State Aid

Last verified on Tuesday 30th July 2019

State Aid: Germany

Sarah Blazek and Helge Heinrich

Noerr

National state aid control - competent authorities

1. Which national authority or body is responsible for the oversight of state aid in your country, in particular the identification of new aid measures and their notification to the European Commission, the monitoring of existing aid measures for compliance with EU state aid rules and decisions, the submission of annual reports on existing aid schemes to the European Commission and cooperation more generally with the European Commission on state aid matters?

Germany

The Federal Republic of Germany is a federal country with 16 states (the Länder) as members. The exercise of state power is divided between the federation and the Länder: both the Länder as member states and the federation as a whole have their own state power. The Länder are states with their own constitutions, parliaments, administrative structures and competences. Accordingly, the competences for granting state aid in Germany lie mainly with the 16 Länder (including municipalities and other state bodies) as well as with the federal government. Against this background, it follows that there is not just one universal state aid authority in Germany.

At national level, the German Federal Ministry for Economic Affairs and Energy (BMWi) is in charge regarding fundamental issues of European state aid control policy. There is a dedicated state aid control policy unit within the BMWi (BMWi-EA6). The BMWi also represents the Federal Republic of Germany in most state aid proceedings before the European Commission. The Federal Ministry of Food and Agriculture (BMEL) and the Federal Ministry of Transport and Digital Infrastructure (BMVI) perform this task only in the special areas of agriculture and transport. At Länder level, dedicated state aid control units have also been established (usually within the respective Länder Ministries for Economic Affairs).

The BMWi’s responsibilities include, in particular, the initial notification of individual aid measures or aid schemes to the European Commission, the monitoring of notification procedures, and – after approval by the European Commission of aid measures – mediation between the European Commission and the various national aid donors (such as federal ministries as well as ministries of the Länder, municipalities and development banks) regarding the implementation of aid measures (eg, in the form of annual reports), including any recovery proceedings (in the event of a negative decision by the European Commission).

Although the federal government is in charge regarding EU state aid proceedings before the European Commission, it normally takes the interests of the Länder (or any other state body) fully into account during such proceedings, as the German federal system tends to be based on cooperation, in particular between the federation and the Länder.

Answer contributed by Sarah Blazek and Helge Heinrich

2. Does any authority monitor the national legislative process to identify potential aid measures? Does this independent authority have sufficient powers to prevent the legislature or government from adopting aid measures that do not comply with EU state aid rules?

Germany

There is no authority that has been tasked with independently monitoring the national legislative process with respect to any state aid concerns. As pointed out in question 1, Germany does not have a special state aid authority dedicated to comprehensively monitoring the national legislative process or to intervening in such a process. Consequently, no powers exist to prevent the adoption of certain state aid measures by such an authority. However, proposed legislation is regularly subject to interministerial coordination and cooperation, which usually ensures adequate consideration of state aid concerns.

Answer contributed by Sarah Blazek and Helge Heinrich

3. What are the competences of the national authority responsible for state aid control, and what is the legal basis for these powers in domestic law? Does this authority have the power to grant interim measures in addition to any interim relief that may be available in the national courts?

Germany

The competences of the BMWi as the authority mainly in charge of fundamental state aid control issues have been described above. The BMWi does not enjoy the power to grant interim measures or any other such enforcement powers. Instead, the BMWi as well as the federal government overall rely on the cooperation of the Länder, the regions, the municipalities and other state bodies that act as aid donors to comply with EU state aid requirements.

Answer contributed by Sarah Blazek and Helge Heinrich

4. Aside from the role played by the European Commission and national courts in enforcing EU state aid rules, does the national authority responsible for state aid control accept complaints made by competitors, other interested parties, or other third parties regarding potentially unlawful and incompatible aid measures?

Germany

Since there is no universal, standalone national authority responsible for state aid control, complainants cannot address their state aid concerns to one central national authority. Competitors usually submit their complaints to the national authority where their issue can most effectively be dealt with (ie, usually to the national authority that has granted the aid or is about to grant the aid or the national authority that supervises the donor authority). Ideally, a complaint should be submitted in enough time and before any aid has been granted so that the relevant authority can sufficiently investigate the case and take any state aid concerns into account before making a decision. Such complaints can often be successful and can result in either less state aid or no state aid being granted. Likewise, apart from competitors, other interested or third parties can theoretically try to address their state aid concerns with the public authorities directly. 

Answer contributed by Sarah Blazek and Helge Heinrich

5. Does the national authority responsible for state aid regularly cooperate or exchange information with the state aid authorities in other member states? If so, are there formal structures to facilitate this cooperation and information exchange, or does this occur on a purely ad hoc basis?

Germany

There is no formalised, structured and regular cooperation or exchange network in place (such as the European Competition Network, ECN in the field of antitrust law). However, cooperation and exchange does take place, be it informal or within the official framework of working groups consisting of the European Commission and Member States’ representatives.

Answer contributed by Sarah Blazek and Helge Heinrich

6. Which body represents your country in state aid proceedings before the EU courts?

Germany

The BMWi represents the Federal Republic of Germany before the European Courts in Luxembourg through the federal government’s Competence Centre for European Law. The representation before the European courts includes ongoing analysis of all pending proceedings before the European courts as well as the EFTA Court of Justice with subsequent notification of the relevant departments as well as the federal legislators (the upper and lower houses of German parliament, the Bundestag and Bundesrat), the provision of expert advice to the bodies concerned and the coordination of the German position in the court proceedings, the legal representation of the Federal Republic of Germany in written and oral proceedings and the evaluation and documentation of case law.

Answer contributed by Sarah Blazek and Helge Heinrich

7. Is there a national register or other central source of data on national aid measures? Are the various state aid reports, complaints, decisions, etc, published?

