19 Aug, 2019

One Step Closer to Effective State Aid Enforcement: New Notice on Recovery of Illegal State Aid

On July 22, 2019, the European Commission (“Commission”) reported that it has adopted a new Notice on the Recovery of Unlawful and Incompatible State Aid (the “New Notice”), in order to take stock of the Commission’s decisional-practice and case law of the Union courts.

The New Notice came about as a result of a public consultation targeting main stakeholders such as public authorities, citizens, companies and organizations.  Member States and the EFTA Surveillance Authority also contributed to the document.

Compared to the previous 2007 Recovery Notice, the New Notice explains in greater detail how the Commission may assist Member States when implementing recovery decisions.  In that regard, the Commission may, inter alia, provide a tool to calculate recovery interest, share examples of escrow agreements suitable for the provisional recovery of aid and provide information on provisional or definitive closure of a recovery procedure.

The Commission has opted for a sharper turn and more active involvement in the recovery process, especially when defining its role in identifying aid beneficiaries.  Unlike before, the Commission is now obliged to propose the methodology for a Member State’s identification of beneficiaries, in case it failed to identify the beneficiaries in the decision.  

Furthermore, the New Notice addresses a wide spectrum of situations and conditions under which alternative means of recovery are introduced.  In that regard, recovery in kind and offsetting of claims are deemed acceptable whereas deferrals of recovery or payments in instalments beyond the recovery deadline are not.

All of the above demonstrates just how important the issue of recovery of illegal State aid is for the Commission.  It also mirrors the Commission’s determination not to hesitate in availing of all measures at its disposal to ensure that Member States are compliant with their obligations in this field.  

Takeaways for Serbia?

As a part of the accession process, Serbia is bound to accommodate EU rules and transpose them into its legislation.  Compliance with the Union acquis as regards the State aid policy has proven tricky in the past for Serbia.  The latest progress report suggested that “Serbia needs to address, as a matter of priority, issues of non-compliance with the [Stabilisation and Association Agreement], regarding in particular state aid control”. 

Given that Serbia is currently in the process of drafting a new State Aid Control Act, one can expect that it will strive to ameliorate its State aid legal framework by adopting some of the arrangements set forth in the New Notice.  This may, as many hope in Serbia, jolt the drafters of the new legislation into action and compel them to look more closely at the rules and procedures governing the recovery of State aid.