JUDGMENT OF THE COURT (Second Chamber)
20 January 2022 (*)
(Failure of a Member State to fulfil obligations – State aid – Aid declared unlawful and incompatible with the internal market – Obligation of recovery – Judgment of the Court establishing the failure of a Member State to fulfil its obligations – Non-compliance – Failure to comply with the obligation to recover unlawful and incompatible aid – Financial penalties – Proportionality and dissuasiveness – Periodic penalty payment – Lump sum – Ability to pay – Weighting of the Member State’s voting rights in the European Parliament)
In Case C‑51/20,
ACTION for failure to fulfil obligations under Article 260(2) TFEU, brought on 29 January 2020,
European Commission, represented by A. Bouchagiar and B. Stromsky, acting as Agents,
applicant,
v
Hellenic Republic, represented by K. Boskovits and A. Samoni-Rantou, acting as Agents,
defendant,
THE COURT (Second Chamber),
composed of A. Arabadjiev (Rapporteur), President of the First Chamber, acting as President of the Second Chamber, I. Ziemele, T. von Danwitz, P.G. Xuereb and A. Kumin, Judges,
Advocate General: G. Pitruzzella,
Registrar: A. Calot Escobar,
having regard to the written procedure,
after hearing the Opinion of the Advocate General at the sitting on 1 July 2021,
gives the following
Judgment
1 By its action, the European Commission claims that the Court should:
– declare that, by failing to adopt all the measures necessary to comply with the judgment of the Court of Justice of 9 November 2017, Commission v Greece (C‑481/16, not published, EU:C:2017:845; ‘the judgment establishing the failure to fulfil obligations’), the Hellenic Republic has failed to fulfil its obligations in accordance with that judgment and under Article 260(1) TFEU;
– order the Hellenic Republic to pay to the Commission a daily penalty payment in the sum of EUR 26 697.89 per day’s delay in complying with the judgment establishing the infringement from the day on which judgment is delivered in the present case until the day on which the judgment establishing the failure to fulfil obligations has been complied with;
– order the Hellenic Republic to pay to the Commission a lump sum, the amount of which is obtained by multiplying the daily amount of EUR 3 709.23 by the number of days elapsed between delivery of the judgment establishing the failure to fulfil obligations and the day on which that Member State put an end to the infringement or, if the infringement has not been brought to an end, until the date of delivery of the judgment in the present case; and
– order the Hellenic Republic to pay the costs.
Background to the dispute
2 As part of its economic adjustment programme, the Hellenic Republic implemented a privatisation programme. Larco General Mining & Metallurgical Company SA (‘Larco’), a Greek mining and metallurgical undertaking, is among the companies to be privatised. That company specialises in the extraction and processing of laterite ore, the extraction of lignite, and the production of ferronickel and its by-products. Its activities include exploration, development, mining, smelting and trading of its products worldwide.
3 In March 2012, the Hellenic Republic Asset Development Fund, a company set up to manage the privatisation process, informed the Commission of the planned privatisation of Larco.
4 The Commission therefore carried out a preliminary examination of those plans, in order to verify that it did not contain elements of State aid.
5 It sent a questionnaire to the Greek authorities. It is clear from the replies thereto, received by the Commission on 16 March 2012, that Larco had already benefited from measures taken by the Greek State. Next, the Commission requested additional information, by its emails of 18 April 2012, 24 April 2012, 5 July 2012, 22 August 2012 and 7 December 2012, and by its letters of 4 May 2012 and 14 January 2013, to which the Greek authorities replied on 20 April 2012, 26 April 2012, 3 October 2012, 13 November 2012, 15 November 2012, 7 December 2012, 24 December 2012 and 18 January 2013. Meetings between the Commission services and representatives of the Greek authorities took place on 30 April 2012 and 11 September 2012 in Athens (Greece) and on 25 January 2013 in Brussels (Belgium).
6 By letter of 6 March 2013, the Commission notified the Hellenic Republic of its decision to initiate the formal investigation procedure provided for in Article 108(2) TFEU in respect of various measures, such as State guarantees granted to Larco for the years 2008, 2010 and 2011, a capital increase in 2009, a debt settlement agreement signed in 1998 and the possibility of submitting letters of guarantee amounting to EUR 1.5 million in lieu of paying a tax fine of EUR 190 million.
7 The Commission then invited the Greek authorities and interested parties to submit their comments on those measures.
8 The Commission received comments only from the Greek authorities on 30 April 2013.
9 On 27 March 2014, the Commission adopted Decision 2014/539/EU on the State aid SA.34572 (13/C) (ex 13/NN) implemented by Greece for Larco General Mining & Metallurgical Company S.A. (OJ 2014 L 254, p. 24), Articles 2 to 5 of which provide that the measures at issue are unlawful and incompatible with the internal market, that the aid must be recovered from Larco, and that information must be provided to the Commission, in particular as regards the measures already taken or planned to comply with that decision.
10 Furthermore, since the Hellenic Republic had informed the Commission of its intention to sell certain of Larco’s assets by two separate calls for tender, the Commission adopted, on the same day, the decision on State aid SA.37954 (2013/N) relating to that sale (‘the decision on the sale of certain assets of Larco’). In the latter decision, the Commission states that, according to the information provided by the Hellenic Republic, the two tendering procedures would be conducted by the State and Larco respectively as owners of the assets affected by each call for tenders. In particular, the first call for tenders concerned the Larymna (Greece) smelting plant and 40% of the rights over the Agios Ioannis (Greece) laterite ore mining area, while the second relates to 73% of the Evia (Greece) laterite ore mining rights and all of the Kastoria (Greece) laterite ore mining rights. Following the two tender procedures and irrespective of their outcomes, Larco would be put into bankruptcy in accordance with national law, and its remaining assets would be sold as part of the liquidation procedure.