Germany

There is no such national register or other central source of data that comprehensively covers all state aid measures, nor are the various complaints, decisions etc published in a comprehensive manner.

However, certain state aid reports are publicly available:

Since 1967, the Federal Ministry of Finance (BMF) has published reports providing an overview of the financial assistance and tax benefits in Germany every two years (subsidy reports). The subsidy reports are published only in German but the BMF also releases English summary reports. Both the subsidy reports in German and the English summary reports are available on the BMF website. The 26th Subsidy Report is the most recent publication, covering the years 2015 to 2018. It provides insights into the subsidy policy and the definition of subsidies in Germany and reaffirms the federal government’s commitment to take the subsidy policy guidelines of 28 January 2015 into consideration when handling new or existing subsidy measures. The 26th Subsidy Report outlines trends in subsidies granted in Germany. Although most of the information and figures refer to subsidies granted at federal level (eg, overall volume of federal financial assistance and tax benefits and by economic sector, federal subsidy ratios, information on the 20 largest federal financial assistance items and federal tax benefits), the report also includes data on reported subsidy volumes of the Länder and local authorities, on ERP financial assistance and EU market-related expenditure.

The Advisory Board advises BMF by regularly publishing expert opinions and reports on current issues. On 7 February 2018, a report in English with the title “Tax benefits and EU state aid control: The problem of and approaches to resolving the conflict of jurisdiction with fiscal autonomy” was published on the BMF’s website. It deals with the development that in recent years EU state aid control has increasingly set its sights on tax policy measures. In the opinion of the Advisory Board, in this process, the European Commission and the European Court of Justice tend to apply a very broad definition of state aid that results in considerable legal uncertainty about the classification of national measures and creates problems for companies and member states. The report argues that the broader definition of state aid severely undermines the fiscal autonomy of EU member states and suggests state aid control should be more clearly aligned with the reason for prohibiting state aid, which is to avoid distortions in cross-border trade.

There are also subsidy reports issued by other German institutions. For example, the Kiel Institute for the World Economy publishes periodic subsidy reports. The latest report was published in March 2018 and documents federal grants as well as total tax benefits up to 2017.

Answer contributed by Sarah Blazek and Helge Heinrich

National substantive and procedural rules

8. Describe any recent developments in substantive or procedural rules under domestic law relating to state aid.

Germany

No specific substantial recent developments in substantive or procedural rules in relation to state aid can be reported.

Answer contributed by Sarah Blazek and Helge Heinrich

9. Is there a specific legislative or administrative scheme under national law relating to the application or enforcement of EU state aid rules?

Germany

There is no specific scheme or statutory act under German law that comprehensively deals with the application or enforcement of EU state aid rules. However, various schemes in Germany governing the application and granting of state aid have been approved by the European Commission or qualify as block exemptions. These federal and non-federal schemes cover matters such as regional aid, SMEs, research and development, education and training, environment and nature conservation or energy efficiency and renewable energies (see BMWi’s online federal funding database (Förderdatenbank des Bundes im Internet), which provides detailed and up-to-date information on the available funding programmes at federal, Länder and EU level. It enables a targeted search for suitable funding and at the same time provides an overview of the wide range of public funding on offer).  

Answer contributed by Sarah Blazek and Helge Heinrich

10. Are there national rules or guidelines relating to the implementation of EU state aid rules, in particular EU guidelines?

Germany

Since there is no single German authority dealing with EU state aid issues, there are no comprehensive national rules or guidelines in place relating to the implementation of EU state aid rules. However, to implement the State Aid Modernisation (SAM) Initiative of the European Commission, the BMWi has developed tools such as a compliance strategy for state aid control in Germany. In this context, various handouts, recommendations and working papers were presented on its website, including a State Aid Handbook (dated January 2016, based on the paper The State Aid Manual of the UK Department for Business, Innovation and Skills dated July 2015). Overall, the papers referenced on the BMWi’s website mostly cover the European Commission’s publications. In addition, some of the regional or local authorities have published their own guides on EU state aid rules (eg, regarding SGEIs and infrastructure financing and the promotion of innovation or SME financing).

Answer contributed by Sarah Blazek and Helge Heinrich

11. Are there national rules or guidelines relating to the process of applying for, and the granting of, state support?

Germany

The various aid schemes that exist in Germany (see question 9) mostly provide for specific rules and guidelines to be followed. The online federal funding database further specifies the aim and purpose, the eligible applicants, the criteria, the type and amount of funding as well as the application process for each funding programme. Further information can be found on the website or information available from the relevant federal or non-federal authority or state body responsible for granting the funding measure.

Answer contributed by Sarah Blazek and Helge Heinrich

12. How is the concept of "service of general economic interest" (SGEI) defined on the national level? Did the definition recently lead to disputes, and, if so, how was the dispute adjudicated?

Germany

The concept of SGEI is not comprehensively defined at national level in Germany – no individual piece of legislation comprehensively and specifically deals with SGEI. Although the Altmark criteria and article 106(2) of the Treaty on the Functioning of the European Union (TFEU) are regularly employed in practice by German state authorities to avoid or justify the granting of state aid, such measures are usually designed and carried out on a case-by-case basis, often in the form of contracts or individual administrative acts. Whether a measure has been designed in conformity with the formal and material SGEI criteria after all is therefore usually difficult to assess, especially for a third party.

One recent dispute involved the question of public funding of state-owned hospitals. The medical services provided by the hospitals in question were classified by the German Federal Court of Justice (BGH) as being SGEI exempt from the notification requirement in so far as they were granted on the basis of an adequate entrustment act. The BGH found that the inclusion of the hospitals in the hospital plan meant that their operation was necessary to provide the population with care in line with its needs.

