OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 3 September 2020 (1)
Case C‑445/19
Viasat Broadcasting UK Ltd
v
TV2/Danmark A/S,
Kingdom of Denmark
(Request for a preliminary ruling from the Østre Landsret
(High Court of Eastern Denmark, Denmark))
(Reference for a preliminary ruling – State aid – Public-service broadcasters – Article 106(2) TFEU – Services of general economic interest – Aid compatible with the internal market – Legal consequences – Article 108(3) TFEU – Failure to notify – Obligation to pay illegality interest – Competitive advantage from unlawful implementation of aid – Amounts to be included in the calculation of interest)
I. Introduction
1. This request for a preliminary ruling once again concerns the financing of public-service broadcasting in Denmark through State subsidies, which has already been the subject of a number of decisions by the European Union Courts. Those decisions found with force of res judicata that the State financing measures in favour of TV 2/Danmark A/S (‘TV 2’) constitute aid compatible with the internal market. (2)
2. However, the measures were not notified to the Commission before they were implemented. The point at issue in the main proceedings now is whether the recipient of that aid, which is unlawful on formal grounds, is therefore required to pay interest to Denmark for the period up to its authorisation by the Commission. The Commission has developed the concept of illegality interest to this end. (3)
3. The obligation to pay illegality interest is also recognised, in principle, in situations where the aid does not have to be repaid, because it is compatible with the internal market. (4) However, in the present case, TV 2 and Denmark, supported by the Netherlands and Austria, contend that the aid in question constituted compensation for the provision of services of general economic interest, which must have implications for the obligation to pay illegality interest.
II. Legal framework
4. Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 TFEU (5) (‘Regulation 2015/1589’) contains provisions in Article 16 (6) concerning recovery of aid. Paragraph 2 thereof reads as follows:
‘The aid to be recovered pursuant to a recovery decision shall include interest at an appropriate rate fixed by the Commission. Interest shall be payable from the date on which the unlawful aid was at the disposal of the beneficiary until the date of its recovery.’
III. Facts and main proceedings
5. The financing of the Danish public-service broadcaster TV 2 using State resources in the years from 1995 to 2002 has been the subject of a number of administrative and judicial proceedings.
6. In the period in question, TV 2 received, in addition to licence fees, revenue from the sale of television advertising. That revenue was generated for a time by the independent State-owned company TV 2 Reklame A/S and some of the profits were transferred through a fund to TV 2, while some were paid directly to TV 2.
7. The broadcaster TV 2 consists of nine independent undertakings: eight regional stations and one nationally acting undertaking. In the period in question, TV 2 had a statutory obligation to produce national and regional television programmes and to broadcast them on national and regional stations.
8. The regional stations did not generate any revenue themselves, but were financed by TV 2. This was also a statutory obligation for TV 2.
9. Denmark did not notify the financing through licence fees and advertising revenue to the Commission. After the General Court had annulled a first Commission decision from 2004, (7) in 2011 the Commission decided, after a fresh examination (8) (‘decision TV 2 II’), that the measures for the financing of TV 2 between 1995 and 2002 constituted aid which was unlawfully implemented in breach of Article 108(3) TFEU but was, in its overall amount, compatible with the internal market under Article 106(2) TFEU. This decision was definitively confirmed by the Court of Justice. (9)
10. Relying on the failure to notify the aid in question, the applicant in the main proceedings, Viasat Broadcasting UK Ltd. (‘Viasat’), is now seeking a declaration that TV 2 is obliged to pay, for the period between the disbursement of the aid and the final Commission decision on its compatibility with the internal market in 2011, illegality interest totalling 1 746 300 000 Danish krone (DKK) (approximately EUR 234 623 606).
11. The calculation of this interest claim is based on the sum of the financing measures classified as aid, and therefore encompasses the amounts which TV 2 obtained from advertising revenue and the amounts which TV 2 transferred to its regional stations.
12. TV 2 contests that claim. It asserts that in a case like the present one, in which non-notified aid paid as compensation for the provision of services of general economic interest, is compatible with the internal market under Article 106(2) TFEU and does not therefore have to be repaid, no illegality interest may be levied. As grounds, it argues in essence that in such cases Article 106(2) TFEU precludes the application of the notification and standstill obligation under Article 108(3) TFEU, and that, in any event, the obligation to pay interest is linked to the existence of a genuine undue advantage. There is no such advantage in this instance.