11 In the light of that information, the Commission took the view, in the decision on the sale of certain assets of Larco, that provided that a series of provisions and conditions were complied with, that sale, first, did not constitute State aid and, second, would not lead to economic continuity between Larco and the owner or owners of the assets to be sold. The Commission considered that, in those circumstances, the question of recovery of the unlawful and incompatible State aid which had been paid to Larco would not concern the new owners of the assets intended for sale.
12 The two-month time limit set by Article 5 of Decision 2014/539 for the Hellenic Republic to provide information as to measures adopted to recover the aid in question expired on 28 May 2014, without the Commission having received any information in that connection.
13 By letter of 23 June 2014, the Commission reminded the Greek authorities of their obligations under Decision 2014/539 and asked to be informed, within 20 working days, of the arrangements made for implementing that decision. Those authorities replied, by an email of 18 July 2014, that they were not in a position to provide the Commission with information within that timeframe.
14 Furthermore, the Commission also reminded the Hellenic Republic that it was required to comply with the time limit of four months set by Article 4(2) of Decision 2014/539. That time limit expired, however, on 28 July 2014, without the Commission having obtained information on the implementation of that decision.
15 By letters of 6 October 2014 and 18 December 2015, the Commission requested that that Member State provide it with that information and organise an exchange of views concerning the arrangements for recovery of the aid in question. However, the Member State did not reply to those letters. During a meeting held in Athens between the Commission and the Greek authorities, the latter failed to put forward any argument capable of justifying the lack of measures taken to implement Decision 2014/539.
16 On 2 September 2016, taking the view that the Hellenic Republic had failed to comply with its obligations under Decision 2014/539, the Commission brought an action against that Member State, pursuant to Article 108(2) TFEU, for failure to fulfil obligations, seeking a declaration that that Member State had failed to adopt, within the time limit prescribed, all the measures necessary to comply with that decision or, in any event, had not sufficiently informed the Commission of the measures adopted, contrary to the requirements of Article 5 of that decision.
17 On 9 November 2017, by the judgment establishing the failure to fulfil obligations, the Court held that the Hellenic Republic had failed to adopt, within the prescribed period, all measures necessary to ensure implementation of Decision 2014/539 and had failed to inform the Commission of the measures taken pursuant to that decision.
Pre-litigation procedure
18 Following delivery of the judgment establishing the failure to fulfil obligations, on 15 November 2017 the Commission sent a letter to the Greek authorities asking them to recover the unlawful aid incompatible with the internal market, to which the latter authorities failed to reply.
19 On 13 November 2018, by letter sent to the Greek Minister for Finance, the Commission requested information on the status of the procedure for recovery of the aid in question and stated that it could bring an action for failure to fulfil obligations under Article 260 TFEU. That letter also remained unanswered.
20 On 25 January 2019, finding that Decision 2014/539 had yet to be implemented, the Commission sent a letter of formal notice to the Hellenic Republic, in accordance with Article 260(2) TFEU, inviting it to submit its observations within two months.
21 On 29 March 2019, that Member State replied to the letter of formal notice, explaining, in particular, the difficulties that it faced and its willingness to cooperate.
22 It was in those circumstances that the Commission decided to bring the present action.
Developments during the course of the present proceedings
23 On 14 February 2020, the Hellenic Republic passed Law No 4664/2020. Article 21 of that law provides that Larco be placed under a special administration scheme, which is to lead, by means of a simplified and expeditious procedure, to the liquidation of that company (‘special administration’).
24 Following an application by that Member State acting in its capacity as creditor of Larco, the Monomeles Efeteio Athinon (Court of Appeal (single judge), Athens, Greece), by Decision No 1407/2020 of 28 February 2020, put that company under special administration, which did not lead to that company ceasing operations. By the same decision, that court appointed a special administrator responsible for making an inventory of all of the assets and liabilities of that company and required to carry out a public tendering procedure for the purposes of the divestiture of that company’s assets.
25 On 13 March 2020, the Greek authorities, first, requested that Larco pay, within 30 calendar days, the amount corresponding to the aid declared unlawful and incompatible with the internal market, plus the applicable interest, and, second, informed the Commission of the special administration applicable to Larco.
26 On 26 March 2020, the Court of Justice, by its judgment in Larko v Commission (C‑244/18 P, EU:C:2020:238), upheld the appeal brought by Larco against the judgment of the General Court of 1 February 2018, Larko v Commission (T‑423/14, EU:T:2018:57), by which the General Court had dismissed the action brought by that company seeking annulment of Decision 2014/539. The Court of Justice set aside the judgment of the General Court in so far as the latter had rejected the first part of the first plea in law, which relates to the guarantee granted in 2008 by the Greek State to Larco in relation to a loan of EUR 30 million granted to that company by ATE Bank (‘measure No 2’).
27 Following the judgment of the Court of Justice, Larco raised objections to the amount of the aid relating to measure No 2, which is to be recovered.
28 On 7 April 2020, Larco’s special administrator brought proceedings against the Hellenic Republic seeking arbitration of the dispute concerning the system of ownership of the Larymna smelting plant.
29 By letter of 27 April 2020, the Greek authorities informed the Commission of Larco’s objections concerning measure No 2, to which the Commission replied by letter of 6 May 2020.
30 On 14 May 2020, those authorities sent the Greek tax authorities a letter by way of which they requested full recovery of the aid in question from Larco.
31 Following a request for information from the Court of Justice on the basis of Article 62(1) of the Rules of Procedure of the Court of Justice, the Hellenic Republic produced documents concerning the recovery of the aid at issue.
32 It is apparent from the reply to that request for information, first, that, on 22 March 2021, Larco was still under special administration, in the light of the time required for the arbitration award relating to the system of ownership of the Larymna smelting plant to be delivered and of the fact that that special administration was to come to an end following a period of 12 months which ran from the date on which it was implemented or a period of nine months which ran from the date of delivery of that award.
33 Second, by that award, delivered on 24 September 2020 and rectified on 8 October 2020, the arbitration tribunal recognised the Greek State’s right of ownership over the Larymna smelting plant and mining complex. Larco continued to lease those assets from the Greek State.
