not preparatory activities but rather the start of the implementation of the investment project.

Preparatory activities, such as feasibility studies, are indeed excluded from the notion of ‘Start of work’ on the project under Article 8.2 of the 2008 GBER, as the Commission clarified in the Regional Aid Guidelines 2007-2013 (footnote 40) and other guidance documents, and as Article 2(23) of the GBER currently in force confirms. However, in the case under review, the alleged preparatory activities were not feasibility studies, and therefore the dividing line between those activities and the actual implementation of the project at stake is blurred. In such a scenario, it is submitted that the Spanish Supreme Court ought to have cooperated with the European institutions before reaching a final decision, and that such cooperation would have probably altered the outcome in this case.

Firstly, the Spanish Supreme Court could have requested the European Commission’s opinion on relevant issues concerning the application of the State aid rules, currently regulated by Article 29, paragraph 1 of Council Regulation (EU) 2015/1589. Secondly, and more importantly, the Supreme Court ought to have used the preliminary reference procedure under Article 267 TFEU if it had doubts – as it seems was the case (particularly in light of the dissenting opinion), as to the nature of the earthmoving works carried out by the appellant company under the 2008 GBER, given that under national law no further judicial remedy exists against the Supreme Court’s decision, and therefore the submission of a request for a preliminary ruling of the Court of Justice of the EU was, in principle, mandatory.

The EU institutions would have made reference to the Eesti Pagar judgment of the Court of Justice of the EU (CJEU), where the Court, in Grand Chamber formation, underlined that the GBER must be interpreted strictly. In that case, the CJEU concluded that the costs related to withdrawing from a contractual commitment are not liable to altering the finding that an investment project has started under Article 8.2 of the 2008 GBER if there is an unconditional and legally binding commitment before the submission of the aid application. Regrettably, no discussion is reflected in the Supreme Court judgment as to the potential application of the Eesti Pagar case law to the case under review, or as to the reasons for not requesting a preliminary ruling under Article 267 TFEU.

 

Jorge Piernas is Assistant Professor of International Law and International Relations at the University of Murcia (Spain) and consultant to the World Bank and other public institutions in competition and State aid law and policy. He is the author of The Concept of State Aid under EU Law: From internal market to competition and beyond, published by Oxford University Press in 2015.

 

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