IV. Request for a preliminary ruling and procedure before the Court
13. By order of 29 May 2019, received at the Court on 6 June 2019, the Østre Landsret (High Court of Eastern Denmark, Denmark) referred the following questions to the Court for a preliminary ruling pursuant to Article 267 TFEU:
‘(1) Does the obligation for a national court to order an aid recipient to pay illegality interest (see the judgment in CELF) apply also in a situation such as that in the present case, in which the unlawful State aid constituted public-service compensation which was subsequently found to be compatible with the internal market under Article 106(2) TFEU and in which approval was granted on the basis of an assessment of the entire public-service undertaking’s overall financial situation, including its capitalisation?
(2) Does the obligation for a national court to order an aid recipient to pay illegality interest (see the judgment in CELF) apply also in respect of amounts which, in circumstances such as those of the present case, are transferred from the aid recipient to affiliated undertakings pursuant to a public-law obligation but which are categorised by a final Commission decision as constituting an advantage for the aid recipient within the meaning of Article 107(1) TFEU?
(3) Does the obligation for a national court to order an aid recipient to pay illegality interest (see the judgment in CELF) apply also in respect of State aid which the aid recipient, in circumstances such as those of the present case, received from a publicly controlled undertaking, given that the latter’s resources are derived partly from sales of the aid recipient’s services?’
14. In the proceedings before the Court, Viasat, TV 2, the Kingdom of Denmark, the Kingdom of the Netherlands, the Republic of Austria and the European Commission submitted written observations and replied in writing to further questions asked by the Court.
V. Legal assessment
15. The referring court asks three questions, by which it is seeking to ascertain whether, and, if so, to what extent, TV 2 is required, on account of the failure to notify the aid, to pay illegality interest on the amounts received for the period from the implementation of the aid to the final Commission decision in 2011.
16. It must be clarified in connection with the first question whether the obligation to pay illegality interest, which is based on failure to notify aid in contravention of the Treaty (see under A.), also applies to aid granted without prior notification but in conformity with Article 106(2) TFEU (see under B.). The second and third questions, which should be examined together, concern the amounts which are to be included in any calculation of illegality interest (see under C.).
A. Preliminary remark
17. Aid is unlawful on formal grounds if it was put into effect in contravention of the procedural rule contained in Article 108(3) TFEU. (10) Article 108(3) TFEU is one of the features of the control system established by the TFEU in the field of State aid. Within that system, Member States are under an obligation, first, to notify to the Commission each measure intended to grant new aid or alter aid for the purposes of Article 107(1) TFEU and, secondly, not to implement such a measure, in accordance with the third sentence of Article 108(3) TFEU, until that institution has taken a final decision on the measure. (11)
18. This notification and standstill obligation is designed to ensure that a system of aid cannot become operational before the Commission has had a reasonable period in which to study the proposed measures in detail and, if necessary, to initiate the formal examination procedure. (12) It ensures that incompatible aid will never be implemented. (13)
19. There are exceptions to this principle. For example, Article 3 of Regulation (EU) No 651/2014 (14) exempts aid which fulfils the conditions laid down in the regulation from the requirements under Article 108(3) TFEU. At the same time, however, recital 7 of the regulation emphasises the exceptional character of that exemption and makes clear that all other aid is subject to Article 108(3) TFEU.
B. First question referred for a preliminary ruling
20. By its first question, the Østre Landsret (High Court of Eastern Denmark) wishes to know, in essence, whether the national courts are obliged to order the recipient of unlawful aid to pay illegality interest also where the Commission has subsequently found the aid to be compatible with the internal market under Article 106(2) TFEU because it constituted compensation for the performance of services of general economic interest and does not therefore have to be repaid.
21. The first question refers to the judgment in CELF, (15) in which the Court found that illegality interest is to be levied if State aid was disbursed in breach of the notification obligation, but was subsequently declared to be compatible with the internal market under Article 107(3) TFEU. (16) Ultimately, it must therefore be clarified whether the reason for which aid is found to be compatible with the internal market affects the obligation to pay illegality interest.
1. Principle: obligation to pay interest in respect of aid which is merely unlawful on formal grounds
22. The obligation to pay illegality interest is established in secondary law in Article 16(2) of Regulation 2015/1589 and Article 14(2) of Regulation No 659/1999. (17) That provision relates explicitly only to the situation in which aid is not compatible with the internal market and must therefore be repaid. Interest is then payable in respect of the period of the unlawfulness, that is to say, between the implementation and the final Commission decision.