Another recent case worth mentioning concerned aid for the disposal of animal carcasses and slaughterhouse waste in Rhineland-Palatinate. In this case, the German Federal Administrative Court (BVerwG), the highest German administrative court, had concluded that no state aid was involved. The BVerwG came to this conclusion because it found that on the one hand overcapacity would not be used, and, on the other hand, because three of the Altmark criteria were met and the fourth Altmark criterion – the determination of the level of compensation needed based on an analysis of the costs of a typical well-run company – was superfluous since there was no market for this state task and therefore no possibility of comparison. This ruling was overturned by Germany’s Federal Constitutional Court. The ECJ finally confirmed the findings of the European Commission and the CFI of incompatible state aid and underlined that the four Altmark criteria were cumulative conditions.

Another recent dispute concerned the German broadcasting contribution. In December 2018, the ECJ found that the replacement of the former broadcasting fee, which was had been classified by the European Commission as existing aid, by the new 'broadcasting contribution' did not constitute a substantial alteration to the system of financing public broadcasting in Germany and therefore was not notifiable to the European Commission as an alteration to existing state aid.

Answer contributed by Sarah Blazek and Helge Heinrich

13. Do any studies on national enforcement of EU state aid rules exist? If so, describe the main subjects and results of these studies.

Germany

See question 7 regarding published studies and other documents on state aid issues.

Answer contributed by Sarah Blazek and Helge Heinrich

Role of national courts

14. Do all national courts have jurisdiction to apply state aid rules? Or do certain dedicated courts have specific jurisdiction for state aid cases?

Germany

There are no dedicated courts with specific jurisdiction for state aid cases in Germany. All German courts have jurisdiction to apply state aid rules. Therefore, the general procedural framework applies. Whether state aid can or should be granted is basically a question of public law. Thus, litigation relating to a state body’s decision in relation to the granting of aid needs to be brought to the administrative courts. The actual implementation of aid measures, on the one hand, often takes the form of instruments subject to civil law. Therefore, such disputes need to be litigated in civil courts. On the other hand, disputes regarding the implementation of aid in the form of public law contracts, which are governed by public law, need to be litigated in administrative courts. Recent examples are the disputes regarding aid for the disposal of animal carcasses and slaughterhouse waste in Rhineland-Palatinate (administrative courts) or the disputes regarding the airport support cases (civil courts).

Answer contributed by Sarah Blazek and Helge Heinrich

15. Can the judgment of a national court on a state aid matter be appealed? If so, what grounds of appeal are available, and which court can hear the appeals? Does an appeal of a recovery order entail an automatic suspension of the obligation to recover unlawful aid (not notified) pending the outcome of the appeal?

Germany

The judgment of a German court on a state aid matter can be appealed following the normal rules for an appeal, meaning that in particular the wrongful application of German or EU law can be appealed in a court of higher instance. Under normal circumstances, an appeal against a recovery order does not have an automatic suspensory effect. In the case of aid granted by an administrative act, the competent authority may issue a recovery order (ie, another administrative act without an automatic suspension of the obligation to recover the aid if the beneficiary appeals against the recovery order). If the aid was granted by contract, the state body that concluded the contract may (summarily) terminate the contract to recover the aid.

Answer contributed by Sarah Blazek and Helge Heinrich

16. Do national courts sometimes confuse the concept of unlawful aid with incompatible aid?

Germany

We are not aware of this happening regularly. However, the Zweckverband Tierkörperbeseitigung case illustrates that German courts can indeed wrongfully apply the concept of aid. In addition, since there is no dedicated special court that exclusively deals with state aid matters, it could in theory be possible that some lower courts that are not familiar with state aid rules could confuse these concepts. 

Answer contributed by Sarah Blazek and Helge Heinrich

17. Do national courts sometimes confuse the concept of new aid with existing aid?

Germany

See question 16. We are not aware of this happening on a regular basis. In the case regarding the German broadcasting contribution, the competent Regional Court in Tübingen took the view that the broadcasting contribution that replaced the former broadcasting fee was contrary to EU law and referred its questions to the ECJ. The ECJ eventually found that the new rules did not constitute a substantive alteration of the former system which was classified as existing aid and thus was not notifiable.

Answer contributed by Sarah Blazek and Helge Heinrich

18. Do national courts traditionally refer questions regarding the interpretation of EU state aid rules to the Court of Justice? Provide any notable examples of preliminary references made on state aid questions.

Germany

Although the number of referrals varies, in recent years the number of referrals appears to have increased (see, for example, question 17). Other notable examples from the recent past are the airport support cases initiated by airline companies and a case relating to certain German taxation rules. The tax case was referred to the ECJ from Germany’s Federal Fiscal Court regarding a certain tax exemption on real-estate transactions when restructuring a business (German intragroup RETT exemption clause). The ECJ found that the tax exemption did not constitute illegal state aid as it did not fulfil the condition relating to the selectivity of an advantage. The ECJ found that the distinction in German law between companies that qualify under group restructurings and those that do not is justified, since it aims to avoid double taxation and stems from the “general scheme” of Germany’s tax system.

Answer contributed by Sarah Blazek and Helge Heinrich

19. Do national courts use the possibilities offered by article 29 of Regulation 2015/1589 (Procedural Regulation) providing for the amicus curiae conditions in state aid matters? Has the European Commission submitted written observations to national courts and asked authorisation to appear in court hearings?

Germany

This can happen from time to time.

Answer contributed by Sarah Blazek and Helge Heinrich

20. Describe recent developments regarding state aid cases before national courts.

Germany

In addition to the cases mentioned previously (Zweckverband Tierkörperbeseitigung, airport support cases and public financing of state-owned hospitals), the following cases could be mentioned:

In one recent judgment the BGH stated that although the national courts may in principle not deviate from the European Commission’s preliminary assessment in its opening decision that a particular measure constitutes aid, it does not see any absolute and unconditional obligation for the national courts to follow that preliminary assessment without any further consideration. It stated that in the event of doubt, the national court should ask the European Commission or the ECJ for a preliminary ruling. It held in particular that circumstances presented before the national court that were not clearly taken into account in the European Commission’s opening decision could give rise to a such a request.

