The new Spanish Act 15/2007, of 3 July 2007, on the Defence of Competition (the "new SCA")1 increases the competences of the Spanish competition authorities in the field of state aid. Indeed, the newly created single competition authority - named "National Competition Commission" ("NCC") - will enjoy wider competences in the ambit of state aid. This body will integrate both the Service for the Defence of Competition, the current fist-tier competition authority in charge of investigations, and the Court for the Defence of Competition, the current second-tier competition authority and decision-maker. Unlike the current competition Act 16/1989 of 17 July 1989 (the "current SCA"), the new SCA imposes some duties on the NCC and the Administration, which enhance their supervisory powers over state aid affairs. This could also open a back door that would allow the NCC to exert real control in this field.

The Old Regime: Discretionary Supervisory Powers Under The Current SCA.

According to Article 19 of the current SCA, the current second-tier competition authority or Court for the Defence of Competition may, ex officio or upon request of the Minister of Economy, analyse the criteria applied to state aid grants as well as their effects on competition, and issue non-binding reports to the Council of Ministers. The Council of Ministers may, in turn, propose the adoption of measures to restore effective competition. There is currently, therefore, no obligation upon the Court for the Defence of Competition to make use of this mechanism. To our knowledge, no use at all has been made of Article 19 of the current SCA. In addition, given that Article 19 of the current SCA does not provide for the initiation of formal proceedings but merely for the issuance of non-binding reports, it is currently impossible for individuals and companies to lodge state aid complaints.

The New Regime:

  • Supervisory Powers Of The NCC Under The New SCA With Respect To State Aid Notified To The European Commission

Points 1 to 3 of Article 11 of the new SCA establish that the administrative bodies competent for notifying state aid to the European Commission2 shall submit all information related to the notified aid to the NCC. Pursuant to this information, the NCC shall issue a non-binding annual report in order to analyse the effects on competition of the criteria applied to the grants. It may also draft case-specific non-binding reports and submit proposals for the modification or even for the removal of state aid measures to the Administration, when it considers that these are capable of distorting competition.

The latter power calls for special attention. Indeed, if one considers that point 3 a) of Article 11 of the new SCA requires the Administration to provide the NCC with information on the notified aid at the very moment of its notification, this implies that the NCC could, in principle, issue its case-specific report prior to the completion of the European Commission’s investigation. Even though the NCC’s reports are non-binding, they could have an impact on the Commission’s analysis because of their publication. We note that the new SCA only foresees collaboration with respect to the application of Articles 81 and 82 of the EC Treaty, and that no cooperation mechanisms between the NCC and the European Commission have been put in place in the field of state aid.

  • Discretionary Supervisory Powers Of The NCC As Regards Unlawful (Non-Notified) State Aid With Intra-EU Trade Effects And Purely National State Aid With Anticompetitive Effects Limited To Spain

Point 4 of Article 11 of the new SCA enables the NCC to request any information related to State aid projects from local, regional and national administrations. This does not apply to unlawful state aid (i.e. non-notified to the European Commission in breach of Article 88 of the EC Treaty) and state aid, which has negative effects on national competition but lacks intra-EU effects, following points 1 to 3 of Article 11 of the new SCA.

Surprisingly, the use and purpose of this information gathering process is not defined in the new SCA. Moreover, in accordance with its general advisory functions under Article 26 of the new SCA, the NCC could also issue non-binding reports and recommendations pursuant to this information. There is no doubt that these public reports could be very useful as they would increase the transparency of state activities and, therefore, ease the European Commission’s supervisory duties, even in the absence of any obligation upon the NCC to submit these reports to the European Commission.

However, this is not the only means for the NCC to fight against anti-competitive state aid.

  • Legal Capacity Expressly Granted To The NCC To Challenge In Court Any Administrative Act Or General Non-Legislative Provision Hindering Competition On The Spanish Market

Pursuant to Articles 12.3 and 34.4 of the new SCA, the NCC may bring actions before the competent courts against any administrative act or general provision – except those with legislative rank - when these acts or provisions have the effect of hindering competition on the Spanish market. Although it could seem, at first sight, that this new competence opens a door to effective state aid control by the NCC (in contrast to its above-mentioned supervisory and advisory powers), this possibility remains unclear.

Firstly, it should be recalled that the grant of state aid in breach of Article 87 of the EC Treaty (i.e. state aid which favours certain undertakings, affects trade between EU Member States and distorts competition) is prohibited. Secondly, it is only for the European Commission and the national courts to, respectively, control this aid and enforce the prohibition of implementing aid prior to its approval by the European Commission, laid down in Article 88.3 of the EC Treaty. Within this limited field of action, the NCC would simply be able to request the Spanish courts to immediately enforce Article 88.3 of the EC Treaty. However, this possible action by the NCC would not bring about any significant added value given that individuals or companies may, in any event, directly proceed in court to require the application of Article 88.3 of the EC Treaty and a declaration of the state’s liability, and to claim a compensation for the damages incurred as a result of the unlawful aid.

Articles 12.3 and 34.4 of the new SCA seem, at first sight, to indicate that the NCC would be entitled to judicially challenge administrative acts and general non-legislative provisions granting purely national state aid with anti-competitive effects limited to Spain. However, whilst state aid with intra-EU trade effects is expressly forbidden by the EC Treaty, there is no such express prohibition in the EC Treaty or in Spanish law where such effects are lacking and only national competition is at risk. We note that Spanish Act 38/2003, of 17 November 2003, on subsidies, contains a special procedure for the annulment and recovery of financial contributions made by the state. However, this Act does not cover the broader concept of state aid from a competition law perspective.

Therefore, the following question remains open: Do Articles 12.3 and 34.4 of the new SCA provide a valid legal basis that enables the NCC to judicially challenge administrative acts that hinder competition but are not expressly forbidden by the law, e.g. state aid measures without intra EU-trade effects? It will be for the Spanish courts to determine if such an action is compatible with the general principles of legality and "no punishment without law".

To Sum Up

The new SCA grants enhanced powers to the NCC in the field of state aid. However, these powers are still essentially of a supervisory and advisory nature. Moreover, the effectiveness and viability of the NCC’s new powers to bring actions before the Spanish courts against administrative acts and general non-legislative provisions granting anti-competitive state aid remains unclear, even though these powers would constitute an instrument of effective state aid control.

Footnotes

1.

Entering into force in September 2007.

2.

This obligation stems from European Competition law and only affects state aid granted by EU Member States likely to affect intra-Community trade. Under Article 88 of the EC Treaty, Member States shall notify this aid to the European Commission prior to its implementation.

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