23. In CELF, however, the Court ruled that the obligation to pay illegality interest exists even where the aid is compatible with the internal market under Article 107(3) TFEU and is not recovered. (18)
24. This principle from case-law must apply to any aid which is compatible with the internal market but unlawful, whatever the background to its compatibility. In so far as the Danish and Netherlands Governments, in particular, contend that the ruling in CELF should not be taken into consideration because of the different ground for compatibility in the case of unlawful aid connected with services of general economic interest, these objections cannot be accepted.
25. The basis for the obligation to pay interest is the infringement of the procedural rule in Article 108(3) TFEU. That breach of procedure consists in non-compliance with the notification and standstill obligation, irrespective of whether or not the aid is compatible with the internal market. The procedure, of which the notification and standstill obligation is a component, is intended to make it possible to establish whether the measure constitutes aid and is possibly compatible with the internal market. For that reason, the requirements under Article 108(3) TFEU precede the decision on compatibility.
26. According to case-law, a Commission decision on compatibility, as the final decision in the examination procedure, does not regularise the disregard of the prohibition in Article 108(3) TFEU accordingly (19) and does not therefore affect the unlawfulness of the aid. Any other interpretation would have the effect of according a favourable outcome to the non-observance of the third sentence of Article 108(3) TFEU and would deprive that provision of its effectiveness. (20) Indeed, if, for any particular aid plan, whether compatible with the internal market or not, failure to comply with Article 108(3) TFEU carried no greater risk or penalty than compliance, the incentive for Member States to notify and await a decision on compatibility would be greatly diminished – as would, consequently, the scope of the Commission’s control. (21)
27. In addition, such an interpretation would involve a shift of powers. In the control system under the rules on State aid, it is for the national courts to safeguard the rights of individuals against possible disregard of the prohibition laid down by Article 108(3) TFEU and if necessary to remedy the consequences of the unlawfulness of aid. (22) The Commission, on the other hand, assesses whether an aid measure is compatible with the internal market. (23) If a positive decision by the Commission had the effect of regularising the breach of procedure, the Commission would also decide indirectly on the infringement of rights in relation to individual competitors of the aid recipient (24) and deny them their means of legal redress before national courts.
28. It follows from the foregoing that the breach of procedure remains whether or not the aid is compatible with the internal market. As the Court held not least in CELF, EU law requires the national courts to order the measures appropriate effectively to remedy the consequences of the unlawfulness. (25)
29. Again in CELF, the Court held that the payment of illegality interest is a proven method for achieving that remedy. (26) The national courts are required in particular to preserve the rights of individuals faced with breaches resulting from the unlawfulness of the aid. (27)
30. The infringement of the standstill obligation gives rise to a competitive advantage for the recipient of the unlawful aid, the counterpart to which is an infringement of rights of third parties operating on the same market. That advantage can be financial as it must be assumed that the aid recipient would have had to obtain the grant during the examination procedure and the associated suspension of the measure in some other way. For providers of services of general economic interest this would also appear, as a rule, to take the form of an interest-bearing loan with the result that it would be subject to normal market interest. (28) Even though State-owned undertakings which can be financed by the State through capital increases are often active in these areas, a commercial loan represents the only means of financing which does not fall within the scope of the rules on State aid and can therefore be made available on an ad hoc basis without a prior administrative procedure.
31. In addition, the advantage from the premature implementation of the aid also resides in the fact that the aid recipient’s competitors suffer, earlier than they would have had to in the case of compliance with the procedure, the effects of compatible aid, and the aid recipient’s competitive position as against the other operators is thereby improved while the unlawfulness lasts. (29)
32. This advantage, which the Court has established with regard to a non-public-service market, is also enjoyed by providers of services of general economic interest. Article 14 TFEU and Article 106(2) TFEU make clear that competition exists and is desired in principle also in this field. The present case shows precisely that this assessment also tallies with the reality of the broadcasting market concerned. Viasat, as a private-sector undertaking, competes with the public-service undertaking TV 2. The undertaking that is commissioned to provide the services therefore holds a competitive position that is improved because it already has financial resources for programming at a time when the Commission has not yet taken a decision on the aid. In television, such resources would appear to be of interest as regards in particular competition for exclusive broadcasting rights.