34 Third, further to that award, the two calls for tenders referred to in paragraph 10 of the present judgment, by way of which the Hellenic Republic stated its intention to sell certain assets of Larco, were updated and the special administrator proceeded with the final preparations of the inventory of all of Larco’s assets and liabilities.
35 Fourth, the procedures relating to those calls for tenders were conducted in parallel and were to be completed at the latest by 8 July 2021.
The failure to fulfil obligations
Arguments of the parties
36 In the first place, the Commission claims that the Hellenic Republic failed to take the necessary measures required in order to implement the judgment establishing the failure to fulfil obligations, since over five years after the adoption of Decision 2014/539 and over two years after the delivery of that judgment, the Greek authorities have failed to recover the State aid in question from Larco.
37 According to the Commission, the Greek authorities did not adopt measures for the recovery of that aid until after 29 January 2020, the date on which the present action was brought, contrary to the requirement for immediate and effective implementation of that decision. First of all, Law No 4664/2020, which provides that Larco be put under special administration, was adopted only on 14 February 2020. Next, Larco was put under special administration on 28 February 2020. Lastly, on 13 March 2020, the Greek authorities requested that Larco repay the amount corresponding to that aid within 30 days.
38 In so far as concerns Larco’s special administration, the Commission notes, first, that Article 21(4) of Law No 4664/2020 provides that that company may receive a State subsidy in order to be able to cover its expenditure associated with that administration. According to the Commission, the operating aid granted to Larco, provided for by that provision and intended to relieve that company of expenses which it would normally have had to bear in its day-to-day management or normal activities, constitutes a category of aid which is particularly harmful to competition. It is argued that, in the present case, the Greek authorities have already granted Larco operating aid as part of the special administration.
39 Second, the Commission takes the view that the Hellenic Republic was required to initiate insolvency proceedings against Larco and to register in the schedule of liabilities those liabilities relating to the repayment of the aid concerned within the four-month period referred to in Article 4 of Decision 2014/539. Such registration should have been followed either by the full recovery of the aid in question or by the liquidation of the beneficiary of that aid and the definitive cessation of its activities.
40 The Commission claims that, in the present case, the Hellenic Republic has failed to register liabilities relating to the repayment of the aid concerned in the schedule of liabilities. Pursuant to Article 21(9) of Law No 4664/2020, such formal registration could be effected only after the transfer of Larco’s assets to the highest bidder, following the sale of those assets at auction.
41 According to the Commission, even if the Hellenic Republic’s claim relating to the repayment of the aid in question had been formally registered in the schedule of liabilities after the transfer of Larco’s assets, as provided for by the special administration, full compliance with the judgment establishing the failure to fulfil obligations would be possible only if the proceeds from the liquidation were sufficient to recover the full amount of the aid in question. Failing that, only the liquidation of Larco and the definitive cessation of its activities would make it possible to ensure full compliance with that judgment.
42 In the second place, as regards the Hellenic State’s obligation to inform the Commission, that institution claims that the authorities of that Member State failed to provide, within the prescribed periods, information allowing the accuracy of the calculation of the amount of aid to be recovered to be verified.
43 Thus, those authorities failed to comply with the judgment establishing the failure to fulfil obligations.
44 Furthermore, the Commission takes the view that the fact that Larco’s action for annulment of Decision 2014/539 is, following the judgment of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238), still pending before the General Court is irrelevant to the present case. It argues that the infringement proceedings under Article 260(2) TFEU are independent of those brought under Article 263 TFEU. The Commission states that, by that judgment, the Court of Justice set aside in part the judgment of 1 February 2018, Larko v Commission (T‑423/14, EU:T:2018:57), but did not annul Decision 2014/539, which remains fully enforceable. The Hellenic Republic is therefore required to implement that decision in its entirety.
45 In its defence, the Hellenic Republic contends, in the first place, that the Greek authorities have taken a series of measures which constitute substantial progress in complying with the judgment establishing the failure to fulfil obligations. Thus, on account of Larco’s financial difficulties, on 14 February 2020 the Greek authorities made provision for Larco to be put under special administration, which, they claim, applied from 28 February 2020 and was to end after a period of 12 months which began to run from the date on which it was applied or after a period of nine months which began to run from the date of delivery of the arbitration award relating the dispute concerning the system of ownership of the Larymna smelting plant.
46 First, the Hellenic Republic notes that, compared to the ordinary bankruptcy procedure and the special procedure established by Law No 4307/2014, special administration is a specific insolvency procedure, in the context of which the special administrator proceeds expeditiously with the sale of the assets of the undertaking concerned and carries out a public tendering procedure in order to avoid any depreciation of those assets.
47 Admittedly, putting Larco under special administration did not lead to the immediate cessation of its activities. Keeping the Larymna smelting plant running was, however, deemed necessary in order, first, to maximise the price of Larco’s assets and, second, to ensure the continued production of nickel in Greece, which is of particular importance for both the Greek and European economies.
48 It is argued, furthermore, that the Greek Ministry of the Environment and Energy has the power under national law to grant State subsidies intended to cover the costs necessary for the implementation of the special administration as well as operating costs for the purposes of keeping the undertaking running until the conclusion of that special administration. However, any amounts paid on that basis should be deducted from the sale price of the assets and be returned to the State, without account being taken of the other liabilities registered in the schedule of liabilities.
49 Second, the Hellenic Republic observes that, within five days following the end of the tendering procedure, the special administrator must invite creditors to register their claims definitively and then draw up a definitive schedule of ranking liabilities. As regards, more specifically, the date on which claims are registered in the schedule of liabilities, the Hellenic Republic submits that, unlike the ordinary insolvency procedure – under which registration in the schedule of liabilities takes place prior to the liquidation of the undertaking – under the special administration procedure, that registration is effected once the assets of the company concerned have been sold. In derogation from the applicable general provisions, debts owed to the State which relate to the recovery of unlawful and incompatible aid take precedence over any general or special priority of other creditors.
