CJEU judgment on the notion of ‘selectivity’ in state aid cases
On 20 December 2017 the Court of Justice of the European Union rendered an interesting judgment in relation to the notion of ‘selectivity’ in state aid cases. This notion is important as the selectivity of an advantage is a constituent factor in the concept of ‘State aid’. The judgment may have an effect on the outcome of other state aid cases which focus on the selectivity of a measure.
The case before the Court of Justice concerned a decision of the European Commission of June 2013, in which the Commission found that subsidies granted by Spanish regions for the switch from analogue to digital terrestrial television in remote and less urbanised areas, constituted illegal state aid. According to the Commission, the beneficiaries of the aid were the operators of the terrestrial television platform in these areas (as opposed to cable, satellite and internet companies). The Commission decision was upheld by the General Court in its judgment of 26 November 2015.
Before the Court of Justice, the appellants (the Comunidad Autónoma de Galicia and the public network operator Retegal) argued that the Commission and General Court failed to examine whether the situation in the municipalities that use terrestrial technology is comparable to that of municipalities in which other technologies (such as satellite technology) are used. In response, the Commission argued that, if a measure applies exclusively to a specific economic sector or to undertakings in a particular geographic area, the selectivity condition is satisfied. The Commission added that, even if the aid had been granted in compliance with the principle of technological neutrality, it would still be a selective measure since it applies to a specific economic sector, namely the broadcasting sector, and not to all economic operators.
The Court of Justice takes sides with the appellants and notes that the statement of reasons in the Commission decision (and in the judgment of the General Court) contains no indication of the reasons why undertakings in the broadcasting sector should be regarded in a factual and legal situation comparable to that of undertakings active in other sectors or why undertakings using terrestrial technology should be regarded as being in a factual and legal situation comparable to that of undertakings using other technologies. The Court of Justice does not accept the Commission’s argument that no reasoning was necessary since the selectivity condition is automatically satisfied if a measure applies exclusively to a specific economic sector or to undertakings in a particular geographic area.
The Court of Justice refers to its earlier case law in which it was held that a measure which benefits only one economic sector or some of the undertakings in that sector is not necessarily selective. It is selective only if, within the context of a particular legal regime, it has the effect of conferring an advantage on certain undertakings over others which are, in the light of the objective pursued by that regime, in a comparable factual and legal situation.
On its website, the Commission has indicated that it ‘takes note of [this judgment] of the European Court of Justice and will carefully analyse the judgment and its potential implications’. Indeed, the judgment may have an effect on other cases which focus on the selectivity condition. This includes the well-known Spanish case relating to tax advantages in case of foreign investments, in which it still needs to be decided whether those undertakings that did not meet the conditions for obtaining the tax advantage conferred by the measure at issue were, in the light of the objective pursued by the tax system concerned, in a factual and legal situation comparable to that of the undertakings favoured by that measure.
For more information, please contact Marc Custers or your regular Loyens & Loeff adviser.