German Court Rules No Claim to COVID-19 Aid Based on EU State Aid Prohibition
A recent ruling by the Mannheim Higher Regional Court (VGH Mannheim) has clarified a critical point regarding Germany’s COVID-19 relief programs. The court determined that businesses cannot claim entitlement to Corona-Überbrückungshilfe (Bridge Loan) simply since the EU’s state aid prohibition – Article 108(3)(3) of the Treaty on the Functioning of the European Union (TFEU) – may have been violated. This decision impacts ongoing legal challenges related to the disbursement of pandemic-era financial assistance.
The Core of the Issue: The State Aid Prohibition
Article 108(3)(3) TFEU prevents a member state from implementing state aid before the European Commission has issued a final decision on its compatibility with the internal market. Essentially, all state aid must be reported to the Commission for approval before it’s granted. Failure to do so, or exceeding approved limits, constitutes a breach of the prohibition.
The case stems from a company that applied for and was denied Überbrückungshilfe III, as it couldn’t demonstrate the required 30% revenue decline compared to its 2019 figures. The company argued that the aid was improperly implemented due to the additional 30% revenue decline requirement, which wasn’t part of the originally notified “Allgemeine Bundesregelung Schadensausgleich, COVID-19” (General Federal Regulation for Damage Compensation, COVID-19) scheme. They posited that this deviation violated the state aid prohibition and therefore entitled them to the aid.
Court’s Decision: Prohibition Doesn’t Equal Entitlement
The VGH Mannheim unequivocally rejected this argument. The court emphasized that the state aid prohibition is a prohibition – it doesn’t create a right to receive aid. A violation of the prohibition may lead to the revocation of improperly granted aid, but it doesn’t obligate authorities to provide aid to those who were initially denied.
The court distinguished between a claim for aid (Bescheidungsklage) and a challenge to aid granted to competitors (Anfechtungsklage). Businesses seeking aid cannot leverage a potential violation of the state aid rules by competitors to force authorities to grant them aid. The correct course of action for a company believing a competitor received aid improperly is to challenge the competitor’s aid approval through an Anfechtungsklage.
Implications for Current and Future Cases
This ruling builds upon existing case law, particularly concerning aid granted after June 30, 2022, when the initial federal aid framework expired. Several courts, including the Higher Administrative Court of Münster (OVG Münster), have indicated that aid granted after this date may be subject to recall due to violations of the state aid prohibition.
However, the Mannheim decision clarifies that even if aid was improperly granted to others, this doesn’t automatically create a claim for those who were denied. The focus remains on whether the aid was lawfully granted in the first place, and whether improperly granted aid must be recovered.
What Does This Imply for Businesses?
Businesses should be aware that simply pointing to a potential violation of EU state aid rules will not guarantee access to COVID-19 relief funds. The court’s decision underscores the importance of meeting the specific eligibility criteria for each aid program.
companies concerned about unfair competition from subsidized rivals should pursue legal challenges directly against the aid granted to those competitors, rather than attempting to use the state aid prohibition as a basis for their own claim.
FAQ
Q: Does this ruling affect cases where aid was already repaid?
A: No, this ruling primarily addresses situations where a company was denied aid and attempted to use the state aid prohibition to force its approval. It doesn’t directly impact cases involving repayments of previously granted aid.
Q: What is Article 108(3)(3) TFEU?
A: It’s a provision of the Treaty on the Functioning of the European Union that prohibits member states from implementing state aid before it has been approved by the European Commission.
Q: What should businesses do if they believe a competitor received aid improperly?
A: They should file an Anfechtungsklage (action for judicial review) against the decision granting aid to the competitor.
Q: Does the expiration of the initial aid framework on June 30, 2022, mean all aid granted after that date is illegal?
A: Not necessarily, but it increases the risk that such aid may be deemed unlawful and subject to recovery. Several courts are currently examining this issue.