In one recent case, the Higher Regional Court of Frankfurt (OLG Frankfurt) decided that a lease contract regarding a former horse racetrack site between the German national football association (DFB) and the city of Frankfurt did not constitute state aid. In its complaint, the racing club of Frankfurt had argued that the rent was far below market value and thus constituted illegal state aid. However, OLG Frankfurt decided that the racing club was not covered by the protective purpose of EU state aid rules. It held that the racing club and the DFB were not competitors and did not compete on the same product market. Furthermore, the racing club did not want to use the site for the promotion of football – on the contrary, the use of the land intended by the complainant differed considerably from the use intended by the DFB. OLG Frankfurt held that merely the interest in the use of the site as such was not sufficient for a competitive relationship.

In another recent case, the Higher Administrative Court of Berlin-Brandenburg (OVG Berlin-Brandenburg) ruled that a sport subsidy granted by the Land Berlin to the German Alpine Club DAV in the form of providing an area for the construction of a climbing hall at a significantly reduced rent constituted state aid granted in violation of the notification and standstill obligations. The court held that the DAV qualified as an undertaking, ie, an entity engaged in an economic activity consisting of offering goods and services on a market.

Answer contributed by Sarah Blazek and Helge Heinrich

21. Under national procedural rules, can a government measure be challenged directly in court on the grounds of illegal state aid, or do applicants first have to go through a preliminary administrative review procedure? If so, describe the steps involved in this procedure.

Germany

The methods and modalities by which the allegedly illegal aid has been granted (is it governed by civil law or administrative law, or is it a tax benefit for which fiscal courts have jurisdiction?) and the fact of which authority has granted the measure are decisive for the question of how far an applicant first has to go through a formal administrative review procedure. However, under normal circumstances a measure can be challenged directly in court on the grounds of illegal state aid. The Federal Court of Justice (BGH) as the highest German civil court has clarified that article 108(3) TFEU is in particular a protective law as defined in section 823(2) of the German Civil Code (BGB). This means that claims for information, removal (recovery), injunctive relief and damages are possible. The third-party protective effect of article 108(3) TFEU is also recognised in administrative law.

Answer contributed by Sarah Blazek and Helge Heinrich

22. Under national procedural rules, who has legal standing to challenge a government measure in court on the grounds of illegal state aid?

Germany

The entitled parties are those affected by the aid (ie, at least the current and potential competitors of the aid beneficiary that are affected).

Answer contributed by Sarah Blazek and Helge Heinrich

23. Can a national authority argue in domestic court proceedings that a particular measure contains unlawful state aid, or are there any procedural bars to doing so?

Germany

A national authority can indeed argue that a particular measure contains unlawful state aid and is in breach of the standstill obligation, irrespective of whether the authority itself was the aid donor. The authority is allowed to position itself in contradiction to its own previous conduct in this regard to secure the effectiveness of and the principle of effet utile regarding EU state aid rules. Thus the invocation of a breach of the standstill obligation by the aid donor itself does not constitute an infringement of the prohibition of the legal principle of venire contra factum proprium. In practice, national authorities therefore from time to time tend to play the card of the illegality of their own measure under EU state aid rules if, for whatever political, economic or other reason, they subsequently no longer favour a certain measure and wish to sidestep their obligations. 

Answer contributed by Sarah Blazek and Helge Heinrich

24. What are the limitation periods under national procedural rules for a party seeking to invoke unlawfulness under state aid rules in domestic court proceedings?

Germany

As previously stated, there is no specific comprehensive state aid code in place in Germany. Therefore, the normal procedural rules generally apply, also regarding limitation periods for seeking relief in domestic court proceedings. Thus the limitation period is based on the regular three-year statute of limitations. The commencement of the period is linked not only to an objective condition (start of the existence of the cause of the claim), but also to a subjective one (knowledge or ignorance based on gross negligence of the circumstances giving rise to the claim).

Answer contributed by Sarah Blazek and Helge Heinrich

25. Does any provision of national law prevent an individual with standing from bringing state aid proceedings in the domestic courts concurrently with an investigation by the European Commission (eg, if the individual has complained to the European Commission in parallel, or the European Commission has started an investigation on its own initiative)?

Germany

There is no German legal provision preventing such parallel proceedings. However, there are some practical considerations to be taken into account: there is a substantial cost risk and the burden of proof for establishing that illegal aid has been granted ultimately lies with the plaintiff (who normally suffers from an information deficit regarding evidence for the existence of aid, which has often  been granted in a non-transparent manner) in German court proceedings. Therefore, it is advisable for a plaintiff to take these points into consideration when coming to a strategic decision on which forum to use for a state aid claim (in particular when taking into account that the European Commission might be tempted not to prioritise a case if it is being brought before a national court in parallel). If the European Commission has already opened a formal investigation, according to the Deutsche Lufthansa decision of the ECJ, the European Commission’s decision that a measure is deemed to constitute state aid has a binding effect on national courts. In such a scenario, bringing a case before a German court can prove useful to achieve a suspension of the implementation of a measure and a recovery of payments already made for the time period up to the final decision of the European Commission.

Answer contributed by Sarah Blazek and Helge Heinrich

26. Under which circumstances will a national court stay proceedings as to the existence of state aid pending a European Commission investigation?

Germany

If no formal investigation has been initiated by the European Commission yet, there are no particular circumstances known to us under which a German court will stay proceedings. The Federal Administrative Court (BVerwG), the highest German administrative court, even went so far as to state that when applying the standstill obligation of article 108(3) TFEU, the German courts are obliged to independently and comprehensively examine the existence of state aid, even if the European Commission has issued a decision after only carrying out a preliminary examination of a measure. The scope of such an extensive independent examination requirement on the German courts is, according to the BVerwG, not reduced in cases where the European Commission has already expressed its opinion on the existence of state aid in a decision not to raise any objections (article 4(3) of the procedural regulation). A mere “plausibility check” by a German court was not deemed sufficient in this context. This ruling was, however, heavily criticised and its practical effects are unclear.

