SNS REAAL and the shareholders who cried State aid
Can SNS REAAL’s expropriated shareholders rely on European State aid law? The Dutch Council of State rules that they cannot.
This year, it would have been hard to miss the increasingly worried news reports concerning the financial stability of Dutch bank SNS REAAL. In order to save the bank from bankruptcy, the Dutch Minister of Finance decided to nationalise it on February 1st, taking possession of the shares and subordinated debt of SNS REAAL and SNS Bank (see previous comments on this blog here). On 25 February, the Dutch Council of State ruled that the Finance Minister’s decision to expropriate the shares and subordinated debt was legitimate, except where it concerned future claims. The next legal battle is now the amount of compensation for the expropriated securities, which the Minister of Finance has set at € 0.
The judgment of the Council of State is hugely interesting on many levels, but I will focus on just one: the judgment’s consequences for the private enforcement of State aid law.
Several claimants have argued that the expropriation decision constitutes illegal State aid. If this is so, the decision should be declared void, being in breach of Article 108(3) TFEU. Previously, the Council of State would probably have assessed whether the expropriation does indeed qualify as State aid. Now, it made use of the newly introduced ‘relativiteitsvereiste’ (article 8:69a of the Dutch General Administrative Law Act), which states that an administrative judge will not annul a decision on the grounds of a breach of a rule or principle of law that does not evidently serve to protect the interests of the person invoking it. Based on case law of the European Court of Justice, the Council of State ruled that Article 108(3) TFEU evidently (!) does not serve to protect the interests of holders of shares issued by an undertaking that is a recipient of illegal State aid.
The Council of State did not refer a preliminary question to the ECJ concerning the scope of protection of European State aid law. Given the extreme urgency of the case, this is understandable. However, I believe it is time that such questions are asked. In its case law, the ECJ has considered that competitors of aid recipients and parties having to pay a hypothecated tax with which State aid is financed may invoke Article 108(3) TFEU. But, to my understanding at least, it is by no means clear whether this list is exhaustive. Another judgment of the Council of State has demonstrated a rather narrow construction of the concept of competitor, significantly limiting the standing of parties wishing to invoke State aid law. Also in proceedings before civil courts, the scope of protection of Article 108(3) TFEU is a matter of contention. To an important extent, it is the national legal system that determines who has standing before its courts, and courts may be very justified in trying to steady an increasing stream of State aid-related cases brought by parties whose real interest does not seem to lie with the return to a level playing field. However, when standing depends on the scope of primary EU law, as is becoming increasingly relevant, the ECJ should be allowed to provide clarity.