On November 13, 2024, the General Court ruled in Case T-141/23 that the Commission failed to meet its obligations under Regulation 2015/1589 (“State aid Procedural Regulation” or “Regulation”),[1] which governs the application of Article 108 TFEU on State aid review in the EU.[2] The General Court held that the Commission’s inaction regarding alleged illegal aid granted by the Kingdom of the Netherlands (“the Netherlands”) to Dutch beam trawlers with pulsed electric currents – prior to the formal ban on electric fishing in the EU in July 2021– constituted a failure to act.
Background of the dispute
In March 2021, 36 French, Dutch, and British fishermen, together with the European association of small fishermen, the Low Impact Fishers of Europe (“LIFE”) (collectively, “the applicants”), filed complaints with the Commission. They claimed that Dutch authorities had unlawfully granted fishing authorizations to Dutch shipowners using beam trawls with pulsed electric currents, exceeding the 5% limit imposed on each Member State’s beam trawler fleet for electrical pulse fishing. They also contended that funding provided to these trawlers under the European Fisheries Fund[3] (“EFF”) and the European Maritime and Fisheries Fund[4] (“EMFF”) was unlawful and incompatible with EU State aid rules.
In an April 2021 letter, the DG Competition stated that contested funding fell within the scope of either EFF or EMFF, so that the measures should be assessed under the rules governing the common fisheries policy, rather than State aid rules. DG Competition advised the applicants to direct their complaints to DG for Maritime Affairs and Fisheries (DG MARE). The applicants disagreed, emphasizing that funding granted in violation of EFF or EMFF regulations must still be assessed under State aid rules. They urged the Commission to identify the funding sources and determine whether they constituted unlawful aid.
In November 2021, the Commission wrote that it found no evidence of potentially unlawful State aid that would require the opening of a formal investigation. The applicants then submitted additional evidence in April 2022, including lists of Dutch beam trawlers benefiting from the fund and pointing to an investment aid program entirely funded by the Netherlands for equipping certain beam trawlers with electrical pulse fishing technology.
After examining the new information, in September 2022 the Commission reiterated that there was no evidence of breaches in EFF and EMFF rules or unlawful State aid requiring further examination. As the Commission had not, to this point, adopted any decision under the State aid Procedural Regulation, in November 2022 the applicants formally called upon the Commission to do so under Article 265 TFUE.
On February 14, 2023, the Commission sent a letter to the applicants informing them that it intended to close the case, stating that there was no basis to initiate proceedings against the Netherlands, nor to pursue further examination of the case. The Commission invited the applicants to provide any new relevant information within four weeks, after which the case would be closed. In the absence of any decision taken by the Commission in application of the State aid Procedural Regulation, the applicants lodged an action for failure to act before the General Court.
Findings of the General Court
The General Court referred to situations in which the Commission is required to act in respect of unlawful or incompatible State aid, as outline in Article 12(1) of the State aid Procedural Regulation which mandates the Commission to examine any complaint submitted by any interested party without undue delay. In addition, Article 24(2) of the Regulation provides that if a prima facie assessment of the facts and legal arguments do not offer sufficient grounds to establish unlawful State aid or misuse of aid, the Commission must issue a pre-closure letter notifying the interested party and invite them to submit comments within a specified period (which cannot normally exceed one month). If the party does not respond within the prescribed timeframe, the complaint is deemed withdrawn. Under the first sentence of Article 15(1) of the Regulation, the examination of potential unlawful aid must result in a formal decision under Article 4 of the Regulation.
On the admissibility of the action, the General Court referenced the principle under Article 265 TFEU which states that an “institution has not failed to act, not only when it adopts a measure vindicating the applicant, but also when it refuses to adopt such a measure but answers the request made to it with a statement of the reasons why it considers that that measure should not be adopted or that it does not have the power to do so.”[5] The General Court further noted that when faced with an applicant’s call to act, the Commission shall do so in a clear and definitive manner.[6] It is thus only outside these cases that an action for failure to act can be deemed admissible.
In light of these principles, the General Court examined the Commission’s exchanges with the applicants (i) on the existence of funding granted in breach of the EEF and EMFF rules, and (ii) on the existence of national subsidies constituting State aid:
- Regarding the contested EFF and EMFF funding, the General Court ruled that the Commission’s response included both a statement of reasons and argued a lack of competence to adopt a decision that had to be carried out in accordance with the specific procedures laid down in the EFF and EMFF regulations. Second, the General Court chose a contextual approach in assessing whether the Commission’s position was clear and definitive in nature. It ruled that when read in context of (and in conjunction with) the exchanges it preceded, the Commission’s February 14, 2023 letter constituted a clear and definitive position taken by the Commission. Following this approach, the General Court ruled that any action for failure to act regarding EFF and EMFF funding was inadmissible.[7]
- Regarding the contested national aid, the General Court found that the Commission failed to take a clear and definitive position as required under Article 265 TFEU. First, by interpreting the applicants’ complaints as only concerning the EFF and EMFF funding, the Commission conducted an incomplete assessment by omitting to express its opinion on the Dutch aid scheme. The General Court further sided against the Commission by ruling that the February 14, 2023 letter could not qualify as a pre-closure letter under the second subparagraph of Article 24(2) of the State aid Procedural Regulation. This was because the Commission could not simultaneously argue that the letter served as such while previously asserting it lacked competence to adopt a decision under the same Regulation. The General Court ultimately held that the applicants’ action was admissible insofar as it concerned the contested national aid. On substance, the General Court found that the Commission failed to take any action or adopt a formal decision, despite receiving complaints detailing alleged unlawful aid or misuse of aid. Consequently, at the end of the statutory two-month period following the call to act, the Commission’s inaction confirmed the applicants’ claim that the Commission did not fulfil its obligation under the Regulation, with respect to the contested national aid.
Key takeaways
The judgment, issued by the General Court in extended composition, is a rare instance where the EU judicature acknowledged the Commission’s failure to act in the area of State aid. It offers valuable insight into the rules governing the admissibility of such actions, particularly when the institution has been explicitly required to adopt a clear and definitive stance on alleged unlawful State aid.
As for its direct consequences, the Commission is invited to take all necessary measures to comply with the ruling of the General Court, and thus seriously examine the complaints concerning the alleged national aid.
[1] Regulation No. 2015/1589, laying down detailed rules for the application of Article 108 TFEU, OJ 2015 L 248/9.
[2] Merlin and Others v. European Commission (Case T-141/23) EU:T:2024:818
[3] Regulation No. 1198/2006, concerning the EFF, OJ 2006 L 223/1.
[4] Regulation No. 508/2014, concerning the EMFF, OJ 2014 L 149/1.
[5] Merlin and Others v. European Commission (Case T-141/23) EU:T:2024:818, para. 22.
[6] Ibid., para. 24.
[7] Ibid., para. 38.