Clamp-down on delays in aid repayment

Date: 02/04/1998

By Chris Johnstone

THE European Commission is moving to clamp down on companies which use long drawn-out court action to delay the repayment of illegal government subsidies.

A survey by the Commission's Directorate-General for competition (DGIV) has found that almost half of the aid repayments demanded since 1982 have not been made because companies have launched stalling legal procedures.

Over the last 16 years, only 30 of the 84 firms ordered to pay back subsidies have actually done so. Another 17 went out of business before making any reimbursement and the rest resorted to an array of legal procedures in national courts to suspend action.

Competition officials are now considering publishing fuller details of the repayment laggards in an attempt to highlight where the problem is at its worst.

In some countries, launching court proceedings postpones the need to refund the money. "As a result, the companies go from one court to another attempting to avoid repayment," said Competition Commissioner Karel van Miert.

German and Spanish companies are among the worst offenders, said one official, with repayments postponed by ten to 15 years in some cases.

"The practice is quite commonly used in Germany, though it partly depends on the type of case in question," he added.

Angered by such a poor performance, Van Miert is now seeking a change in the rules which would force firms to repay illegal aid at once and would limit the scope of court action to claim it back later.

This proposal will be put to national governments at the next meeting of EU industry ministers on 7 May, when a much wider shake-up of state aid rules will be under discussion.

Van Miert hopes that the majority of governments, which do not allow court challenges to suspend repayment, will support a change in the rules and that this will be enough to push the reform through.

"At the moment there is a kind of discrimination between countries and companies where repayments can be suspended and those where they cannot. This is not fair," he said.

Van Miert's general strategy for overhauling the EU's state aid rules, which won the support of the full Commission in January, has been criticised as too timid by some in the legal profession and the European employers' organisation UNICE.

They argue that more could have been done to make information available to firms which have an interest in subsidy cases and that tougher deadlines could have been set for final Commission decisions.

The Commission is moving to clamp down on companies which use long drawn-out court action to delay the repayment of illegal government subsidies.