BRX Update: State Aid August 2019

Notice on the recovery of State aid

If, in the course of an in-depth assessment, the EU Commission finds that an unlawfully granted aid is incompatible with the internal market, it is obliged under Article 16 of the Procedural Regulation 2015/1589 to order the recovery of the aid by the Member State. On 23 July 2019, the Commission published an updated notice on recovery (2019/C 247/01).

General principles

The Treaty on the Functioning of the European Union ("TFEU") prevents Member States from granting financial advantages to undertakings and thereby distorting competition in the internal market. Aid must be notified to the EU Commission unless it is exempted from the notification requirement. Pending the decision on the compatibility of the aid with the internal market, the Member States are prohibited from implementing the aid measure ("prohibition of implementation"). Infringement of this prohibition leads to unlawfulness of the measure. The Member State must then stop the implementation of the aid or, if it has already been implemented, order its recovery.

The TFEU does not explicitly provide for recovery. However, this is a necessary addition to the prohibition of State aid under Art. 107 (1) TFEU and the prohibition of implementation under Art. 108 (3) TFEU as the Court of Justice already decided this in 1973 (Case 70/72, Commission/Germany).

Purpose and scope of recovery

Recovery is intended to deprive the recipient of any advantage over its competitors gained by the illegal aid. It is therefore not a sanction but merely a means of restoring a level playing field in the internal market.

Limits to recovery

The recovery requirement finds its limits in the general principles of legal certainty, the protection of legitimate expectations and the legal effect of a decision. However, these principles are interpreted narrowly by the Union Courts so that they can rarely limit recovery. For example, an earlier decision of the EU Commission, its silence regarding a notified aid measure or its inaction in relation to a not notified aid measure does not give rise to a legitimate expectation on the part of the beneficiary that would preclude recovery. The provisions to protect confidence of German administrative law may be applicable due to the requirement of effectiveness of European law.

Implementation of a recovery decision

If the Commission concludes that the aid granted is incompatible with the common market, it adopts a recovery decision requiring the Member State concerned to withdraw the aid and to recover it within a specified period.
First, the recovery debtor is determined. As such, not only the specific aid recipient can be considered, but also the whole group of companies must be treated as a single undertaking (as an “economic unit”). The decisive factor is therefore who the beneficiary of the aid is. In the case of an asset deal, the Commission checks whether the economic continuity by the company acquiring the assets is ensured. In the case of mergers or restructuring, the Commission may require the Member State to determine the legal successor of the aid beneficiary. In the case of tax measures, it does not help a company that it has duly declared the aid or that a tax assessment has become final, but it is crucial for recovery whether a tax advantage is present that contravenes State aid law. When quantifying the recovery, the de minimis rule can be applied retroactively.
If the recipient is unable to repay the aid, it must exit the internal market by means of insolvency proceedings without legal or economic successors. The insolvency proceedings allow the distortion of competition caused by the aid to be eliminated.

Where the recovery procedure has been provisionally closed or definitively closed, the Commission may nevertheless reopen the procedure. This is particularly the case where the decisive circumstances of the case have subsequently changed.

Legal protection against recovery orders

The beneficiary of the aid may take legal action against national measures implementing a recovery decision (as well as possibly against the Commission decision itself). However, in order to minimise the risk of delay in implementing recovery, national courts may grant preliminary injunction only under the strict conditions laid down by the Court of Justice in the Sugar Factory and Atlanta cases:

  • considerable doubts as to the validity of the recovery order,
  • urgency of the decision to avoid serious and irreparable harm to the applicant,
  • due consideration of the EU's interests by the national court, and
  • consideration of comparable decisions of the EU Courts granting preliminary injunction at European level.

If a recovery decision is not implemented by the Member State, the Commission may initiate infringement proceedings.


The Commission's notice contains useful information and explanations. However, there is still a need for clarification on some points, e.g. the rigid time limit for implementing a recovery decision as well as the conditions for its extension, which is granted only "in exceptional circumstances", the protection of legitimate expectations or the restructuring of an insolvent aid recipient. It remains to be seen how the European courts will deal with the requirements laid down in it.



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