In the event that the European Commission has taken the decision to initiate a formal investigation procedure, the ECJ’s Deutsche Lufthansa case law applies. The BGH, the highest German civil court, in principle followed this case law, but provided a slightly modified view. According to the BGH, national courts in principle may not deviate from the European Commission’s preliminary assessment in an opening decision that a certain measure constitutes state aid – a finding that is in line with the Deutsche Lufthansa decision. However, according to the BGH there is no absolute and unconditional obligation on national courts to automatically follow that preliminary assessment. If a German court has any doubts, it can put a question to the European Commission or ask the ECJ for a preliminary ruling. In particular, circumstances raised before the German court that were not clearly taken into account in the European Commission’s decision to initiate the proceedings could give rise to a request for the European Commission’s opinion as to whether it allows for a different state aid assessment by the German court. If the European Commission continues to hold to its view but the reasons put forward did not convince the German court, it would have to refer the matter to the ECJ for a preliminary ruling (see also question 20). If the German court is subsequently required, pending a final decision by the European Commission, to provisionally assume that the measure in question constitutes state aid, it cannot itself conclude that there is a right to information and recovery. Instead, the German court is obliged to give practical effect to the European Commission’s decision to initiate the procedure, but at the same time also to safeguard the interests of the parties concerned and, where appropriate, to take account of exceptional circumstances in an individual case. In particular, the principle of proportionality must be observed. For example, recovery may be found to be disproportionate on the basis of a preliminary assessment by the European Commission if the aid is highly likely to be declared compatible and the recovery seriously threatens the existence of the undertaking concerned.

The practical implications of this judgment are still unclear. Under normal circumstances, it is likely that a German court will continue to comply with the Deutsche Lufthansa case law of the ECJ.

Answer contributed by Sarah Blazek and Helge Heinrich

27. What are the consequences for national courts if the European Commission has already come to the preliminary conclusion in its opening decision that the measure constitutes incompatible state aid?

Germany

This might in particular have an effect on the assessment of the proportionality of a recovery decision; see more details in question 26.

Answer contributed by Sarah Blazek and Helge Heinrich

28. How do national courts react to the Deutsche Lufthansa case? By referring matters to the European Commission (for amicus curiae support) or to the Court of Justice of the European Union (CJEU) for a preliminary ruling under article 267 TFEU?

Germany

There is no particular tendency known to us regarding the reaction of the German courts and the approach preferred by them in the aftermath of the Deutsche Lufthansa decision.

Answer contributed by Sarah Blazek and Helge Heinrich

29. What is the burden of proof in state aid cases before national courts?

Germany

The burden of proof in state aid cases in Germany follows the regular procedural rules. This means that a plaintiff needs to present evidence regarding the entirety of the facts on which the claim is based. A plaintiff needs to provide sufficient evidence that illegal state aid has been granted and that all criteria for state aid are met. This burden of proof rule has numerous practical implications for the plaintiff. Competitors typically have an information deficit regarding the legal basis and the method and modalities of the granting of the (alleged) aid, but it is they who have to present the whole set of facts. Often, a plaintiff will not be in a position to provide such clear evidence. This is the case in particular if the aid has been granted in a more or less disguised form or where it is already difficult to establish the aid character of a measure per se (eg, compensation for SGEI). In the case of claims for damages, an additional level of difficulty arises. It is up to the plaintiff to prove the causality of the breach of the standstill obligation of article 108(3) TFEU for any damage suffered. Although the Deutsche Lufthansa case law (binding effect of the opening decision of the European Commission on national courts, see also question 25) might provide some relief regarding the assessment of a measure as state aid, plaintiffs might potentially tend to abstain from bringing legal action before a German court due to the high burden of proof for the plaintiff. No solution, such as a reversal of the burden of proof under certain circumstances or any other legal principle, has yet been developed by the German courts.

Answer contributed by Sarah Blazek and Helge Heinrich

30. In light of the EU law obligation on national courts to protect the rights of individuals affected by the unlawful implementation of state aid, what are the requirements under national law for a plaintiff seeking interim measures in the courts, in particular to prevent the grant of aid? In what form and under what circumstances can interim relief be granted?

Germany

As previously stated, for state aid cases, broadly speaking the normal procedural rules apply. This also applies to injunctions or interim relief measures. Therefore, a claim for an injunction or interim relief measure first needs to be demonstrated prima facie, which is the material claim asserted or to be asserted by the applicant in the main action. Second, grounds for an injunction need to be established, meaning the urgency of the action. It must be unreasonable for the applicant to pursue the claim in regular legal proceedings due to lack of time. However, the same burden of proof issues as for regular legal proceedings (see question 29 for more details) are relevant for injunctions or interim relief measures. In addition, the party that has obtained an injunction is, according to section 945 of the German Code of Civil Procedure, under certain circumstances obliged to compensate the opponent for damages incurred if the injunction proves to have been unfounded. Against this background, it is not surprising that very few cases are known where competitors have not been deterred by the requirements and risks and have successfully been granted an injunction or interim relief.

