Absolute impossiblity to recover state aid: the SNCM/CMN case

It is settled case law that the EU Courts are unwilling to accept the absolute impossibility to recover state aid defence submitted by Member States that have been found by the European Commission to have granted aid in breach of the provisions of the TFEU. EU Courts have indeed adopted a strict interpretation of the concept of impossibility. As a result, to demonstrate to the expected evidentiary standard the impossibility to implement the Commisssion' s decision can be an insurmountable task for a Member States adressee of a recovery order.

Unsurprisingly in light of the above, the Court of Justice of the EU (CJEU) has recently rejected the pleadings submitted by France, arguing for the impossibility to recover aid previously granted to two ferry companies, SNCM and CMN (CJEU, judgment of 9 July 2015 made in the Case C-63/14 European Commission v France).

Following receipt a complaint filed by a competitor, the Commission launched an investigation into the public service delegation contracts awarded to SNCM and CNM. By these contracts SNCM and CMN committed to operate for the 2007-2013 period a number of maritime links from the port of Marseille to some Corsican ports and viceversa with the view to guarantee the territorial continuity between mainland France and Corse. By the decision made in May 2013 the Commission found that the compensation awarded to SNCM and CMN for the provision of the above maritime links constituted illegal and incompatibility aid and ordered France to recover it (European Commission, Decision 2013/435/EU of 2 May 2013, Case SA.22843, Lignes maritimes Marseille-Corse opérées par la SNCM et la CMN).

France and SNCM challenged the Commission's decision before the General Court of the EU (GC). The appeals are still pending before the GC (Case T-366/13 France v Commission; Case T- 454/13, SNCM v Commission). The GC also rejected the France application for interim measures for the suspension of the challenged decision.

In the meantime, believing that France failed to implement the negative decision of the Commission of 2 May 2013, in February 2014 the Commission brought an infringement action before of CJEU on the basis of Article 108(2) TFEU. To its defence, among other things, France played the card of the absolutely impossibility to execute the Commission's recover order. It contended that the impossibility was due to the social unrest and the break in the territorial continuity that would occur had SNCM given back the aid it had received before. Indeed, SNCM was alrealy placed by the Commercial Court of Marseille in a court-supervised administration procedure as it had failed to repay a loan. Therefore, so the France argument run, the implementation of the recover order would result in the insolvency and in the following compulsory liquidation of SNCM, with the ensuing risks of social unrest. France also argued that the exit of SNCM from the market would make necessary to conclude a public service delegation contract with another ferry company that might not have the means to operate the required maritime links. As a consequence, in the period between the termination of the contract with SNCM and the point in time when the new awardee would start its services, the maritime links in such contract and, accordingly also the territorial continuity between Marseille and Corsica, would be likely suspended.

The CJEU rejected all the France's contentions. It pointed out that when social unrest is feared Member State have to to adopt all the suitable measures to guarantee the full scope and effect of EU law so to ensure its proper implementation. It is upon Member State to demonstrate that it is not possible to deal with problems for public order with the means at their disposal. The CJEU found that France did not provide such evidence. The possible long-term blockade of the maritime links with Corse evoked by France as an effect of the recovery of aid could no be taken as decisive evidence of the impossibility to implement the decision. As made clear by the AG Wathelet in his Opinion, a similar situation was already faced by French authorities at the time of the protacted strike in 2005 that blocked some links between mainland France and in Corsica. And then France succeeded in supplying Corsica through alternative ways. In addition, the CJEU also noticed that the preliminary actions taken by France to recover aid did not cause any social unrest.

As for the risk of break of territorial continuity, the CJEU believed that with the SNCM xit of the market, at least in a short-time horizon the Marseille-Corse maritime links would be reduced. Yet, it held that France would not give any evidence that this event might have consequences of such magnitude on public order that, as a result, the recovery of aid should be regarded as absolutely impossible. As said before, the measures taken to deal with the 2005 strike indicated that the French authorities could rely on measures suitable to cope with the consequences on public order of such event.

In conclusion, in European Commission v France the CJEU did not depart from its strict approach to assess the absolute impossibility defence. Outbreaks of social unrest feared due to the implementation of recovery order are not considered as evidence of impossibility of such recovery, unless the addresee Member State demonstrates to not have at its disposal suitable measures to deal with the public order problems. Something more than political disconfort in taking action against groups opposing to the recovery order is then needed in order to meet the evidentiary burden for the granting of the absolute impossibility defence.

European Commission v France also made clear that practical difficulties in replacing the previous awardee of a public service contract, that would exit the market due to the repayment of illegal aid it had received, may not be considered a a ground of impossibility of recovery. This was not the case with aid granted to SNCM, considering that the French authorities could rely on alternative channels to ensure the maritime links that the beneficiary aid had to operate.