Find Publication
During the times of recession the government is still willing to help the national leaders escape bankruptcy, as state aid measures not only ensure future flow of taxes, but also help avoiding the unemployment, increase the available cash flow and otherwise stimulate the economy, at least on regional levels. We have already provided you in the past with the overview of the available state aid measures, but there may be more help needed in the future.
While receiving the state aid may be a turning point in the fight for survival, we would like to warn you on the possible consequences of receiving illegal state aid.
The European Community Treaty's state aid rules (Article 88(3)) oblige Member States to not only notify state aid measures to the Commission before their implementation, but also to await the outcome of the Commission's investigation before implementing notified measures. When either of these obligations is not respected, the state aid measure is considered to be "illegal".
When an illegal state aid has been received the company, beneficiary of the aid in question, not only becomes obliged to repay all the illegal state aid, but is also ordered to repay the interest for the whole period during which the illegally received funds were in its possession. In practice, illegal state aid cases are known to be discovered and investigated for quite long period of time and, accordingly, the amount of interest accrued during the said period may be "killing".
Indeed, state aid is normally granted for big projects (companies) and therefore the amounts granted within the framework of the state aid measures could reach gigantic amounts. Thus, paying out all of the money at once together with the interest has result in almost 10% of all the beneficiaries of illegal state aid to bankrupt (according to the statistics, published by the European Commission in spring 2009). Other companies may have recovered, but the financial consequences are very serious.
A recent example (June 2009) of such cases is the decision of the European Commission to refer Italy to the European Court of Justice for the failure to recover illegal state aid. Although over five years have elapsed since Italy was requested to recover the illegally granted aid, Italy has still only recovered a small part of the overall aid amount estimated at about 281 million euro. The European Commission therefore now requests the European court to impose further fines on Italy.
We hope that our Clients and Friends are getting well through the current crisis, but if it happens and you request state aid from the government, make sure the measure in question has been duly approved by the European Commission.