50 Third, the Hellenic Republic maintains that the definitive cessation of Larco’s activities will occur once that company’s assets are sold, thus ensuring the absence of economic continuity and distortion of competition on the market concerned. Thus, putting Larco under special administration is an irreversible procedure which will lead to the liquidation of that company and to the definitive cessation of its activities. In any event, the Hellenic Republic claims that, if the public tendering procedure were to fail, Larco would be put in bankruptcy and its assets liquidated under the ordinary insolvency procedure. Such a failure would have to be found if, during the special administration, 75% of that undertaking’s assets were not sold.
51 Moreover, the Hellenic Republic does not dispute that Decision 2014/539 remains fully enforceable after delivery of the judgment of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238). However, according to that Member State, in its Notice on the recovery of unlawful and incompatible State aid, the Commission takes the view that, where an action against a recovery decision is pending, provisional implementation of that decision may be achieved, for instance, by way of a payment by the beneficiary of the full recovery amount into an escrow account.
52 In the second place, the Hellenic Republic claims that, by its letter of 13 March 2020, it informed the Commission of all the measures taken with a view to recovering the aid in question. On 14 May 2020, it ordered the recovery of the total amount of that aid.
Findings of the Court
53 As a preliminary point, it should be noted that the action brought by Larco for annulment of Decision 2014/539, which gave rise to the judgment of 26 March 2020, Larko v Commission (C‑244/18 P, EU:C:2020:238), has no bearing on the enforceability of that decision and, consequently, on the present dispute. According to the case-law of the Court of Justice, as is clear from Article 278 TFEU, in the absence of a decision of the General Court to the contrary, an action for annulment does not have suspensory effect. Thus, in principle, the bringing of an action for annulment does not alter the enforceability of the decision the annulment of which is sought (see, to that effect, judgment of 9 July 2015, Commission v France, C‑63/14, EU:C:2015:458, paragraph 47).
54 As to the Hellenic Republic’s argument that, in its Notice on the recovery of unlawful and incompatible State aid, the Commission states that, where an action against a recovery decision is pending, provisional implementation of that decision may be achieved, for instance, by way of a payment by the beneficiary of the full recovery amount into an escrow account, it is sufficient to note that, in the present case, that Member State has failed to provide any evidence demonstrating such a payment.
55 Principally, it must be recalled, in the first place, that it is clear from the case-law of the Court of Justice that the Member State to which a decision requiring recovery of unlawful aid declared incompatible with the internal market is addressed is obliged, under the fourth paragraph of Article 288 TFEU, to take all measures necessary to ensure implementation of that decision. It must succeed in actually recovering the sums owed in order to eliminate the distortion of competition caused by the anticompetitive advantage procured by that aid (judgment of 14 November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraph 68 and the case-law cited).
56 The recovery of unlawful aid declared incompatible with the internal market must be effected without delay and in accordance with the procedures under the national law of the Member State concerned, provided that they allow the immediate and effective execution of the Commission’s decision. To this effect, the Member States concerned are required to take all necessary steps which are available in their respective legal systems, including provisional measures, without prejudice to EU law (judgment of 14 November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraph 69 and the case-law cited).
57 In cases in which the unlawful State aid paid and declared incompatible with the internal market must be recovered from recipient undertakings which are in financial difficulty or are insolvent, it should be recalled that such difficulties do not affect the obligation to recover. The Member State is therefore required, as the case may be, to bring about the liquidation of that company, to have its claim registered as one of that company’s liabilities or to take any other measure enabling the aid to be recovered (judgment of 17 January 2018, Commission v Greece, C‑363/16, EU:C:2018:12, paragraph 36).
58 In particular, according to settled case-law, restoration of the previous situation and elimination of the distortion of competition resulting from that aid may, in principle, be achieved through registration of the debt relating to the repayment of the aid in question in the schedule of liabilities (judgment of 17 January 2018, Commission v Greece, C‑363/16, EU:C:2018:12, paragraph 37 and the case-law cited).
59 However, it must be noted that such registration can satisfy the recovery obligation only if, where the State authorities are unable to recover the full amount of aid, the insolvency proceedings result in the liquidation of the undertaking, that is to say, in the definitive cessation of its activities, which the State authorities are able to bring about in their capacity as shareholders or creditors (judgment of 17 January 2018, Commission v Greece, C‑363/16, EU:C:2018:12, paragraph 38).
60 It follows that the definitive cessation of the activities of the undertaking receiving aid is necessary only where the recovery of the entire amount of the aid remains impossible throughout the insolvency proceedings (judgment of 17 January 2018, Commission v Greece, C‑363/16, EU:C:2018:12, paragraph 39).
61 It should also be recalled that, concerning infringement proceedings under Article 260(2) TFEU, the reference date which must be used for assessing whether there has been a failure to fulfil obligations is that of the expiry of the period prescribed in the letter of formal notice issued under that provision (judgment of 14 November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraph 73 and the case-law cited).
62 In the present case, as has been recalled in paragraph 20 of the present judgment, since the Commission sent the Hellenic Republic a supplementary letter of formal notice on 25 January 2019, in accordance with the procedure laid down in Article 260(2) TFEU, the reference date mentioned in the preceding paragraph of the present judgment is the date of expiry of the period prescribed in that letter, namely 25 March 2019.
63 It is clear that, at that date, the Greek authorities had not complied with the obligation to recover the aid in question.
64 As is apparent from paragraphs 23 to 25, 45 and 52 of the present judgment, the Greek authorities did not adopt measures for the recovery of the aid in question until after 29 January 2020, the date on which the present action was brought. First, Law No 4664/2020 establishing the special administration scheme was in fact adopted on 14 February 2020, that is to say almost one year after the expiry of the period prescribed in the letter of formal notice and almost six years after the date of expiry of the initial period for implementation of Decision 2014/539. Second, it is common ground that the Hellenic Republic put Larco under special administration on 28 February 2020. Third, the request that the amount corresponding to the aid in question be repaid within 30 days was sent to Larco on 13 March 2020. Fourth and lastly, on 14 May 2020, the Greek authorities sent the Greek tax authorities a letter in which they requested that the aid in question be recovered in full from Larco.