33. Against this background, the objections raised by TV 2 and the Danish and Netherlands Governments, according to which TV 2 did not obtain an undue advantage in this case from the premature implementation of the aid and that, in any case, such an advantage should have been established in an examination of the individual case, must also be rejected. As grounds, the parties assert, in essence, that TV 2 was not overcompensated by the aid, which should also be taken into consideration where the effect of the premature implementation of the aid is assessed.
34. However, the advantage of premature access described in point 31 of this Opinion, which results from the breach of procedure, cannot be precluded by this objection, which is thematically linked to the question of the compatibility of the aid with the internal market and thus to the factual conditions under Article 107(1) TFEU. The de facto advantage must be distinguished from the advantage resulting from unlawful implementation. Whilst the former is a substantive requirement for the existence of aid, the satisfaction of which must be established by the Commission on the basis of certain criteria, the latter advantage does not require an examination of the individual case because the improved position compared with potential competitors already stems from the availability of State resources and exists irrespective of whether the Commission finds the measure to be compatible with the internal market. Even if a measure is justified, this is only subject to the procedure being lawful. (30)
35. Against this background, regard must be had to the principle that aid implemented in breach of the notification and standstill obligation under Article 108(3) TFEU gives rise to illegality interest, irrespective of its possible compatibility with the internal market, because premature implementation gives the aid recipient an undue advantage.
2. No exception in respect of aid for the provision of services of general economic interest
36. The question arises, however, whether the preferential treatment which the provision of services of general economic interest is accorded by the European Treaties, particularly Article 14 and Article 106(2) TFEU, necessitates an exception to this principle. These are the broad lines of the objections raised by TV 2 and the Austrian Government, by which they argue that on the basis of Article 106(2) TFEU the provisions of Article 108(3) TFEU, or in any case the obligation to pay interest, must be disapplied in so far as the provisions or the obligation impair the provision of services of general economic interest.
37. Under Article 106(2) TFEU, undertakings entrusted with the operation of services of general economic interest are to be subject to the rules contained in the Treaties, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them.
38. Article 14 TFEU provides that, without prejudice to Article 4 TEU or to Articles 93, 106 and 107 TFEU, and given the place occupied by services of general economic interest in the shared values of the European Union as well as their role in promoting social and territorial cohesion, the European Union and the Member States, each within their respective powers and within the scope of application of the Treaties, are to take care that such services operate on the basis of principles and conditions, particularly economic and financial conditions, which enable them to fulfil their missions.
39. These two provisions are reaffirmed in Protocol No 26 on services of general interest (31) and Protocol No 29 on the system of public broadcasting in the Member States, (32) which are annexed to the Treaties. (33)
40. The obligation to pay interest in respect of aid which is unlawful on formal grounds can affect this objective of guaranteeing services of general economic interest. It would be incompatible with this objective, and ultimately with the abovementioned rules of primary law, to deprive the aid recipient definitively, by virtue of the obligation to pay interest, of resources which it requires in order to offer those services.
41. Article 106(2) TFEU provides two ways, however, to overcome the prohibition of State aid in respect of financial support for services of this kind and to achieve an appropriate balance between the obligation to pay interest and the guaranteeing of services of general economic interest. First, on the basis of the criteria laid down in the judgment in Altmark Trans, (34) certain State support measures do not constitute aid within the meaning of Article 107(1) TFEU, and, second, the Commission may authorise support measures which do not satisfy those criteria and therefore constitute aid.
42. If a financing gap arises in the provision of the service on account of the obligation to pay interest, the Member State is thus able to assess, in respect of that specific aid, whether it is reimbursing the service provider for interest expenditure on the basis of the criteria laid down in Altmark Trans (35) so as to allow the necessary services to be implemented. In that case the provision of the services is still guaranteed. The rules on State aid do not then preclude the reimbursement of interest expenditure.
43. If the measure which refunds interest to the service provider does not satisfy the Altmark criteria, the Member State concerned could grant the necessary resources as aid, which would, however, require prior authorisation by the Commission. (36) That aid would be compatible with the internal market under Article 106(2) TFEU, in so far as the financial burden from the interest obstructs the performance, in law or in fact, of the services assigned.
44. It could be contended, with regard to this solution, that the recipient of an authorised payment is thereby obliged – supposedly solely in order to satisfy formal procedural requirements – to repay a proportion to the Member State in the form of interest, only to obtain that amount back as new aid. Against this background, the question arises whether in specific cases the suspension of the obligation to pay interest in respect of unlawful but authorised aid for the provision of services of general economic interest would be more in keeping with the substantive legal positions of the parties.
