The Court Of Justice Relaxes Its Case-law To Challenge A ... - DE BANDT

In case C-212/19, the Court of Justice had to rule on the execution of a Commission’s decision considering a French compensation scheme for the fishing industries as State aid incompatible with the common market. In its judgment of 17 September 2020, the Court went further than merely interpreting the Commission’s decision; it assessed its validity and declared it invalid.

The facts leading to the present case started at the end of the 20th century when France decided to take several measures to help the fishermen who had faced difficult conditions because of oil pollution caused by the wreck of a tanker and violent storms. One of these measures consisted in granting all fisheries undertakings a 50% reduction in social security contributions for 6 months. The Commission declared this measure as State aid incompatible with the common market and ordered the immediate recovery of the sums corresponding to the reductions. At that time, that decision was not challenged under 263 TFEU.

France did not implement the Commission’s decision and, therefore, the Commission brought an action for failure to act before the Court of Justice. By a ruling of 20 October 2011 in case C-549/09 (Commission v. France), the Court held that France had failed to fulfil its obligations under EU law. Following that ruling, an order of payment was issued against Compagnie des pêches de Saint-Malo for an amount corresponding to the reduction of the social contributions. This order of payment was challenged before the French Courts.

It is in the framework of this procedure that the French Conseil d’État referred the case to the Court of Justice. The Court had to ascertain whether the concept of ‘social security contributions’ used by the Commission in its decision covered both the employers’ and the employees’ contributions.

Firstly, the Court had to examine the admissibility of the request. The Commission argued that this request for interpretation ultimately led to indirectly challenge the validity of the Commission’s decision. The Commission relied on the case-law Textilwerke Deggendorf (C-188/92) to raise the inadmissibility of the request, explaining that if Compagnie des pêches de Saint-Malo did not bring an action for annulment of the decision within the time limit set out in Article 263 TFEU, it cannot later challenge the validity of the same decision by diverted means.

In its judgement, the Court decided that given the specificities of the case, it was necessary to examine the validity of the decision in question to give a complete answer to the national court. It recalled that, in principle, a validity concern cannot be raised of the Court’s own motion where the defendant in the main proceedings would undoubtedly have had standing to seek annulment of the decision at issue. However, it considered that, in this case, it was not certain that Compagnie des pêches de Saint-Malo had an interest in bringing proceedings against the part of the Commission’s decision relating to employees’ contributions, since those contributions were not borne by the fisheries undertakings, in their capacity as employers, but were payable by the employees, those employees being the actual beneficiaries of the reductions relating to those contributions.

Secondly, the Court examined if the Commission rightly considered that the reduction of the employees’ contributions could also be considered as State aid incompatible with the common market. In its decision, the Commission qualified both the social contributions of employers and employees as State aid. According to settled case-law, the concept of aid encompasses advantages granted by public authorities which, in various forms, mitigate the charges which are normally included in the budget of an undertaking. In the case at hand, the contributions are not borne by the fisheries undertakings, but by the employees. Indeed, the fisheries undertakings only act as an intermediary between the employees and the social security; the contributions are financed from the employees’ salary. Therefore, following the advocate general’s reasoning, the reduction of the employees’ social contributions was an advantage given to the employees and not to the fisheries undertakings.

In conclusion, the Court considered that the Commission decision was invalid as it erred in law in considering that the reduction in employees’ contributions conferred a direct advantage to fisheries undertakings.

One could see in this judgment a departure from – or, at the very least, a nuance compared with - the previous case-law and, in particular, Textilwerke Deggedorf. Indeed, in Textilwerke Deggedorf, the Court only verified whether the beneficiary of aid could, without any doubt, have challenged the Commission’s decision under Article 263 TFEU. Since the answer was positive, the Court ruled that it could not rule on the validity of that decision and that the national court was bound by the Commission’s decision, regardless its lawfulness. In Compagnie des pêches de Saint-Malo, the Court went further than in Textilwerke Deggedorf and verified whether the beneficiary of aid would have had the standing to bring proceedings against the contested decision and whether its action would have been admissible. Since the answer was negative, it declared itself competent to rule on the validity of the Commission’s decision.

Please contact Pierre de Bandt, Jeroen Dewispelaere, Raluca Gherghinaru for further information about this case and/or for general legal advice relating to State aid.