65 In those circumstances, the Hellenic Republic cannot validly claim that, on the date of expiry of the period prescribed in the letter of formal notice, it had taken all the measures necessary to implement the procedure for recovery of the State aid at issue.
66 In the second place, as regards the failure to inform the Commission, it should be observed that, on the expiry of the period prescribed in the letter of 25 January 2019, the Hellenic Republic had not submitted to the Commission the information set out in Article 5 of Decision 2014/539.
67 It must therefore be held that, by failing to take all the measures necessary to comply with the judgment establishing the failure to fulfil obligations, the Hellenic Republic has failed to fulfil its obligations under Article 260(1) TFEU.
Financial penalties
The penalty payment
Arguments of the parties
68 The Commission takes the view that the Hellenic Republic’s alleged failure to fulfil obligations is ongoing as at the time of the examination of the facts by the Court.
69 It proposes that the failure to comply with the judgment establishing the failure to fulfil obligations should be penalised, in particular by the payment of a periodic penalty payment, on the basis of Communication SEC(2005) 1658 of 12 December 2005, entitled ‘Application of Article [260 TFEU]’ (OJ 2007 C 126, p. 15; ‘the 2005 Communication’), the Communication on the modification of the calculation method for lump sum payments and daily penalty payments proposed by the Commission in infringement proceedings before the Court of Justice (OJ 2019 C 70, p. 1), and its Communication entitled ‘Updating of data used to calculate lump sum and penalty payments to be proposed by the Commission to the Court of Justice of the European Union in infringement proceedings’ (OJ 2019 C 309, p. 1). The Commission notes that, according to the formula referred to in the 2005 Communication, the daily penalty payment is to be equal to the initial flat-rate amount of EUR 3 116 multiplied by the coefficient for seriousness, the coefficient for duration and the ‘n’ factor.
70 As regards the coefficient for seriousness, the Commission argues that the provisions of the FEU Treaty on State aid which have been infringed in the present case are fundamental. That institution highlights the detrimental effect which the unrecovered unlawful and incompatible aid had on the market on which Larco carries on its activities. Taking into account the characteristics of that market, the Commission takes the view that the adverse effect of the unrecovered aid on competition affects undertakings not only in Greece but also more widely in the European Union.
71 As to whether there are aggravating or mitigating circumstances, the Commission, first, draws attention to repeated failures by the Hellenic Republic in the field of State aid and, second, takes the view that there are no mitigating circumstances in the present case. Consequently, it proposes applying a coefficient for seriousness of 7 on the scale of 1 to 20 established in the 2005 Communication.
72 In so far as concerns the duration of the infringement, the Commission claims that, as at the date on which it decided to bring proceedings before the Court in the present case – namely, 27 November 2019 – the duration of the infringement, the starting point of which is set at the date of delivery of the judgment establishing the failure to fulfil obligations – that is, 9 November 2017 – was 24 months, so that a coefficient for duration of 2.4 on the scale of 1 to 3, also established in that communication, is to be applied.
73 As regards the defendant Member State’s ability to pay and, more specifically, the ‘n’ factor, the Commission observes that, in its judgment of 14 November 2018, Commission v Greece (C‑93/17, EU:C:2018:903), the Court held that, since the voting system within the Council of the European Union had changed since 1 April 2017, the ‘n’ factor could no longer take into account the number of votes of the Member State concerned in the Council, and that the gross domestic product (GDP) of the Member States was to be relied upon as the predominant factor.
74 According to the Commission, it is necessary to retain the institutional weight in the European Union of the Member State concerned as an essential element in the calculation of the ‘n’ factor, for the purposes of imposing penalties which are both proportionate and sufficiently dissuasive. In its view, the taking into account of GDP alone considerably increases the gap between the Member States in respect of that factor. The Commission submits that the method of calculating the ‘n’ factor must be based not solely on demographic or economic weight, but also on the fact that each Member State has an intrinsic value within the institutional framework of the European Union. Therefore, in order to maintain a balance between the ability to pay and the institutional weight in the European Union of a Member State, the ‘n’ factor should be calculated on the basis of, first, the GDP and, second, the number of European Parliament seats allocated to the Member State concerned. Consequently, the Commission takes the view that that ‘n’ factor should be set at 0.51 for the Hellenic Republic.
75 That being so, the use of GDP and the number of European Parliament seats, without any adjustment, would result in a reference value significantly lower than the value resulting from the application of the previous method of calculating the ‘n’ factor. Thus, for the purposes of calculating the standard flat-rate amount for the periodic penalty payment, the Commission proposes that an adjustment factor of 4.5 be used in order to ensure that the amounts of the penalties proposed by the Commission to the Court of Justice remain proportionate and sufficiently dissuasive.
76 Lastly, as regards the frequency of the periodic penalty payment, the Commission takes the view that it should be daily and half-yearly. It argues that, in the present case, daily penalty payments must be free of any degressivity.
77 The Hellenic Republic contends that there is no need to impose financial penalties in the present case, on the ground that considerable progress was made by the very adoption of Law No 4664/2020 and putting Larco under special administration. Furthermore, that Member State states that that special administration is intended, as a whole, to ensure the expeditious liquidation of Larco, either through the sale of its assets by the special administrator in such a way as to obtain the highest possible price, or, in the event that the sale of 75% of the assets is not completed within a period of 12 months, by making it subject to the ordinary insolvency procedure.
78 The Hellenic Republic takes the view that, should the Court consider that a periodic penalty payment must nevertheless be imposed, the amount of the penalty payment sought by the Commission is not adapted to the particular circumstances of the case and does not comply with the principle of proportionality.
79 As regards the seriousness of the infringement, the Hellenic Republic submits, in the first place, that account should be taken, first, of the measures taken at that stage and, second, of the fact that, in the present case, the amount to be recovered, together with interest, calculated up to 14 May 2020, amounts to EUR 160 million, whereas in the case giving rise to the judgment of 14 November 2018, Commission v Greece (C‑93/17, EU:C:2018:903), the amount to be recovered was EUR 670 million. In that context, having regard to the time that would be necessary to bring about substantial progress in the Larco liquidation procedure, that Member State requests that the periodic penalty payment be set on a six-monthly basis.
