Negative elements affecting solidarity in the field of State aids

Despite this recent positive improvement and the fact that the Commission has rarely declared an aid granted by national authorities after a disaster incompatible, from a strictly legal point of view, current legislation is still characterized by some challenges that deserve attention since they may risk undermining the demands of solidarity that should fuel the Union’s approach towards a State in need.

First of all, it is appropriate to explore to what extent the exceptions contained in the 2014 Regulation operate by reporting the meaning attributed over time to the concepts of “natural disaster” and “exceptional occurrences” falling within the scope of current Article 107, para. 2, TFUE which, according both to the Commission and the CJEU, should be interpreted restrictively330_{. As for the}

notion of “natural disaster”, the Commission has preferred to demarcate the scope of application of Article 107, para. 2, point b, TFEU by specifically indicating an exhaustive list of events that can fall within the concept, rather than providing a more generic and objective definition.

328 _{See, C. Micheau, Droit des aides d’État et des subventions en fiscalité, Larcier, 2013.}

329 _{See, L. Grard, “Le droit des aides d’Etat, moteur auxiliaire de la solidarité communautaire”, in} C. Boutayeb, La solidarité dans l’Union européenne - Eléments constitutionnels et matériels, cit., p. 206.

330 _{See, European Commission, European Union Guidelines for State aid in the agricultural and} forestry sectors and in rural areas 2014 to 2020, OJ C 204, 1 July 2014; CJEU, Third Chamber, Joined Cases C-346/03 and C-529/03, Atzeni v. Regione autonoma della Sardegna, 23 February 2006, ECLI:EU:C:2006:130; Case C-278/00, Greece v. Commission, 29 April 2004, ECLI:EU:C:2004:239, para. 81.

119 As laid down in recital 69 of Regulation 651/2014, the list of situations that can be recognised as natural disasters comprises “earthquakes, landslides, floods, in particular floods brought about by waters overflowing river banks or lake shores, avalanches, tornadoes, hurricanes, volcanic eruptions and wildfires of natural origin”331_{. Despite the situations covered are wide-ranging, the letter of the recital}

does leave no room for new types of assessments or for the introduction of new categories of disasters. In addition, the regulation sets that the damage caused by adverse weather conditions such as frost, hail, ice, rain or drought, which occur on a more regular basis, should not be considered as natural disasters within the meaning of Article 107, para.2, point b, TFEU. This exclusion seems quite curious since in Guidelines for State aid in the agricultural and forestry sectors

and in rural areas 2014 - 2020, the Commission explicitly keeps open the option of considering compatible with EU law those aids granted in occasion of adverse weather situations comparable to disasters which destroy more than 30% of average annual production332_{. Moreover, the intensification of events related to}

climate change might require a more frequent State intervention in favour of businesses that have suffered from extensive damage due to extraordinary weather events. The exemption from notification without a clear definition of the concept of natural disaster could paradoxically lead to an increase number of incompatibility cases, and, consequently, of the proceedings to recover the aid already bestowed to companies that perhaps without such incentives would not have rebalanced their losses.

With regard to the concept of “exceptional occurrences”, there is no doubt that it may comprise a variety of defining options, since it only highlights the extraordinary nature of the event, but not other intrinsic characteristics. It could, thus, be seen as a residual category potentially including a variety of situations, such as internal disturbances, strikes, serious nuclear or industrial accidents, severe health emergencies and even terrorist acts. Over the years, the Commission

331 _{See, Regulation (EU) 651/2014, Recital 69.}

332 _{See, European Union Guidelines for State aid in the agricultural and forestry sectors and in} rural areas 2014 to 2020, cit., para. 330.

120 has demonstrated a certain openness in this regard333_{, by determining the}

compatibility of State aids granted, for example, in occasion of the Erika oil tanker accident, the Chernobyl nuclear disaster, the crisis sparked by the dioxin contamination in animal feed as well as that of the bovine spongiform encephalopathy (commonly known as the disease of “mad cow disease”)334_.

However, Regulation 651/2014 has excluded the so-called “exceptional events” from those situations that may be exempted from prior notification.

Prima facie, this choice is understandable since the inclusion of such a wide category would create not only some confusion about the events subjected to the new regulation, but also an ex post excessive monitoring work for the Commission. In addition, the automatic compatibility of the above-mentioned events could encourage the entrepreneurs not to take precautionary measures against foreseeable occurrences to limit the damages. Despite this, it seems less evident why there has been no mention of specific events whose origin is not natural, but that in certain circumstances may be regarded as natural disasters in terms of impact and need for intervention. Indeed, also disasters of anthropic character like far-reaching industrial or nuclear accidents as well as health or environmental emergencies, could have negative consequences on the functioning of the society so as to require early interventions by the national authorities through measures falling in the guidelines on State aids. As a result, while on the one hand the adoption of Regulation 615/2014 represents a positive step in the procedure for granting aid, on the other hand it has contributed to accentuate some uncertainties the defining framework.

The second criticism is linked to the requirement whereby a direct causal link between the damage suffered and the natural disaster is demonstrated in order to

333 _{See, M. Tjepkema, “Damages Granted by the State and their Relation to State Aid Law”, in}

European State Aid Law Quarterly, Vol. 3, 2013, pp. 478-492.

334 _{See, Commission Decision 29 July 1999 concerning the Belgian dioxin crisis, No sub 2.1. In} addition, see Commission Decision concerning special measures relating to a dioxin contamination in Ireland, Aid No NN 44/2009 (ex N 435/2009): “In order to be able to categorise an event as an exceptional occurrence, the said event has to distinguish itself clearly from the ordinary by its character and by its effects on the affected undertakings and therefore has to lie outside of the normal functioning of the market”.

121 avoid overcompensation335 _{and, consequently, incompatibility}336_{. Definitely, it is}

reasonable that whether a company has been the beneficiary of an inappropriate advantage, the value corresponding to the facilitation obtained should be paid back. This notwithstanding, it is necessary to make a further consideration.

In disaster settings it is not always straightforward to identify a clear dividing line between the overall damage – which should also include consequential damage and loss of profits – and the amount unduly granted. In addition, the mere location of an enterprise necessarily creates an economic damage that may not be evident at first sight. The context in which businesses operate after a disaster is certainly not equal to that of the normal operation of the market, where any government intervention can, effectively, distort competition. On the contrary, the occurrence of severe natural disasters, such as earthquakes, tornadoes and floods, can lead to the weakening of the entire local economy where the rules of the competition are undermined and businesses (especially SMEs) must operate in a competitive situation that is distorted. Same, if not worse, problems may then arise for those businesses located in large areas affected by serious exceptional events, such as nuclear or industrial accidents, whose effects in terms of environmental and temporal impact cannot be immediately estimated. Therefore, in such circumstances, the order of recovery would further penalize the already highly injured businesses and, once again, limit the full effectiveness of solidarity in the event of disaster and, consequently, the citizens’ trust in the Union.