Cases T‑624/15, T‑694/15 and T‑704/15
European Food SA and Others
v
European Commission
Judgment of the General Court (Second Chamber, Extended Composition), 18 June 2019
(State aid — Award made by an arbitral tribunal established under the auspices of the International Centre for Settlement of Investment Disputes (ICSID) — Payment of compensation granted to certain economic operators — Decision declaring the aid incompatible with the internal market and ordering its recovery — Competence of the Commission)
1. State aid — Provisions of the Treaty — Scope ratione temporis — Accession of Romania to the European Union — Act of Accession — Application of provisions on State aid as from the date of accession and solely in regard to situations arising as from that date — Pre-accession State aid — Post-accession arbitral award relating to the State aid — Irrelevant
(Arts 107 and 108 TFEU; Act of Accession of 2005)
(see paragraphs 66-93)
2. State aid — Definition — Grant of an advantage to the beneficiaries — Award by an arbitral tribunal of compensation intended to compensate for the withdrawal of tax incentives by a Member State before its accession to the European Union — Not included
(Art. 107(1) TFEU; Act of Accession of 2005)
(see paragraphs 100-109)
Résumé
In the judgment in European Food and Others v Commission (Joined Cases T‑624/15, T‑694/15 and T‑704/15), delivered on 18 June 2019, the Court annulled in its entirety Commission Decision (EU) 2015/1470 of 30 March 2015, (1) by which the Commission classified as aid incompatible with the internal market the payment of the compensation awarded by an arbitral tribunal established under the auspices of the International Centre for Settlement of Investment Disputes (ICSID).
On 29 May 2002, the Government of the Kingdom of Sweden and the Government of Romania concluded a bilateral investment treaty on the promotion and reciprocal protection of investments (‘the BIT’), which entered into force on 1 July 2003 and Article 2(3) of which provided that each contracting party would at all times ensure fair and equitable treatment of the investments by investors of the other contracting party. In 2005, in the course of the negotiations on Romania’s accession to the European Union (which ultimately took place on 1 January 2007), the Government of Romania repealed a national scheme of incentives for the benefit of investors in disfavoured regions that had been adopted by Emergency Governmental Ordinance (‘EGO’) No 24/1998. Claiming that, by repealing that scheme, Romania had infringed its obligation of fair and equitable treatment owed to the Swedish investors, five applicants benefiting from that scheme (‘the arbitration applicants’) initiated proceedings before an arbitral tribunal on 28 July 2005, in accordance with Article 7 of the BIT. By arbitral award of 11 December 2013, that tribunal awarded the arbitration applicants compensation payable by Romania in the amount of approximately EUR 178 million. By its decision, the Commission classified the payment of that compensation, plus the interest that had accrued since the arbitral award was issued, as new State aid that was incompatible with the internal market and, accordingly, adopted the contested decision in order to prevent Romania from complying with the arbitral award. The companies directly concerned by that decision (‘the applicants’) brought an action for annulment, for the purposes of Article 263 TFEU.
As regards the plea raised by the applicants concerning the inapplicability of EU law to a situation preceding Romania’s accession, the Court stated that the adoption of the incentive scheme and its repeal, the entry into force of the BIT, Romania’s infringements and the initiation of the proceedings brought before the arbitral tribunal by the arbitration applicants all took place before that accession and that the repeal of the incentives constitutes the event giving rise to the damage for which the compensation at issue was awarded by the arbitral award. The Court concluded that the arbitration applicants’ right to compensation arose at the time when Romania repealed the incentives in 2005 and, therefore, before its accession to the European Union. Since EU law was not applicable in Romania at that time, the Court ruled that the Commission could not exercise the powers conferred on it by the Treaty in the field of State aid. Lastly, the Court clarified that, while it is true that new rules apply, as a matter of principle, immediately to the future effects of a situation which arose under the old rule, it cannot however be considered that the effects of the arbitral award constitute the future effects of a situation arising prior to accession, since that award retroactively produced definitively acquired effects which it merely ‘stated’ for the past, that is to say, effects which, in part, were already established before accession, given that, as stated by the Commission in its decision, the implementation of the arbitral award would re-establish the situation in which the applicants would have, in all likelihood, found themselves if EGO had never been repealed by Romania and that this constituted operating aid.
The Court also recalled that compensation for damage suffered cannot be regarded as aid unless it has the effect of compensating for the withdrawal of unlawful or incompatible aid and that, therefore, in so far as EU law is not applicable to compensation intended to compensate for the withdrawal of the incentive scheme, that compensation cannot be regarded as compensation for the withdrawal of aid which is unlawful or incompatible with EU law. On that ground, the Court concluded that the Commission’s decision is unlawful in so far as it classified that compensation as an advantage and aid within the meaning of Article 107 TFEU.