80 In the second place, the Hellenic Republic contends that it is unlikely that that aid had serious repercussions for the level playing field within the European Union or was the cause of distortions of competition.
81 In the third place, that Member State submits that, as regards the alleged recurrence of its unlawful conduct in the field of State aid, in the case which gave rise to the judgment of 14 November 2018, Commission v Greece (C‑93/17, EU:C:2018:903), the Greek authorities had taken the necessary measures to complete the recovery procedure by liquidating the assets of the company concerned.
82 Consequently, the Hellenic Republic takes the view that it is not appropriate to apply a coefficient for seriousness in excess of 1 in the present case.
83 As regards the coefficient for duration, the Hellenic Republic considers that it should not exceed 1.
84 Lastly, as regards the ability to pay and, more particularly, the ‘n’ factor, like the Commission, the Hellenic Republic takes the view that, for the purposes of calculating the value of that factor, account should be taken not only of economic weight, but also of the institutional weight in the European Union of the Member State concerned. Account should therefore be taken of the number of European Parliament seats allocated to that Member State.
Findings of the Court
85 As a preliminary point, it must be recalled that the procedure laid down in Article 260(2) TFEU is aimed at inducing a defaulting Member State to comply with a judgment establishing a failure to fulfil obligations, thereby ensuring that EU law is in fact applied, and the measures provided for by that provision, namely a lump sum and a penalty payment, are both intended to achieve this objective (judgment of 12 March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 134 and the case-law cited).
86 It should also be recalled that, in each case, it is for the Court to determine, in the light of the circumstances of the case before it and according to the degree of persuasion and deterrence which appears to it to be required, the financial penalties appropriate, in particular, for preventing the recurrence of similar infringements of EU law (judgment of 14 November 2018, Commission v Greece, C‑93/17, not published, EU:C:2018:903, paragraph 107 and the case-law cited).
87 According to the settled case-law of the Court, the imposition of a penalty payment is, in principle, justified only in so far as the failure to comply with an earlier judgment of the Court continues up to the time of the Court’s examination of the facts (judgment of 12 March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 137 and the case-law cited).
88 In order to determine whether the failure to fulfil obligations of which the defendant stands criticised continued up until the Court’s examination of the facts, it is necessary to consider the measures which were adopted, according to the defendant Member State, after the period prescribed in the letter of formal notice (see, to that effect, judgments of 11 December 2012, Commission v Spain, C‑610/10, EU:C:2012:781, paragraph 98, and of 17 September 2015, Commission v Italy, C‑367/14, not published, EU:C:2015:611, paragraph 89).
89 In the present case, the Hellenic Republic claims that Larco remains under special administration and that the two tendering procedures whereby the sale of Larco’s assets could be carried out were to be completed on 8 July 2021.
90 However, it is sufficient to note that the Hellenic Republic has failed to establish that, at the time of the Court’s examination of the facts of the case, it had taken all measures necessary to comply with the judgment establishing the failure to fulfil obligations.
91 In the light of the foregoing, it must be held that the failure to fulfil obligations of which the Hellenic Republic is criticised continued up until the examination of the facts by the Court.
92 In those circumstances, an order imposing a periodic penalty payment on the Hellenic Republic is an appropriate financial means by which to encourage the Hellenic Republic to take the measures necessary to put an end to the infringement established and to ensure full compliance with the judgment establishing failure to fulfil obligations.
93 According to settled case-law, the periodic penalty payment must be decided upon according to the degree of persuasion needed in order for the Member State which has failed to comply with a judgment establishing a breach of obligations to alter its conduct and bring to an end the conduct established (see, to that effect, judgment of 12 March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 147 and the case-law cited).
94 In exercising its discretion, it is for the Court to set the penalty payment at a level that is both appropriate to the circumstances and proportionate to the infringement established and to the ability to pay of the Member State concerned (judgments of 11 December 2012, Commission v Spain, C‑610/10, EU:C:2012:781, paragraph 118 and the case-law cited; of 22 February 2018, Commission v Greece, C‑328/16, EU:C:2018:98, paragraph 90 and the case-law cited; and of 12 March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 148 and the case-law cited).
95 The Commission’s proposals regarding the periodic penalty payment cannot bind the Court and are merely a useful point of reference. Similarly, guidelines such as those set out in the Commission’s communications are not binding on the Court but rather contribute to ensuring that the Commission’s own actions are transparent, foreseeable and consistent with legal certainty when that institution makes proposals to the Court. In proceedings under Article 260(2) TFEU relating to a failure to fulfil obligations on the part of a Member State that has persisted notwithstanding the fact that that same failure to fulfil obligations has already been established in a first judgment delivered under Article 258 TFEU or Article 108(2) TFEU, the Court must remain free to set the penalty payment to be imposed in an amount and in a form that the Court considers appropriate for the purposes of inducing that Member State to bring to an end its failure to comply with the obligations arising under that first judgment of the Court (see judgment of 14 November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraph 119 and the case-law cited).
96 For the purposes of determining the amount of a penalty payment, the basic criteria which must be taken into consideration in order to ensure that that payment has coercive effect and that EU law is applied uniformly and effectively are, in principle, the seriousness of the infringement, its duration and the ability to pay of the Member State in question. In applying those criteria, regard must be had, in particular, to the effects on public and private interests of the failure to comply and to how urgent it is for the Member State concerned to be induced to fulfil its obligations (judgment of 12 March 2020, Commission v Italy (Unlawful aid granted to the hotel industry in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 149 and the case-law cited).
97 In the first place, as regards the seriousness of the infringement, the fundamental nature of the provisions of the FEU Treaty on State aid should be recalled (judgment of 12 March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 150 and the case-law cited).