45. However, such an approach must ultimately be rejected. First of all, it is precluded by the allocation of the powers of examination under the rules on State aid, as in reality the ‘suspension’ of illegality interest (37) constitutes a remission of that interest, and thus aid, unless the criteria laid down in Altmark Trans are complied with. The examination of its compatibility with the internal market under Article 106(2) TFEU is a task for the Commission alone and even in specific cases cannot be carried out by the national courts.
46. In addition, aside from the objectives described, (38) the notification and standstill obligation, the effectiveness of which guarantees the obligation to pay interest, also protects the rights of the competitors of an aid recipient. This aspect does not become obsolete where the aid proves to be compatible with the internal market and interest is also refunded to the recipient.
47. Furthermore, the procedural rights of competitors have particular importance under the European rules of State aid. First, they can make a significant contribution to the effectiveness of aid control. Second, the prohibition of State aid serves to protect undistorted competition, which may be restricted by aid for services of general economic interest only in so far as is actually necessary.
48. Although my proposed approach for resolving the tension between the obligation to pay interest and guaranteeing services of general economic interest increases the administrative burden, it does prevent any incentive to refrain from making a prior notification in the case of aid for services of general economic interest. In addition, it safeguards the allocation of the powers of review between the Commission and the national courts in the rules on State aid. It guarantees the rights of competitors and ensures that the amount of such aid is subject to strict control, whether based on the Altmark criteria or by means of authorisation by the Commission.
49. The obligation for a national court to order an aid recipient to pay illegality interest therefore applies also where the unlawful State aid was granted for the performance of services of general economic interest and was subsequently found by the Commission to be compatible with the internal market under Article 106(2) TFEU on the basis of an assessment of the entire public-service undertaking’s overall financial situation, including its capitalisation.
C. Second and third questionsreferred for a preliminary ruling
50. The basis for the calculation of the amount of interest is the subject of the second and third questions referred for a preliminary ruling. By these questions, the referring court seeks clarification as to the amount on which the illegality interest is based. In essence, it would like to know whether interest is to be levied on all the financing measures in favour of TV 2 in the period at issue or whether certain measures are excluded.
51. These questions can be answered together. They have different connecting factors as the second question relates to the proportion of the financing measures in favour of TV 2 stemming from advertising revenue, whilst the third question concerns the amounts which TV 2 transferred to the regional stations. However, the answer to both questions follows from the relevant rules and the case-law in that regard.
52. It follows from these that the notification and standstill obligation extends to all aid. (39) The European Union Courts have also confirmed with regard to advertising revenue (40) and the amounts transferred by TV 2 to the regional stations (41) that the conditions laid down in Article 107(1) TFEU are met. It is thus clear that these elements of the financing measures are also State aid.
53. Because the Danish State did not duly notify them or suspend them pending approval by the Commission, the amounts which are mentioned separately here also constitute aid which is unlawful on formal grounds and gives rise to illegality interest.
54. As has already been explained, it is also immaterial, as far as illegality interest is concerned, whether an undue advantage is created or preserved for the recipient from the unlawful aid itself. (42) It is therefore irrelevant that, as the referring court holds, TV 2 did not retain a ‘net advantage’ from the revenue that it transferred to the regional stations. The obligation to pay interest stems from the breach of procedure and compensates for the advantage resulting from the premature implementation of the aid. (43)
55. The answer to the second and third questions asked by the referring court should therefore be that the national courts are obliged to order an aid recipient to pay illegality interest in respect of all amounts which are categorised by a final Commission decision as constituting an advantage for the aid recipient within the meaning of Article 107(1) TFEU.
VI. Conclusion
56. I therefore propose that the Court rule as follows:
(1) The obligation for a national court to order an aid recipient to pay illegality interest applies also where the unlawful State aid was granted for the performance of services of general economic interest and was subsequently found by the Commission to be compatible with the internal market under Article 106(2) TFEU on the basis of an assessment of the entire public-service undertaking’s overall financial situation, including its capitalisation.
(2) The obligation for a national court to order an aid recipient to pay illegality interest applies in respect of all amounts which are categorised by a final Commission decision as constituting an advantage for the aid recipient within the meaning of Article 107(1) TFEU.