When there are more companies wishing to receive a subsidy than there is money available, it is not uncommon to hold a lottery. The lucky winners receive a subsidy; the losers have to be content with having had a fair chance. But what happens if it later turns out that a loser should actually have been a lucky winner?
According to a recent judgment by the Dutch Council of State, the subsidizing party must make sure that the unfortunate loser is brought in the same position he would have been in if the right decision had been taken in the first place. In this case, a subsidy must be awarded – retroactively.
This is where State aid law comes in – but with a Twist! After all, the subsidies in question are governed by Community guidelines for State aid, according to which aid granted retrospectively for activities that have already been undertaken, lacks the necessary incentive element. Instead, it constitutes operating aid that simply relieves the beneficiary of a financial burden. So, the subsidizing party argued, such aid is in principle incompatible with the internal market and unfortunately, the poor loser cannot be quite completely reinstated. “It’s not us, it’s Brussels…”
Let’s summarize this issue in four points.
- Can a subsidizing party refuse to subsidize on the basis of State aid law?
Yes! In fact, if the European Commission has not authorized it, he must.
- Even if that means denying an undertaking a right under national law?
In principle, yes, due to the supremacy of EU law. There are some exceptions, such as in rare cases of legitimate expectations. Generally speaking, State aid law prevails.
- How does the court deal with this problem?
The court rules that there was no case of incompatible State aid, even if the subsidy were to be granted retrospectively. A deciding factor was that the undertaking in question had been carrying out the activities in the hope and expectation that it would eventually be determined that it should have been one of the winners. The chance that the situation would be righted in the near future, according to the court, provided the necessary incentive element and thus fulfilled the requirements of the cited Community guidelines for State aid. The unfortunate loser could thus become a winner, after all.
- Is this the legally correct approach?
This is an interesting question that requires some analysis of the relevant European and Dutch law. As long as we are looking at this case from the point of view of Oliver Twist, however, (and you can accept my comparison between a company losing out on a subsidy and a poor orphan boy in early 19th century London), it feels oddly satisfying. Perhaps the subsidizing party really was trying to loyally adhere to State aid law, but it is hard to shake the feeling that really, it was just a good excuse to avoid having to pay what was due when the budget was probably already uncomfortably overstretched.