98 The rules which are the subject of Decision 2014/539 and the judgment establishing the failure to fulfil obligations are the expression of one of the essential missions conferred on the European Union by virtue of Article 3(3) TEU, that is the establishment of the internal market and Protocol (No 27) on the internal market and competition, which, in accordance with Article 51 TEU, is an integral part of the Treaties and under which the internal market concludes a system guaranteeing that competition is not distorted.
99 The importance of the EU rules infringed in a case such as this is reflected, in particular, in the fact that repayment of aid declared unlawful and incompatible with the internal market eliminates the distortion of competition caused by the competitive advantage afforded by the aid and that, by repaying the aid, the recipient forfeits the advantage which it had enjoyed over its competitors on the market (see, to that effect, judgment of 12 March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 151 and the case-law cited).
100 As regards the infringement found in the present case, it should be noted, first, that, notwithstanding the fact that the Hellenic Republic took measures to recover the State aid at issue, it has not recovered that aid in full. That being so, in the light of the rule, recalled in paragraph 94 of the present judgment, that the penalty payment must be appropriate to the circumstances and proportionate to the infringement established, account must be taken of the fact that, although Larco remained the tenant of the Larymna smelting plant and mining complex, following the arbitration award made on 24 September 2020 and rectified on 8 October 2020, the arbitration panel recognised the Greek State’s right of ownership over those assets.
101 Second, it should be noted that the amount of the unrecovered aid is a considerable sum. That amount, together with interest, amounted, on 14 May 2020, to EUR 160 million.
102 Third, account must be taken of the fact that the market in which Larco operates, in particular the ferronickel market, is cross-border. Consequently, the unlawful and incompatible aid which has not been recovered has a detrimental effect on the market, which is not confined to the territory of the Hellenic Republic.
103 Lastly, it must be held that there is a repetition of the conduct infringing the State aid rules by that Member State. The Hellenic Republic has been declared to have failed to fulfil obligations, first, in actions under Article 108(2) TFEU for failure to implement decisions ordering the recovery of aid in the cases which gave rise to the judgments of 1 March 2012, Commission v Greece (C‑354/10, not published, EU:C:2012:109), of 28 June 2012, Commission v Greece (C‑485/10, not published, EU:C:2012:395), of 17 October 2013, Commission v Greece (C‑263/12, not published, EU:C:2013:673), of 9 November 2017, Commission v Greece (C‑481/16, not published, EU:C:2017:845), and of 17 January 2018, Commission v Greece (C‑363/16, EU:C:2018:12), and, second, in an action under Article 228(2), third paragraph, EC in the case which gave rise to the judgment of 7 July 2009, Commission v Greece (C‑369/07, EU:C:2009:428).
104 It must be held that, in the present case, the infringement of the rules of the FEU Treaty on State aid is very serious.
105 As regards, in the second place, the duration of the infringement, it should be borne in mind that that duration must be assessed by reference to the date on which the Court assesses the facts and not the date on which proceedings are brought before it by the Commission (judgment of 12 March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 156 and the case-law cited).
106 In those circumstances, as the Hellenic Republic has been unable to prove that it has put an end to its failure to fulfil its obligations to comply in full with the judgment establishing the failure to fulfil obligations, it must be held that that infringement has continued for more than four years after the date of delivery of that judgment, which is a considerable period of time.
107 In the third place, as regards the ability to pay of the Member State concerned, it is clear from the settled case-law of the Court that it is necessary to take account of recent trends in that Member State’s GDP at the time of the Court’s examination of the facts (judgments of 11 December 2012, Commission v Spain, C‑610/10, EU:C:2012:781, paragraph 131; of 12 March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 158 and the case-law cited; and of 25 February 2021, Commission v Spain (Personal Data Directive – Criminal Law), C‑658/19, EU:C:2021:138, paragraph 83 and the case-law cited).
108 In order to ensure that penalties are proportionate and dissuasive, the Commission proposes to take into account, in addition to the GDP of the Member State concerned, the latter’s institutional weight in the European Union expressed by the number of votes that that Member State has within the European Parliament. The Commission also takes the view that an adjustment coefficient of 4.5 should be used to ensure that the penalties are proportionate and dissuasive.
109 In that regard, it should be recalled, as is apparent from paragraph 95 of the present judgment, that the Commission’s proposals concerning the periodic penalty payment cannot bind the Court and are merely a useful point of reference.
110 Since the mathematical variables used by the Commission to calculate the amount of penalty payments, which are indicative rules setting out the approach which the Commission proposes to follow, they help to ensure that it acts in a manner which is transparent, foreseeable and consistent with legal certainty and are designed to achieve proportionality in the amounts of the penalty payments to be proposed by it (see, to that effect, judgment of 4 July 2000, Commission v Greece, C‑387/97, EU:C:2000:356, paragraphs 86 and 87).
111 In that context, first, it is clear from the case-law subsequent to 1 April 2017, the date from which the old system of weighted votes determining the number of votes of Member States in the Council no longer applies, that for the purposes of assessing the ability to pay of the Member State in question, the Court takes into account the GDP of that Member State as the predominant factor (see, to that effect, judgment of 14 November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraphs 141 and 142).
112 Second, as regards the taking into account of the institutional weight in the European Union of the Member State concerned in order to ensure that the penalties are proportionate and dissuasive, it should be recalled, first, that it is clear from the settled case-law of the Court referred to in paragraph 94 of the present judgment that the proportionality of financial penalties is assessed in the light of the failure to fulfil obligations established and the ability to pay of the Member State concerned.
113 Second, it must be held, as the Advocate General observes in point 35 of his Opinion, that the objective of setting penalties that are sufficiently dissuasive does not necessarily require that account be taken of the institutional weight in the European Union of the Member State concerned.
114 As the Advocate General observes, in essence, in point 29 of his Opinion, the institutional weight in the European Union of the Member State concerned is independent of the characteristics of the infringement at issue.
115 Therefore, taking into account the institutional weight of the Member State concerned is not essential to ensuring sufficient deterrence and inducing that Member State to change its current or future conduct in relation to the grant of State aid.