Answer contributed by Sarah Blazek and Helge Heinrich

Consequences of violation of state aid rules

31. What remedies are available to a national court if it determines that a non-notified measure contained state aid?

Germany

According to the established case law of the BGH, the highest German civil court, a measure that contains state aid and violates the standstill obligation of article 108(3) TFEU is null and void pursuant to section 134 of the German Civil Code (BGB). Consequently, the aid can be recovered (usually by the state body that was the aid donor). However, the BGH subsequently ruled that an infringement of the standstill obligation does not necessarily lead to the contract by which the aid was granted being completely null and void, but can also result in the partial nullity of a contract. If the aid element is, for example, a price below market level, it is sufficient to require the beneficiary to pay back the difference between the agreed price and the higher adequate market price plus the interest up until recovery to eliminate the competitive advantage that was unlawfully obtained by the beneficiary. The finding of partial nullity only is subject to certain conditions that need to be met in an individual case.

Answer contributed by Sarah Blazek and Helge Heinrich

32. In light of the EU law requirement that national courts must, in principle, order the full recovery of unlawful state aid from a beneficiary, are there any domestic law provisions that may hinder a national court from ordering the recovery of non-notified state aid? Do national courts set aside such domestic law provisions as required by the Court of Justice’s case law?

Germany

There are no domestic law provisions that would hinder a recovery of state aid. Although administrative acts by which state aid has been granted may in principle only be withdrawn under German law subject to certain restrictions in the German Administrative Procedure Act (VwVfG), it is established case law that an aid beneficiary can only rely on the legality of the aid if it was granted in compliance with article 108(3) TFEU. The Alcan case law of the ECJ is generally reflected in German case law. The competent German authority is therefore obliged to comply with the European Commission’s recovery request, even if, for example, the relevant limitation period that exists under German law (in the interest of legal certainty) has passed, if the authority is responsible for the illegality to such an extent that the withdrawal appears to be a breach of good faith towards the aid beneficiary or even if the withdrawal in principle is excluded under German law due to the loss of enrichment or due to the lack of bad faith of the aid recipient.

Answer contributed by Sarah Blazek and Helge Heinrich

Enforcement by the European Commission

33. Would the national court necessarily declare a guarantee invalid if it secures a loan constituting aid and was granted in breach of article 108(3) TFEU? Does it make a difference if the only aid beneficiary is the borrower and not the lender?

Germany

This question has been intensively debated, not only at European level, but also at German level following the Residex judgment of the ECJ and subsequent decisions, such as in particular the judgment of the General Court in the ARCO case. While there are good arguments that can be put forward for the view that in a triangular constellation in which the borrower was the only aid beneficiary and not the lender (eg, the bank), the lender should still be allowed to rely on the validity of a guarantee, there is no specific case law by any of the higher German courts yet which has clarified this issue.

Answer contributed by Sarah Blazek and Helge Heinrich

34. How can a competitor of the beneficiary or other affected third parties claim compensation from the authority granting the state aid for damages caused by the aid? Explain the steps involved in bringing such an action for damages. Explain the steps involved in bringing such an action for damages and how national courts have applied the criteria of the relevant EU case law.

Germany

In general, competitors can bring such an action for damages before a German civil court according to the principles of the Francovich decision of the ECJ and other case law of the European courts in line with this. Such actions for damages due to government liability could be based on section 839 of the German Civil Code in conjunction with article 34 Basic Law for the Federal Republic of Germany and article 108(3) TFEU. However, up to now, there has been no successful case to our knowledge. The main reason is likely the high burden of proof: In practice, it is difficult to prove causality between the breach of a member state’s procedural obligations and damage. In particular, the competitor must prove that the illegal aid was used by the beneficiary to undercut prices and that it was precisely this conduct that caused the competitor damage.

Answer contributed by Sarah Blazek and Helge Heinrich

35. How can a third party claim compensation from the member state for damage caused by failure to respect the standstill obligation?

Germany

See question 34 – in general, the same reasoning also applies also to third parties. However, legal standing would have to be established first by a third party and the practical difficulties regarding the burden of proof for third parties would be even higher in such a scenario. Since not even competitors have been successful regarding such compensation claims in Germany, the chances of success of a third-party compensation claim currently seem rather slim.

Answer contributed by Sarah Blazek and Helge Heinrich

36. Under national law, can a third party bring damages actions against the beneficiary?

Germany

This is possible in a scenario where the state is at the same time the donor and the beneficiary of the aid. In theory, a complaint by a competitor affected by the unlawful granting of the aid directly brought against the (non-state) aid beneficiary, particularly actions for damages, could also be conceivable. According to the case law of the BGH, the highest German civil court, article 108(3) TFEU constitutes also a statutory provision which is also intended to regulate market conduct in the interest of market participants as defined in section 3a (formerly section 4 no. 11) of the German Act Against Unfair Competition (UWG). However, this is only a hypothetical option so far.

Answer contributed by Sarah Blazek and Helge Heinrich

37. Under national law, how can a beneficiary bring damages actions against the member state as per the SFEI case law of the Court of Justice for having unlawfully granted aid? How do national courts avoid the risk of circumvention of EU state aid rules?

Germany

See question 26.

Answer contributed by Sarah Blazek and Helge Heinrich

38. What are the consequences of a violation of EU state aid rules for the validity and enforceability of the aid measure under national law? Are the consequences the same for unlawful aid that was not notified to the European Commission as for aid that the European Commission has ultimately determined as incompatible with the internal market?

Germany

See question 31. According to the established case law of the BGH, the highest German civil court, a measure that contains state aid and violates the standstill obligation of article 108(3) TFEU is null and void pursuant to section 134 BGB (German Civil Code). Consequently, the aid can be recovered (usually by the state body that was the aid donor). If the aid measure has been declared to be incompatible with the internal market, the same consequences apply.  

Answer contributed by Sarah Blazek and Helge Heinrich

Recovery of state aid

39. What are the consequences of a violation of EU state aid rules for the validity of a government regulation or contract containing the aid measure, and for subsequent regulations or contracts linked to the aid measure? Are the consequences the same for unlawful aid that was not notified to the European Commission as for aid that the Commission has ultimately determined to be incompatible with the internal market?

