The European Court of Justice recently ruled [1] on the well-known matter of alleged State aids in the case “Fallimento Traghetti del Mediterraneo SpA” (hereinafter “FTDM”).
The case originates from the subsidies granted under Law n. 684 of 20 September 1974 to Tirrenia di Navigazione SpA (hereinafter “Tirrenia”) to run shipping services between mainland Italy and the islands of Sardinia and Sicily.
At first, between 1981 and 2000, FTDM (a competing undertaking of Tirrenia) brought legal proceedings against Tirrenia, seeking compensation for the damage allegedly suffered as a result of Tirrenia's abuse of dominant position. Indeed, according to FTDM, as a result of the subsidies obtained, Tirrenia was able to apply a low-fare policy which was inconsistent with the real cost of the service.
The outcome of the three-stage proceedings was unfavourable to FTDM. Lastly, the Court of Cassation rejected the claimant’s claim for a preliminary ruling to the Court of Justice as to the consistency of Italian Law 684/1974 with the European Union law.
Then, in 2002, FTDM decided to file a further action against the Italian Republic before the Court of Genoa, seeking compensation for the damage incurred as a result of (i) the subsidies granted to the competitor Tirrenia; (ii) the behaviour of the Court of Cassation, which, despite its position as judge of last resort, failed to refer the matter to the Court of Justice for preliminary ruling as requested by the claimant; and (iii) the behaviour of the Italian Government, which failed to inform the Court of Cassation of the infringement procedure being started before the European Commission in relation to Law 684/1974 (see 2001/851/EEC).
After two references for a preliminary ruling to the Court of Justice [2], the Court of Genoa ordered the Italian Government to pay a huge amount in damages to FTDM. This was confirmed, even if based on different grounds, by the Court of Appeal of Genoa.
Finally, the case was brought to the Court of Cassation by the Italian Government. The Court of Cassation decided to make a new reference for a preliminary ruling to the Court of Justice, submitting the following questions to the Court:
Concerning the first question, the Court of Justice initially recalled that a State measure can be classified as a State aid subject to the following conditions being fulfilled, namely, the intervention in question must:
Secondly, the Court of Justice stated that the subsidies granted to an undertaking before the date of liberalisation of the market concerned cannot be classified as existing aid because of the merely formal absence of liberalisation of that market at the time when those subsidies were granted. More specifically, the national court shall verify, on a case by case basis, the presence of the conditions to fulfilled for considering a national measure as a State aid, with a focus, as to non-liberalised markets, on the capacity of the measure to affect trade between the Member States and to distort, or threaten to distort, competition.
Regarding the second question, the Court of Justice stated that the 10-year limitation period for the recovery of illegal aid ordered from the Commission is not applicable to the case under examination. The subsidies were granted in breach of the obligation imposed on States to give prior notification of State aid, which is why the State cannot rely on the principle of the protection of legitimate expectations. Furthermore, if a competitor claims for damages (as in the case examined here), by virtue of the principle of legal certainty, the aforementioned limitation period shall not apply by analogy, being closely linked to the functions and powers of the European Commission.
On the one hand, the European Commission has jurisdiction to verify the compatibility of subsidies with the common market; on the other hand, national courts must protect the rights of individuals in the event of Member States failing to comply with the duty of prior notification to the Commission of any new State aid. In principle, irrespective of any approval of the European Commission, where a claimant is able to demonstrate that he has suffered loss caused by the premature implementation of State aid, an action for damages can be upheld.
Therefore, in the absence of a decision of the European Commission on this point, a national court, against an action for damages arising from a national measure, shall not consider the 10-year limitation period under Article 15 of Regulation 659/1999. The expiry of such term cannot indeed have an effect of retroactively legalising unlawful State aid, because, if so, there would be no longer a legal basis for claiming damages, simply because (illegal) State aid becomes existing aid.
The action brought by FTDM against the Italian Government is the practical application of the so-called “private enforcement” of EU antitrust law. Such instrument enables private subjects (competing undertakings) to take action before their national courts for infringement of State aid rules and seek compensation for the damage suffered. This can happen even before the European Commission reaches a conclusion in its investigation on the disputed measure.
On the other hand, private antitrust enforcement is not only an instrument aimed at protecting subjective rights. Indeed, from the perspective of single market protection, the reason for private enforcement is clear: by allowing competing undertakings to bring legal actions before their own national courts and, thus, facilitating the filing of claims for damages, a potentially indefinite number of market operators will ultimately play a role as a guardian of competition. Against such background, Member States will be more cautious in granting subsidies.
Italian case law on the matter is evolving and the phenomenon is becoming increasingly widespread throughout Europe. In general, a claimant who intends to pursue the said action will have to prove the causal link between the subsidies granted by the State to a competitor and the damage actually suffered. To provide evidence, a decision of the European Commission on that particular case or any similar case may help the line of defence, despite not being essential. Indeed, as noted, awarding damages to undertakings based only on previous decisions of the European Commission would conflict with the ratio itself of private enforcement.
That being said, the decision of the national referring court (the Court of Cassation) will be very interesting to analyse. The Court of Cassation will have to take a position and give some clear indications as to the compatibility of national law with EU law on State aid as well as on the procedures to be followed to enforce claims for damages.
This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Ekaterina Aksenova or Francesco Spinelli.
[1]Judgment of the Court of Justice of the European Union of 23 January 2019, Case C-387/17, Presidenza del Consiglio dei Ministri v. Fallimento Traghetti del Mediterraneo SpA.
[2]Judgment of the Court of Justice of the European Union of 13 June 2006, Case C-173/03, Traghetti del Mediterraneo SpA v. Repubblica italiana and Judgment of the Court of Justice of the European Union of 10 June 2010, Case C-140/09, Fallimento Traghetti del Mediterraneo SpA v. Presidenza del Consiglio dei Ministri.