116 In those circumstances, without prejudice to the possibility for the Commission to propose financial penalties which are based on multiple criteria, with a view, in particular, to allowing a reasonable gap between the various Member States to be maintained, it is necessary to rely on the GDP of the Hellenic Republic as the predominant factor for the purposes of assessing its ability to pay, without taking account of the institutional weight of the Hellenic Republic expressed by the number of votes that that Member State has within the European Parliament for the purposes of setting sufficiently dissuasive and proportionate sanctions.
117 Moreover, as to the Commission’s proposal to use an adjustment coefficient of 4.5, the Commission has failed to establish the objective criteria on the basis of which it fixed the value of that coefficient.
118 As regards the frequency of the periodic penalty payment, the Commission submits that this should be daily.
119 However, account must be taken of the specific character of the operations for recovery of the aid in question.
120 In that connection, account must be taken of the fact that the Greek authorities have taken certain measures which could serve as a basis for complying with the judgment establishing the failure to fulfil obligations. However, the consequences of those measures may not be noticed immediately. It therefore appears that full compliance with Decision 2014/539 and, accordingly, the judgment establishing the failure to fulfil obligations cannot be achieved in short order.
121 It follows that any finding that the infringement has come to an end could be made only after a reasonable period allowing an overall assessment to be made of the results obtained.
122 Therefore, it is appropriate to impose a six-monthly penalty payment to enable the Commission to assess the progress of the measures implementing the judgment establishing the failure to fulfil obligations, having regard to the situation prevailing at the end of the period concerned.
123 In the light of the foregoing and of the Court’s discretion under Article 260(3) TFEU, the Hellenic Republic must be ordered to pay to the Commission a periodic penalty payment of EUR 4 368 000 for each six-month period of delay in implementing the measures necessary to comply with the judgment establishing the failure to fulfil obligations, from the date of delivery of the present judgment until full compliance with the judgment establishing the failure to fulfil obligations.
The lump sum
Arguments of the parties
124 The Commission proposes that the Court determine the amount of the lump sum by multiplying a daily amount by the number of days on which the infringement continues.
125 For calculation of the lump sum, that institution proposes that the same coefficient for seriousness and the same ‘n’ factor as those put forward in respect of periodic penalty payments should be applied. It fixes the basic flat-rate amount, however, at EUR 1 039 per day. In contrast with the calculation of the periodic penalty payment, a coefficient for duration is not applied, given that the duration of the infringement has already been taken into account by multiplying the daily amount by the number of days the infringement persists.
126 The Commission thus proposes that the amount of the lump sum should be equal to the basic flat-rate amount of EUR 1 039 multiplied by the coefficient for seriousness (7) and the ‘n’ factor (0.51), or the sum of EUR 3 709.23, which is itself multiplied by the number of days between delivery of the judgment establishing the failure to fulfil obligations and the date on which the Member State complied with its obligations or, failing that, the date of delivery of the present judgment.
127 The Hellenic Republic contends that the lump sum proposed by the Commission is not appropriate to the particular circumstances and does not comply with the principle of proportionality.
Findings of the Court
128 As a preliminary point it should be recalled that, in exercising the discretion conferred on it in such matters, the Court is empowered to impose a penalty payment and a lump sum payment cumulatively (judgment of 12 March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 163 and the case-law cited).
129 The imposition of a lump sum payment and the fixing of that sum must depend in each individual case on all the relevant factors relating both to the characteristics of the failure to fulfil obligations established and to the conduct of the Member State involved in the procedure initiated under Article 260 TFEU. In that regard, the latter provision confers a wide discretion on the Court in deciding whether to impose such a penalty and, if it decides to do so, in determining the amount (judgment of 12 March 2020, Commission v Italy (unlawful aid to the hotel sector in Sardinia), C‑576/18, not published, EU:C:2020:202, paragraph 164 and the case-law cited).
130 In the present case, all the legal and factual circumstances culminating in the breach of obligations established indicate that, if the future repetition of similar infringements of EU law is to be effectively prevented, a dissuasive measure must be adopted, such as a lump sum payment.
131 In those circumstances, it is for the Court, in the exercise of its discretion, to fix the lump sum in an amount appropriate to the circumstances and proportionate to the infringement (judgment of 14 November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraph 156 and the case-law cited).
132 Relevant considerations in this respect include factors such as the seriousness of the infringement and the length of time for which the infringement has persisted since the delivery of the judgment establishing it (judgment of 14 November 2018, Commission v Greece, C‑93/17, EU:C:2018:903, paragraph 157 and the case-law cited).
133 The circumstances of the present case which must be taken into account are apparent, in particular, from the grounds set out in paragraphs 97 to 117 of the present judgment regarding the seriousness and the duration of the infringement and the ability to pay of the Member State in question.
134 In the light of all the foregoing, the Court considers that proper account of the circumstances of the present case will be taken by setting the amount of the lump sum which the Hellenic Republic will have to pay at EUR 5 500 000.
135 The Hellenic Republic must therefore be ordered to pay to the Commission a lump sum of EUR 5 500 000.
Costs
136 Under Article 138(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission applied for costs and the Hellenic Republic’s failure to fulfil its obligations has been established, the latter must be ordered to pay the costs.
On those grounds, the Court (Second Chamber) hereby:
1. Declares that, by failing to adopt all the measures necessary to comply with the judgment of 9 November 2017, Commission v Greece (C‑481/16, not published, EU:C:2017:845), the Hellenic Republic has failed to fulfil its obligations under Article 260(1) TFEU;
2. Orders the Hellenic Republic to pay the European Commission a periodic penalty payment in the amount of EUR 4 368 000 per six-month period from the date of delivery of the present judgment up to the date of full compliance with the judgment of 9 November 2017, Commission v Greece (C‑481/16, not published, EU:C:2017:845);
3. Orders the Hellenic Republic to pay to the European Commission a lump sum of EUR 5 500 000;
4. Orders the Hellenic Republic to pay the costs.
[Signatures]