Germany

Regarding the consequences for government contracts, see in particular question 31. If a government regulation infringes EU state aid rules, it may not be implemented.

Answer contributed by Sarah Blazek and Helge Heinrich

40. Describe any major state aid investigations opened by the Commission against your country over the past 12 months. State whether these investigations were specific to your country or part of a broader investigation into several member states.

Germany

In addition to the investigations carried out by the European Commission in the context of sector inquiry into national capacity mechanisms regarding various member states, there have been no other major, particularly noteworthy state aid investigations against Germany in the past 12 months. It could be mentioned that in October 2018, the European Commission (again) looked into aid in the context of the German airport Frankfurt-Hahn. It opened an in-depth investigation to assess whether measures in favour of Ryanair at the airport of Frankfurt-Hahn are in line with state aid rules. The Commission will also investigate certain measures in favour of the airport operator FFHG. This investigation falls within the European Commission’s broader state aid policy approach regarding airports and airlines in the member states.

Answer contributed by Sarah Blazek and Helge Heinrich

41. Has the European Commission suggested appropriate measures concerning existing aid measures in your country over the past 12 months?

Germany

No, such measures have not been suggested.

Answer contributed by Sarah Blazek and Helge Heinrich

42. Has the European Commission ever opened specific investigations against your country following a sector inquiry?

Germany

On 29 April 2015, the European Commission launched a state aid sector inquiry into national capacity mechanisms. The European Commission adopted the final report on the results of the sector inquiry on 30 November 2016. Subsequently, the European Commission approved a German measure to stabilise the electricity network by reducing electricity consumption of large consumers under EU state aid rules (interruptibility scheme AbLaV). Furthermore, the European Commission approved German plans to put in place a reserve to ensure sufficient electricity capacity in Southern Germany (the “network reserve”) for four years. Finally, the European Commission authorised Germany’s plans for strategic capacity reserves keeping certain generation capacities outside the electricity market for operation only in emergencies.

Answer contributed by Sarah Blazek and Helge Heinrich

43. Has your country ever been subject to an injunction by the European Commission to suspend or provisionally recover aid under article 13 of Regulation 2015/1589?

Germany

We are not aware that any such injunction has ever occurred. 

Answer contributed by Sarah Blazek and Helge Heinrich

44. Has your country ever been subject to an infringement procedure under article 108(2) TFEU and article 260 TFEU?

Germany

Yes, Germany has been subject to such an infringement procedure. The most recent and well-known cases were, eg, the Deutsche Post case (the European Commission had referred Germany to the ECJ for failing to comply with a European Commission decision of January 2012 ordering the recovery of incompatible state aid from Deutsche Post) and the Biria case (the European Commission had ordered Germany to recover aid granted to Biria Group, a producer of bicycles, and the order had not been enforced nearly two years after it was adopted).

Answer contributed by Sarah Blazek and Helge Heinrich

45. Has the European Commission ever undertaken on-site state aid monitoring visits based on article 27 Regulation 2015/1589 (previously article 22 of Regulation 659/1999)? How were the visits carried out? What measures were taken to assist the officials and experts carrying out the visit?

Germany

We are not aware of any such on-site state aid monitoring visits by the European Commission (if such visits have indeed taken place, they were not widely publicised).

Answer contributed by Sarah Blazek and Helge Heinrich

Main areas of state aid

46. Which national authority orders the recovery of state aid following a European Commission decision, a judgment of the Court of Justice, or a national court judgment?

Germany

In all scenarios of a European Commission decision, a judgment by the ECJ or a national court judgment, the recovery of state aid would be ordered by the administrative body or government unit that granted the aid. Depending on the form in which the aid was granted, the aid donor would issue an administrative recovery order or terminate the civil or public law contract and reclaim the state aid amount under the law of unjust enrichment.

Answer contributed by Sarah Blazek and Helge Heinrich

47. What procedural or administrative actions are contemplated in the national law for the recovery of unlawful or incompatible state aid?

Germany

As no specific rules apply regarding the recovery of unlawful or incompatible state aid, the recovery of state aid follows the same procedural rules as those applying to the granting of the aid. This means that if the aid was granted through an administrative act, the donor would withdraw its administrative act granting the aid and issue an administrative act ordering the recovery of the aid amount. However, if the aid was based on a civil or public law contract, the aid donor would have to terminate the contract and claim back the amount of aid provided under the law of unjust enrichment. To ensure a speedy recovery of the aid it was contemplated whether the aid donor should be entitled to always issue an administrative recovery order even if the aid was originally granted through a civil or public law contract providing for certain termination rights of the parties, too.

Answer contributed by Sarah Blazek and Helge Heinrich

Other

48. What actions are available to the national recovering authority seeking to force an unwilling beneficiary to refund the unlawful and incompatible state aid?

Germany

If the beneficiary does not accept the administrative recovery order of the aid or a termination of the civil or public law contract granting the aid, litigation before civil or administrative courts will follow. Once either the original recovery order or a judgment by civil or administrative courts has become final and may not be contested any more, the authority may rely on the normal forms of enforcing final administrative acts or court decisions (usually by threatening and issuing penalty payments in administrative proceedings or by relying on a bailiff in civil proceedings).

Answer contributed by Sarah Blazek and Helge Heinrich

49. Can an individual with standing bring an action in the national courts for the purpose of: challenging the validity of the national recovery order implementing the European Commission’s recovery decision; or suspending the national recovery order pending a final decision either on the validity of the national recovery order itself, or on the validity of the European Commission’s recovery decision?

