Recovery of Illegal State Aid from a Beneficiary’s View - The exception of legitimate expectations, the (mal)functioning air bag of the State aid policy

Abstract: The member states of the European Union grant subsidies for various reasons. The purpose of such State aid can be economic and social as well as political and strategic. It can correct market failures by, for example, supporting research and development as well as investment in environmental technology. At the same time however, EC law has indeed a strict view on the granting of subsidies, since it may affect the competition through out the union in a negative way and thus distort the common market. Member states are therefore obliged to notify the Commission and await its examination of the proposed aid measure before putting it into action. And before approving a measure, the Commission thoroughly examines its compatibility with the Common market. However, while the tasks of examining State aid measures and deciding whether they are to be approved or not, or recovered or not, are placed upon the Commission, the recovery of unlawful and illegal State aids is to be carried out by the national courts, in accordance with national procedures. And as a consequence to the frequent slowness and sometimes lack of such procedures, the recovery of illegal State aids and the enforcement of State aid rules, have repeatedly been on the Commission’s agenda. In addition, changes have been made within the procedure of the Commission’s examination of potential State aid measures, where additional exemptions to the obligation to notify under Article 88(3) EC Treaty have been approved. By this, the examination in these exempted areas has been replaced by conditions in secondary EC law and the Commission’s soft law. And as a consequence, the position of the beneficiary seems to have been weakened. The purpose of this thesis is, in general, to provide a picture of the situation of the beneficiaries during the examination and recovery procedure under EC law, and in particular, to examine on what grounds a recipient undertaking of unlawful or illegal State aid, believed to be lawful and legal, can be protected from recovery by the principle of the protection of legitimate expectations. It provides, in other words, an examination and analysis of the different sources that may create legitimate expectations. And since such expectations merely can be entertained when contrary to a general principle of community law or when exceptional circumstances prevail, this thesis also provides a picture of in which context such claims can be successfully invoked. Last but not least, the above mentioned changes of the State aid field possess indeed a potential of affecting the position of the beneficiary and thus the notion of legitimate expectations. Therefore, this report also examines in what way and to what extent that may be the case.