European Court of Justice: TV2 is required to pay illegality interest for State aid

The ECJ judgment of 24 November 2020 in case C-445/19, TV2

Background

In a decision issued in 2004, the European Commission found that TV2 had received illegal State aid from 1995 to 2002. In 2008, the Commission’s decision was set aside by the General Court, but by then TV2 had already received recapitalisation aid from the Danish State by way of a capital injection and a government loan enabling TV2 to repay the State aid.

In a new decision in 2011, the Commission held that although the recapitalisation aid amounted to State aid, it was still compatible with the State aid rules, because the aid was necessary and proportionate and was granted to TV2 as a provider of services of general economic interest. The aid was therefore compatible with the State aid rules because the conditions in Article 106(2) TFEU were satisfied.

The 2011 decision was referred to the General Court in four separate actions brought by the Commission, TV2 and Viasat. However, the General Court essentially upheld the Commission’s decision.

The four actions were then referred to the ECJ, which delivered its judgments in two steps in 2017. In consequence of the judgments, the Commission’s decision from 2011 was upheld.

As described in our news article of 7 September 2020, Advocate General Kokott wrote in her opinion on the case that there are no exceptions to the requirement for payment of illegality interest if the State aid has not been notified to and authorised by the Commission. Kokott argued that there is also no exception to that requirement even if the aid has been granted for the purpose of providing services of general economic interest and has subsequently been held compatible under Article 106(2) TFEU, and even if the aid has been granted to a public service broadcaster.

Kokott emphasised that the assessment of the compatibility of a State aid measure differs from the assessment of a breach of procedure. Consequently, the outcome of the compatibility assessment cannot influence the formal illegality assessment.

This is what the ECJ had to consider

On 24 November 2020, the ECJ issued its preliminary ruling on the three questions referred to it by the Danish Eastern High Court on 29 May 2019. The preliminary ruling was generally in line with Advocate General Kokott's opinion.

The questions were all about whether the requirement for payment of illegality interest also applies in a situation where the aid has been granted as public service compensation. In addition, the first question also concerns whether the fact that the aid is subsequently found to be compatible has any influence on the decision about payment of illegality interest.

What is the lesson from the ECJ ruling?

In its preliminary ruling, the ECJ concludes that Article 108(3) TFEU must be interpreted as meaning that national courts are under an obligation to order a recipient of State aid to pay illegality interest if the State aid has not first been notified to and authorised by the Commission. This applies even if the State aid is subsequently found to be compatible. Even if the aid in this situation constituted public service compensation, which was subsequently found to be compatible with Article 106(2) TFEU, it was still necessary to pay illegality interest because of the failure to notify.

The ECJ also concludes that the obligation to impose illegality interest also applies even if:

• the State aid amounts have been transferred to affiliated undertakings pursuant to a public-law obligation;
• the aid has been received from a publicly-controlled undertaking whose resources are derived partly from sales of the aid recipient’s services.

The ECJ ruling confirms that there are still no exceptions to the rule that national courts are required to impose illegality interest on the State aid recipient if the aid has not been notified to and authorised by the Commission. This is subject to a formal assessment.

It is therefore decisive that providers and recipients of State aid are aware of the EU State-aid rules and the notification requirement.