Germany

Usually this will only be relevant for the beneficiary. As such, the beneficiary can contest the validity of an administrative recovery order before administrative courts, if applicable, before civil courts; the beneficiary may also try to suspend recovery proceedings until a final decision on the validity of the recovery decision has been obtained. The latter also holds true with regard to suspending the recovery procedure until the European Commission’s incompatibility and recovery decision has become final and non-contestable. However, once the European Commission’s recovery decision has become final, the beneficiary may not use the national recovery proceedings to seek a review of the validity of the European Commission’s recovery decision (eg, through a referral by the national court to the ECJ for a preliminary ruling on the validity of the recovery decision).

Answer contributed by Sarah Blazek and Helge Heinrich

50. Can third parties with standing obtain a mandatory order from the court that forces the relevant national authority to recover funds from a beneficiary of incompatible state aid where the former has failed to implement a recovery decision by the European Commission?

Germany

Yes, this would be possible if the authority failed to or did not implement a recovery decision by the European Commission.

Answer contributed by Sarah Blazek and Helge Heinrich

51. What defences by beneficiaries against recovery have been accepted by national authorities or courts?

Germany

National courts, in general, have not accepted many defences brought by beneficiaries against the recovery of aid. Most scenarios relate to the protection of legitimate expectations, the applicability of time-barring rules and the impossibility to pay back the aid amount. However, under the case law of the ECJ, the defence of legitimate expectation is only available in very narrow circumstances (if at all) and this has been accepted by German courts. Apart from that, the recovery order needs to be directed against the right legal entity. This becomes relevant if the aid recipient entity became insolvent in the meantime. So far it seems that German courts would not recognise that a recovery order directed against a specific legal entity could be simply converted within the same administrative proceedings against a new recipient entity that may be part of the same corporate group as the other entity.

Answer contributed by Sarah Blazek and Helge Heinrich

52. Provide information on any other special features of your country’s state aid regime not covered above.

Germany

Answer contributed by Sarah Blazek and Helge Heinrich

53. What is the situation under national law if recovery was ordered by a national court owing to the violation of the standstill obligation but the aid is later declared compatible with the internal market by the European Commission?

Germany

German courts as well as the competent authorities will, of course, take note of the case law by the ECJ holding that a violation of the standstill obligation cannot be remedied by a subsequent decision of the European Commission declaring the aid compatible with the internal market (leading to a compatible aid decision with ex nunc effect only). Still, there does not seem to be any German case law similar to the French saga of the CELF cases. Accordingly, no German cases have been reported so far where authorities or courts have ordered the payment of interest for the interim period.

Answer contributed by Sarah Blazek and Helge Heinrich

54. How do national courts apply the CELF I case law (Case C-199/06)?

Germany

Please see answer to question 52.

Answer contributed by Sarah Blazek and Helge Heinrich

55. How do national courts handle cases where the European Commission has not yet decided on compatibility?

Germany

It should be differentiated here between cases where only the aid beneficiary is affected and cases where a competitor is (actively) involved. When only the aid beneficiary is affected, courts could stay proceedings and wait what the final outcome of the proceedings before the EU Commission looks like. In the case of a competitor claim against a violation of the standstill obligation, courts may not simply stay proceedings and have to decide on the merits of the case to ensure the constitutional right for effective judicial protection of the competitor of the aid beneficiary. Therefore, courts will have to take a decision on the question whether state aid within the meaning of article 107(1) is involved and how to remedy it (eg, by ordering the interim recovery of the aid or by stopping the further payment of aid amounts to the beneficiary).

Answer contributed by Sarah Blazek and Helge Heinrich

56. Are the recovery interests paid by a beneficiary tax deductible under national tax rules?

Germany

(Late) interest payments on taxes or public charges are deductible if the taxes or public charges are tax deductible as operating costs or business expenses as such. In light of this (and depending on the assessment of the individual case) recovery interests may not be accepted as tax deductible.

Answer contributed by Sarah Blazek and Helge Heinrich

57. Is aid that was granted in the form of a fiscal measure always recovered through a new tax assessment, or do the national authorities use the freedom of choice under EU law to recover through the easiest available and most efficient method, even if not fiscal?

Germany

It is usually recovered through a new or adjusted tax assessment as this will be easiest and most efficient method available.

Answer contributed by Sarah Blazek and Helge Heinrich

58. Which sectors have received the highest amounts of aid in the past five years?

Germany

We refer to the 26th Subsidy Report of the German federal government, a summary of which is also available in English (see also question 58). The report outlines trends in federal financial assistance and tax benefits during the period from 2015 to 2018. Overall, the total amount of subsidies increased from €20.9 billion in 2015 to €25.2 billion in 2018, whereas the Federation’s revenue shortfall from tax benefits increased from €15.4 billion in 2015 to €16.1 billion in 2018 (included in the overall figure; federal financial assistance without tax benefits was projected to increase from €5.5 billion in 2015 to an estimated total of €9.1 billion in 2018). The individual subsidies that account for the greatest share of this increase are support for the nationwide expansion of broadband networks; measures to promote energy-efficient building refurbishment and to improve energy efficiency; a new financial assistance measure to optimise pumping and heating systems; and a new subsidy for purchases of electric cars.

Answer contributed by Sarah Blazek and Helge Heinrich

59. Provide information on the amounts of state aid paid out under approved state aid schemes and individually approved state aid for the past five years.

Germany

A good overview of state aid granted at various levels in Germany may be found in the English-language summary of the 26th Subsidy Report of the German Federal Government (https://www.bundesfinanzministerium.de/Content/EN/Standardartikel/Press_Room/Publications/Brochures/2018-01-24-26th-subsidy-report-summary-download.pdf?__blob=publicationFile&v=8). The German long version is more than 400 pages long and contains a lot of detailed figures on the grant of state aid in Germany (https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren_Bestellservice/2017-09-21-subventionsbericht-langfassung.html).

 

Answer contributed by Sarah Blazek and Helge Heinrich

60. Provide information on any other special features of your country’s state aid regime not covered above.

Germany

Not applicable.

Answer contributed by Sarah Blazek and Helge Heinrich

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